Becker's Spine Review

45 ASC Inflation hits ASCs, physicians hard By Laura Dyrda T he cost of essential goods jumped 7 percent last year, outpacing the re- imbursement increases to healthcare providers across the board. ASCs will need to have candid conversations with commercial insurers about how infla- tion is affecting their business in the next year. ese conversations may be uncom- fortable, but payer executives have begun realizing the value of surgery centers and aim to move more patients into ASCs. e Consumer Price Index reported gas prices were up nearly 50 percent year over year in December, while energy costs jumped 29 percent, and food prices were up 6.3 percent. New vehicle prices increased 11.8 percent, and household furnishings and operations were up 7.4 percent. By comparison, physician services costs increased 4.3 percent last year, and hospital services costs were up 3.3 percent. Inflation also took a bite out of physician pay last year, as the average physician was only paid 1.5 percent more than in 2020. CMS raised ASC payment rates by 2 percent for 2022, and surgery centers are seeing their supply and labor expenses soar as shortages in both sectors intensify. e labor market, in particular, will likely remain competitive this year, and with employees having to pay more for gas, food and other essentials, a 2 percent pay rate increase won't cover the difference. "Although the 2 percent effective inflation rate update is appreciated, it falls far short of two important realities: First, it falls short of the latest inflation projections, which began to manifest in the first quarter and developed fully in the second quarter — time enough for CMS to have taken them into consider- ation; second, the tight healthcare worker la- bor market, combined with COVID-related attrition and vaccine mandate-related early retirements are forcing us to make signifi- cant adjustments to our wage scales, a cost that we will have to absorb until industry pressure forces payers to make concomitant adjustments," said Alfonso del Granado, ad- ministrator of Covenant High Plains Surgery Center in Lubbock, Texas. ere are independent ASCs across the U.S. struggling to make ends meet as costs in- crease and pay flattens. e opportunity for out-of-network contracts has dissipated for most surgery centers, and it could become more challenging to negotiate with payers as price transparency legislation goes into effect and more surgery centers post global prices online. If ASCs aren't able to get pay bumps to cover increasing costs, they are more likely to sell to a hospital, take on private equity invest- ments or join a chain. e less competitive healthcare landscape oen boosts prices while lowering quality and patient satisfac- tion. n ASC chain that developed 250+ centers gets private equity investment By Alan Condon R aleigh, N.C.-based Compass Surgical Partners has secured a minority investment by Health Veloc- ity Capital, a private equity firm that focuses on healthcare services and software businesses. The partnership aims to drive Compass' growth into new markets and benefit its joint-venture ASCs as the health- care industry continues its shift away from hospitals to- ward the outpatient setting, the company said in a March 11 news release. "Given the tailwinds in the market, we saw a window to further catalyze opportunities to develop high-quality ambulatory surgery centers with trusted partners," said DJ Hill, CEO of Compass. "Our team has developed and managed more than 250 ambulatory surgery centers over the course of our careers, and we have high convic- tion that the outpatient migration is accelerating and that providers deserve dedicated, independent partners to deliver superior clinical and financial results." Compass will use the funding to invest in data and analyt- ics, physician practice support services, hospital partner- ships, value-based care, new service delivery models and technologies supporting the adoption of spine surgery and joint replacement programs. "Compass is disrupting a distinct and rapidly growing healthcare vertical," said Marty Felsenthal, a partner at Health Velocity Capital who joined Compass' board of directors. "We are excited to play a strategic, supporting role in helping to fuel Compass' next phase of growth as it enters new markets and collaborates with other provid- ers to drive value while continuing to redefine the care experience for its patients and providers." n "Although the 2 percent effective inflation rate update is appreciated, it falls far short of two important realities." Alfonso del Granado, Administrator, Covenant High Plains Surgery Center

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