Becker's ASC Review

6 ASC MANAGEMENT How CON reform will rattle ASC ownership structures By Claire Wallace N orth Carolina plans to eliminate certificate-of-need laws across the state by the end of 2025, presenting several new opportunities for ASCs. is change will have several major benefits for ASCs, allowing them to restructure their existing ownership structures, expand more freely and save even more money for patients and payers. Leo Spector, MD, CEO of Charlotte, N.C.-based OrthoCarolina, spoke with Becker's about how new CON changes will shake up its existing ASC ownership structures for the better. Question: How will the removal of CON laws benefit your state? Dr. Leo Spector: ere's no doubt that the cost of care in the Carolinas is high. I think that's why legislation both in North Carolina and South Carolina voted for CON reform. What it's going to do is help lower costs because essentially MRIs and ASCs are a commodity, but they are ones that have been protected by CON. As a result, prices on them have stayed higher than they would in an open market. So with the removal of CON and the ability to have surgeons open up those ASCs, we know that it's going to lower costs at those ASCs because they will no longer be controlled in the way they were previously. As orthopedic surgeons, I think the greatest thing that we can do to help lower the cost of care really is site of service. ere are other things we can do right, we know that certain surgeries may be avoidable. Obviously being good stewards of our patient's care, that's why we believe in bundled payments because we think those really align the incentives of the payer, the patient, and the practitioner. But even within that, the biggest lever we can pull to help lower the cost of care is moving appropriate cases out of the hospital and HOPDs into the ASCs. Q: What is OrthoCarolina's practice strategy this year? LS: ASCs are unique in the Carolinas because while certificate-of-need reforms may have a negative impact on the MRI business, it has a very positive impact for surgery centers because now that South Carolina has fully repealed CON and North Carolina is about to at the end of this year, it creates the opportunity for us as a private practice to own our own ASCs. We estimate that 70% of our surgeries here in the musculoskeletal space can be done in the ASC. We feel that really aligns with our core mission and our values, which is, we are here to make lives better. We want to improve the cost of care for our patients throughout the Carolinas. If we can move patients appropriately from inpatient to outpatient and move from HOPDs to ASCs, we can lower the cost of care by our estimates; if we were to move the full 70% of cases, we would need far more capacity than we currently have. e opportunity for us to invest both the financial and human resources into growing the ASCs was really a decision we made. We look back at therapy and MRI as being service lines that are not as core to what we do. So to have the opportunity to invest and to grow outpatient care will be a win to not only our patients but our practitioners. Q: Do you believe the future of orthopedic care rests in ASCs? LS: We have always been bullish on ASCs. We have seen a huge uptick in use of ASCs post-COVID. ere was a lot of hesitancy from some of the practitioners and some of the patients. We are all creatures of habit, and it's comfortable to go to a hospital and continue doing what we are doing. But getting patients and practitioners to adopt ASCs post- COVID really opened that up. When hospitals were having to take care of all of those sick patients and could not do elective surgeries, ASCs were open and able to continue doing those. As much as orthopedics is elective, when you are hurting, you still want that taken care of. It created a lot of options for both practitioners and patients. So coming out of COVID we have seen a nice uptick in the utilization of our ASCs. Our current ASC ownership structure is a result of the CON laws that existed in North Carolina. We have multiple ASCs, but the ownership structure is different for each one. ey are partnerships with different hospital systems, sometimes different management companies, and it's typically done with the individual shareholders. So there is not a cohesive OrthoCarolina ASCs now drive 50% of Tenet profits By Claire Wallace A s care has shifted rapidly to the outpatient setting over the last 10 years, major healthcare systems are starting to take notice. For Dallas-based Tenet, a growing amount of revenue and EBITDA now come from its outpatient care arm. In 2018, Tenet acquired a 95% interest in United Surgical Partners International, which leads the company's ASC side. Through the acquisition, Tenet has become owner of several outpatient facilities nationwide, recognizing that those facilities often come with high margins. Now, outpatient facilities drive nearly half of Tenet's profits. According to Tenet's SEC filings, in 2016, outpatient care represented 9.2% of its revenue and 25% of its EBITDA. In 2024, those numbers grew to 22% and 45%, respectively. In 2024, Tenet formed a flagship partnership with Synergy Orthopedics to establish the largest musculoskeletal outpatient surgery center in San Diego. In addition, USPI now holds an 8.1% share of the ASC market, with interests in 518 ASCs (375 consolidated) and 25 surgical hospitals (seven consolidated) across 37 states. In 2024, the company added at least 57 new ASCs, with another 10 to 12 standalone centers planned for 2025. De novo facilities are a growing focus alongside acquisitions. USPI also purchased ASC chain Covenant Physician Partners. n

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