Becker's ASC Review

15 ASC MANAGEMENT 10 issues affecting ASCs' bottom line By Laura Dyrda G eopolitical upheaval, economic trends and more are affecting sur- gery center operations. Ten things to know: 1. Inflation is hitting essential goods hard, with overall costs up 7 percent last year. En- ergy costs jumped 29 percent, and gas prices were up 50 percent. At the same time, physi- cian services costs increased 4.3 percent, and the average physician pay was up 1.5 percent. e steep increase in supplies and energy is gobbling up more ASC budgets, while payer reimbursement growth remains low. 2. Construction backlogs have derailed ASC expansions and new center development, adding time and costs to these projects. e Construction Backlog Indicator showed an eight-month backlog as of January, with the biggest backlogs in the South. e high de- mand for construction projects, both residen- tial and commercial, also increases prices. 3. ere will be supply chain disruptions amid Russia's invasion of Ukraine. Some medical device companies ceased operations in Russia when the conflict began. Supply chain compa- ny Premier anticipates the conflict's disruption in crude oil and natural gas production will affect the global supply and pricing of plastics used to make healthcare products, including trays, syringes, sharps containers and more. 4. Oil prices are soaring to their highest rate since 2008 as the United States and Europe consider sanctions against Russia related to the country's invasion of Ukraine. Oil prices ex- ceeded $130 a barrel March 7, according to e Wall Street Journal. e price increase means ASCs will spend more on energy, and gas pric- es will increase for workers and patients. 5. e global computer chip and semiconduc- tor shortage hit medtech companies that rely on the technology to develop new machines, including CT scanners, telemetry monitors and portable ultrasound machines. Health- care providers had monthslong delays in re- ceiving the technology, and prices increased to manufacture this capital equipment, al- ready a huge expense for ASCs. Fujifilm told e Wall Street Journal it paid a broker $65 for a part that typically costs $1.49. Without equipment that works, ASCs aren't able to provide the best treatment for patients. 6. Bad weather can easily disrupt an ASC's operating schedule, closing the center for one or more days during a snowstorm or other inclimate weather. Severe weather has forced ASCs to shut their doors for weeks at a time. Several ASCs have temporarily closed in the last year due to snow, hurricanes, electrical outages and more. In 2017, ASC chain Nobilis Health reported revenue dropped 15 percent in one quarter because a hurricane in Hous- ton forced several centers to close operations for an extended period. 7. Target, Walmart, Amazon and other large retailers are raising minimum wages for em- ployees, and healthcare workers are leaving the field for more lucrative roles in other in- dustries. ese companies are raising mini- mum wage to $15 per hour or more, while the national minimum wage remains $7.25. ASCs operate on a tight budget, and some are strain- ing to keep staff wages competitive without being able to charge more for services. 8. e unemployment rate dropped in Feb- ruary to 3.8 percent, according to the U.S. Bureau of Labor Statistics — good news for ASCs. Unemployed people oen don't have health insurance and delay or skip needed surgeries and treatments. But if a recession hits, unemployment is likely to rise quickly and plateau for an extended period. 9. Many states are planning to cut income taxes as the pandemic wanes and economic recov- ery takes hold. irteen states are considering income tax cuts this year, and 16 enacted cuts last year, according to e Wall Street Journal. e tax cuts would help ASCs grappling with increased wages and other staffing costs. 10. Medical office property sales declined by 12.7 percent in 2020 during the pandemic, but rebounded last year when COVID-19 closures receded. Investors see medical properties, including ASCs, as great invest- ment opportunities, especially since surgery will never be remote. e price for medical offices increased 3.7 percent during the pan- demic, according to a report from CRBE, a commercial real estate services and invest- ment firm. Physicians are selling while the market is hot and making millions. Two New York cardiologists sold their medical office building in early March to an investor for $11.5 million. n MedPAC recommends CMS slash ASC conversion factor in 2023 By Patsy Newitt I n its March report to Congress, the Medicare Payment Advisory Commission recommended cutting the 2023 Medicare conversion factor for ASCs and to require ASCs to report cost data. The ASC conversion factor, set at $49.92 for 2022, is updated through the hospital market basket index, which uses price data from the U.S. Bureau of Labor Statis- tics. The currently projected hospital market basket index increase for 2023 is a 2 percent, but Medicare recommends decreasing federal spending by $50 million to $250 million in the first year for ASCs and by less than $1 billion over five years. Because ASCs do not submit data on the cost of services they provide to Medi- care, the most recent complete payment data available is from 2020, MedPAC said in its report released March 15. The commission found in its analysis that, although the effect of the COVID-19 pandemic varies across individual ASCs, they are best addressed through targeted temporary policies rather than a per- manent change to all ASC payment rates in 2023. It said it does not anticipate any long-term, pandemic-related effects that would warrant the update. Although cost data is inadequate, data shows the volume of ASC services in- creased in 2019 and rebounded by December 2020. Additionally, the complex- ity of ASC procedures and number of ASCs increased in 2020. MedPAC also recommended that the HHS require ASCs to provide cost data to allow for growth of ASCs' costs over time and evaluate Medicare payments rela- tive to the costs of ASCs. n

• Cover