Image by Klaus from PixabayThe ambulatory surgery center (ASC) industry is at a crossroads.
As consolidation increases, many ASC operators are faced with the decision to either maintain their independence, or partner with larger health systems and corporate entities.
The development of the industry dates back to the 1960s, when small practices and individual ASCs began to emerge to cater to specific outpatient surgical needs. During this time, many ASCs were started by physicians seeking more control over their practices and profitability, while larger health care systems had not yet recognized the full potential of ASCs.
Yet that is changing. Larger health care organizations and private equity are beginning to take notice of the industry’s potential.
“Where the industry was then versus where it is now is night and day,” Joan Dentler, founder of health care advisory firm Avanza Healthcare Strategies, told ASC News.
No longer in its infancy, the ASC industry has entered a phase where larger health care organizations and private equity firms are acquiring smaller, independent centers to build scale. Key players like AMSURG, United Surgical Partners International (USPI) and others are expanding their presence across the country.
As these dominant players expand, they will continue to hone in on specific surgical specialties to strengthen their market positions, eventually leading to a highly concentrated market.
Still, the most recent data shows that about 68% of ASCs – roughly 4,145 surgery centers – are independently owned. And while consolidation offers a financial security blanket for smaller facilities, it comes at a cost. Thus, a growing number of surgeons are rethinking the benefits of remaining independently owned.
One of the key benefits of independent ownership is the entrepreneurial opportunity it creates for surgeons, Woodrow Moore, founder of the Texas ASC Society and Ker Leader Medical, an organization that advocates for physician ownership, told ASC News.
“One of the reasons we’ve launched this effort to align independent ASCs is that we see the opportunity to help those independent ASCs in their continuum – not only in helping them get started, but also in assisting those that are more mature move along their inevitable path,” Moore said. “This includes either remaining ruggedly independent, while assisting and standardizing their operations, all without having to sell equity or give up management control.”
Many younger physicians are becoming more attuned to the idea of entrepreneurship, Moore added.
“There are some young physicians that, perhaps, have been in a five-year employment relationship with either a health system or a group practice that realize the only way they are going to better themselves is to take on their own entrepreneurial nature,” Moore said.
Control and flexibility
Independent ASC ownership allows surgeons to make critical decisions about equipment, personnel and even procedural offerings without external interference.
“The pros of consolidation are [having] the opportunity to move along a continuum at your own pace. … Decisions about equipment, decisions about personnel – those all are the main reasons why the surgery center industry started,” Moore said. “This flexibility allows ASC operators to optimize their business models while improving patient outcomes.”
One of the key benefits is the control that independent ownership affords, according to Dr. Arthur Valadie, a practicing orthopedic surgeon and physician president of Florida-based Coastal Orthopedics. By owning their real estate, physicians have greater autonomy in managing the activities and uses of their facilities without interference from third parties.
“There’s a renewed interest in real estate ownership by physicians, not just for the financial aspect of it, but also the control aspect of it,” Valadie said.
This control contributes to smoother operations, and there is an efficiency in decision-making that comes with independent ownership, Valadie said. Unlike larger organizations that often face bureaucratic hurdles, Coastal Orthopedics has implemented a streamlined process that allows the group to quickly adopt new technologies, medications or implants without lengthy approvals.
“We don’t have a bureaucratic model of 15 committees that you’re running through,” Valadie said. That allows the practice to respond nimbly to innovations that improve patient care and business outcomes, he noted.
Furthermore, Valadie pointed out the importance of standardizing clinical protocols across the organization, which is easier to implement in an independent practice. Coastal Orthopedics has adopted evidence-based best practices that are applied uniformly across its physicians.
“We get together as physicians and agree on the best clinical practices in an evidence-based manner, and then we standardize those activities,” Valadie said.
Navigating the pressures of consolidation
Despite the advantages of independence, many ASCs face the pressure to consolidate with larger entities. And the conversion of independent ASCs to hospital outpatient departments (HOPDs) is creating friction between physicians and patients, Moore said.
“When health systems convert their previously independent ASCs to HOPD models, this is creating conflict between the physician and their patient because the cost structure becomes different,” Moore said.
Independent ASCs are typically reimbursed at lower rates than HOPDs, which ultimately leads to higher costs for patients, and this shift is causing concern among physicians who prioritize affordable care, he added.
“There are physicians who are surgeons closely watching this trend of conversion – converting independent ASCs to HOPD – which is putting them in conflict with their patients,” Moore said.
To combat this, Ker Leader Medical is working to create a network of like-minded, independent ASC owners who share a commitment to maintaining their autonomy, Moore said.
The key is aligning with other like-minded independent ASCs, joining coalitions, cooperatives, and clinically integrated networks (CINs) to give independent operators leverage in payor contracting and procurement, Moore said.
“We see the opportunity to help those independent ASCs in their continuum, not only in helping them get started but helping others that are more mature move along … without them having to sell equity and give up management control,” Moore said.
