For many years there were three typical owners of ambulatory surgery centers: surgeons, management and development companies, and recently hospitals/health systems. But there is a fourth group that has quietly remained involved in ASC ownership for several years and is now taking on a more active role: payers.
Thanks, in part, to the Patient Protection and Affordable Care Act, payers, like hospitals and health systems, find themselves under greater pressure to pursue new and different service delivery options focused on providing high quality care at the lowest cost possible. This is creating interesting new partnerships, and in the case of providers and payers it is encouraging these two typically opposing groups to identify ways of working together for the benefit of both groups.
The concept of payers owning/aligning with ASCs is not new. Some payers have been actively providing healthcare services through their own ASCs and outpatient centers for years, such as Kaiser Permanente and Geisinger. Other health plans are now becoming more active in ASC ownership and development. For example, Highmark announced in January its plans to build 10 outpatient centers in western Pennsylvania.
The reason more payers are looking at ASCs as a prospective partner is to secure the lowest cost for outpatient surgery as possible. As the owners of ASCs have long portrayed themselves as the lower cost provider in outpatient surgery, their alignment with health plans looking for partnerships with providers is an obvious one. But this potentially presents a number of challenges and is ripe for conflict if not handled correctly and carefully.
Since ASCs have argued for years that they are the lower cost surgery model, payers will look to identify how low the reimbursement for surgery centers can go. But when the ASC uses this argument, it does not want to receive the lowest reimbursement possible. It is looking to receive reimbursement just low enough to make it worthwhile for the payer to reward the surgery center with the contract.
It's important to remember that one of the biggest concerns for physicians and third-party management companies, and hospitals investing in ASCs is the need to maximize the revenue cycle and maintain their profit margins. For payers, procedure coding, billing and reimbursement are not the center's primary business focus, but rather operational efficiency and cost savings. Potential partners need to discuss these differences very candidly and find a ways to bridge any gaps in their ownership objectives.
Another challenge for payers entering these relationships with ASCs is the need to understand the motivation for the other owners and users to remain active and productive in the surgery center, and this does not always tie back to financial issues. Depending on the ownership and management structure, what physician investors, publicly traded companies, private management companies and hospitals are looking for in their ASC and what the payer is looking for may be very different. While these differences may relate to economics, they may also concern other issues including choice of supplies and equipment, staffing and case scheduling.
As with most strategies in healthcare, there are potential legal issues. Since payers are looking to become more involved on the provider side to control costs, this could raise anti-trust concerns as well as other healthcare regulatory issues, so it is important to involve legal counsel in these partnership discussions.
One important note: To make this relationship work for both parties, it absolutely needs to be a two-way street. ASC owners must realize that trying to get the best rates out of the payers is a strategy of the past. If ASCs want to look to the future, they need to look at payers as a partner and somebody to strategize with going forward, and payers must look at ASCs the same way. That's the future of healthcare. It's not about higher rates anymore. It's about lower cost and not being left out of alliances.
For most payers, partnering with ASCs is likely uncharted territory. These partnerships will require a delicate touch and plenty of learning on the go. Payers and ASC owners will want to be especially careful not to destroy relationships while they're trying to build these new, different partnerships. Care should be taken to look at the needs of all the potential partners and not fall back on old "war wounds" from the negotiating table; involving a third party that knows the ASC industry and culture can help payers pursuing ASC ownership from making too many missteps on the way to a successful partnership.
Joan Dentler is the president and founder of Outpatient Strategies and ASC Strategies in Austin, Texas.