Becker's ASC Review

10 Becker's ASC 21st Annual Meeting – The Business and Operations of ASCs – Call (800) 417-2035 find trends. If the cancellations were preventable, new protocols may be instituted. Smart ASC lead- ers are diving into the analysis of big data and I think that's meaningful for the future." 8. Drug shortages. Facilities struggle to obtain drugs that may have temporary limited availabil- ity, which means vials from different manufactur- ers may be of different sizes and have different labels. The variation puts staff members at risk of making mistakes. "We are dealing with processes that occur millions of times, so the risk of mixing up drugs is now higher," says Dr. Gayer. "Another issue is single-use only vials. If you have a shortage of a critical drug and only use 5 ccs of a 10 cc vial on a patient, you're required to throw away the balance. Somewhere down the line another patient might be denied that drug due to lack of availability." ASCs can combat these challenges by compound- ing drugs, but that's an expensive and time con- suming process. "The expense is significant, but it may be the right thing to do in the time of short- ages," says Dr. Gayer. "However, you are also in- troducing another variable, the risk of infection through contamination." 9. High deductible insurance plans/pa- tient collections. More patients are opting for high-deductible health plans, which can impact ASCs in several ways. It takes longer for patients to meet their deductible with these plans, and elective procedures are often put off until the de- ductible is met. ASCs might experience a slower start to their year than in the past. These plans also require patients to pay more out- of-pocket. Some centers require patients to pay upfront while others have payment plans. Experts suggest sending bills earlier and more frequently to patients with payment plans. When centers aren't able to collect, they can turn those claims over to debt collectors, but that strategy is less than ideal. Staff members are also undergoing training to communicate about payment with patients. It takes extreme sensitivity and compassion to work with patients on payment plans, especially when the patient is in pain. But collections are impor- tant to keep the ASC running. 10. Leadership under healthcare reform. Business can't go on as usual with the new health- care reform regulations maturing. Leaders must be flexible and responsive to new legislation and market changes. Many physician leaders are pur- suing MBA programs. "We are using the new skills and philosophy to help lead and satisfy our organization's mission," says Dr. Gayer. "The first priority is patient safety and providing a good experience for the patient, but we also want to run the facility in a manner that sustains the organization." Surgery centers are small businesses and require strong relationships between staff and manage- ment to run efficiently. "Anesthesiologists work- ing in ASCs can provide leadership — their base of operations is the ASC," says Dr. Gayer. "Anes- thesiologists will play a vital role in the develop- ment of the surgical home. I think that's where we're going in the future." n 1. What's driving the slowdown in growth? The ASC industry is no longer young. As the industry matures, markets in- evitably become more saturated, there is less room for new centers and the rate of growth for ASCs historically isn't sustainable. While maturation is a natural stage for any industry, healthcare poses a unique set of challenges. Reform has touched every corner of healthcare and its effects have yet to be fully realized. Over and above the maturity of the ASC market, healthcare reform efforts will have a major impact on ASC operations. Another significant matter impacting ASCs and the opportunity for develop- ment of new facilities is the increase in hospital employment of physicians. Physicians are the backbone of the ASC industry and continued recruitment is the surest path to growth. But, the pool of independent physicians available for recruitment to ASCs or who can support or participate in the develop- ment of new ASCs continues to shrink. While ASCs may struggle to find new physicians to provide growth, that's not the only stressor. "The [slow-down] trend is exacerbated by the proliferation of high deductible plans, which are impacting utilization," says Matt Searles, a partner with Merritt Healthcare. It may take patients longer to meet the higher deductible which could cause them are put off much needed elective surgery altogether. These coverage issues both impact volumes and revenues for exist- ing ASCs and make new development projects all the more challenging. 2. What does this mean for individual ASCs? While fewer physicians and less volume to go around means de novo activ- ity will dramatically slow, it also means individual ASCs will have to face the realities of a changing industry. The level of difficulty ASCs face varies from market to market. "Some markets are faring better than others; for instance, certificate of need states where there are many fewer ASCs per capita," says Mr. Searles. On the other hand, ASCs States without CON regulation face intensified saturation and competition. "Trends always change," says John Newman, senior vice president and general counsel of Constitution Surgery Centers. "Do I think we will go back to the level of growth we saw early on? No, but there always is a place in any mar- ket for low-cost, high quality delivery vehicles such as ASCs. The future will probably involve more creative application of ASC resources as opposed to simply involving the creation of independent freestanding ASCs." ASC development will take on a variety of forms, such as joint ven- tures, and operations in collaborations with other providers and facilities. ASCs will have to address how their operations mesh with broader delivery systems such as accountable care organizations. ASCs must form new alliances and be prepared to address new coverage and reimbursement initiatives such as narrow networks or ac- countable care organizations. Though freestanding ASCs that have carved out market niches may enjoy continued success, they may no longer be the most common type of ASC developed, and all ASCs must address the emerging mar- ket pressures posed by healthcare reform and mature marketplaces. 3. What does this mean for ASC companies? Individual freestanding ASCs may have been the start of the industry, but ASC management and development companies ranging from regional leaders to national chains have increasingly emerged as important forces in the industry. The reduction in the number of new ASCs and challenges standing in the way of existing center growth forces a shift in ASC management company strategies as well. "There will be fewer new ASCs developed," says Mr. Searles. "However, we see great opportunity in the management of underperforming centers and advisory services to hospital systems looking to streamline operations." The growth slowdown affects companies much in the same way it affects free- standing centers: fewer physicians and shrinking volumes. "Without growth tied to volume they are taking out a sharper pencil. They [ASC companies] are looking more closely at case mix, focusing on specialties with higher profit margins and seeking to collaborate with others — be it hospitals, recovery care centers or others — as a means of expanding the opportunities for utilization of ASCs," says Mr. Newman. 4. Can we expect to see an uptick in M&A activity? "Consolidation is a common characteristic of any maturing industry," says Mr. Searles. This has certainly been true for the ASC industry. Joint ventures continue to be attractive, and mergers and acquisitions have even begun to reshape the industry at the corporate level. Surgery Partners spent $792 mil- lion to acquire Symbion and, AmSurg created waves with its $2.35 billion acquisition of anesthesia provider Sheridan Healthcare — a bold deal setting a precedent for diversified ASC company strategy. What the Slowdown in ASC Growth Means for the Future of the Industry (continued from cover) Matt Searles John Newman

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