Ambulatory surgery centers (ASCs) are health care facilities that offer short-stay surgical and emergency procedures to patients, who do not require an overnight stay in a hospital. ASCs came into existence around four decades ago in Arizona (USA) by two physicians as an alternative to overcrowded and costly HOPDs (Hospital Outpatient Departments) at hospitals marred by slow operation room turnover time, schedule delays, and budgetary constraints limiting the ability to purchase new medical equipment. From the time of their inception, ASCs have demonstrated a high-quality patient care at a low cost.
ASCs provide a number of services which require less complex and less critical treatment mainly including procedures in areas of ophthalmology, orthopaedics, gastroenterology, pain management, oral and maxillofacial surgery, etc. The ASCs settings either provide single speciality or multi-speciality offerings to patients.
In the past two decades, ASCs have seen a dramatic growth due to a shift from short-stay inpatient surgeries to outpatient surgeries. According to the American Hospital Association, outpatient surgeries increased from 55.4% of the total surgery volumes in 1993 to 65.6% in 2013. The cost of service performed in ASCs is on an average 55% of that of the hospitals [source: Ambulatory Surgery Center Association (ASCA)].
The global ASCs’ market was valued at USD 71.4 billion in 2015 (source: FMI, 2016). The US occupies 52% of the overall market share. In the US, the number of Medicare-certified ASCs grew at a CAGR of 7.7% from 1999 to 2007, however, from 2008 to 2015, the growth slowed down to 1.8% CAGR.
The initial growth in the US commenced from 1982 onwards when the US Medicare program began covering the ASCs services, the Medicare beneficiaries shifted their focus to ASCs for outpatient surgeries.
However, the growth declined subsequent to 2008, when Centers for Medicare Medicaid Services (CMS) implemented a revised ASCs payment system in accordance with the MMA Act of 2003, which increased the reimbursement disparity substantially between the ASCs and the HOPDs. This resulted in a conversion of few freestanding ASCs to HOPDs and return of patients and revenue to the hospitals, which were earlier lost to the ASCs. Although, such HOPDs allow for more predictable fee earned by physicians under a co-management agreement, but this is much lesser than the ASCs, where both the risks (inadequate marketing, lack of physicians, declining reimbursements, and high rate of claim denials, etc.) and returns are higher for physicians. The ASCs allow physicians to retain equity ownership. Moreover, due to lower reimbursements in ASCs, the patient co-pay is also lower than HOPDs, hence this results in cost savings for patients as well.
Thus, owing to the above conversion of less profitable ASCs to HOPDs, the industry has seen a consolidation in last few years. Further, with the introduction of Affordable Care Act (ACA) in 2010, which mandates pay for performance, this has promoted consolidation in the healthcare market by providing quality care.
In the last five years following major consolidations took place in the ASCs Industry:
- 2011: AmSurg acquired National Surgical Care, Surgery Partners acquired NovaMed, USPI acquired Titan Health, USPI acquired Health Mark
- 2014: Surgery Partners acquired Symbion
- 2015: Tenet Healthcare acquired USPI
Lastly, some major hospitals such as Tenet Healthcare Corp. and HCA Holdings started investing in ASCs. Tenet Healthcare Corp., acquired United Surgical Partners International (USPI) in 2015. This was done to retain their patients as well as improve margins since the cost of service performed in ASCs is comparatively lesser owing to lower facility development and maintenance cost, more efficient space utilisation, lesser administrative cost and a better specialised operating clinical environment.
The disparity in Medicare reimbursements for ASCs and HOPDs offering the same services has provided an opportunity to various groups including ASCAs, which have started lobbying for the Ambulatory Surgical Centre Quality and Access Act of 2015. This would change the ASCs yearly reimbursement review from the consumer price index to the hospital market basket review (being used for HOPDs), which will better measure the changes in medical costs. If the law is passed, the reimbursement disparity will reduce, benefiting the ASCs. In addition, the consolidation in the industry is expected to augur well for the participants in the long run. However, any adverse governmental stance on reimbursement remains a key risk for ASCs as incentives for the industry participants as well as for consumers will further be minimised.