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ASCs — good, bad, or just ugly?

A recent court ruling in New Jersey could shut down Ambulatory Surgical Centers across the state.
The judge determined that physician-owned ASCs (almost all ASCs are at least partly owned by physicians) violate a state law banning physician self-referral. Not surprisingly, the 200 ASCs in the Garden State (there are about 5000 nationwide) are pulling out the stops to overturn a ruling that, if it stands, would effectively shut down most ASCs in NJ.

The ASC case was brought by Health Net of New Jersey, but could have been brought by any one of the hundreds of insurers operating in the state. To a large extent the ASCs brought this on themselves, as many have violated the business maxim ‘pigs get fat, hogs get slaughtered’. Insurers (group, comp, and auto) have long been outraged by what they perceive to be ASCs’ inflated charges, employing networks, bill negotiation services, and specialty repricing vendors in an effort to stem the bleeding.
The specialty bill repricing vendors (note FairPay Solutions is an HSA consulting client) have been the most successful in reducing bills, but many payers would seemingly rather the ASCs were just put out of business.
This isn’t the right answer. ASCs, properly managed and utilized, can deliver significantly lower costs and improved outcomes over inpatient surgery. Unfortunately, some greedy operators, likely attempting to deliver the results promised to investor and physician partners, were much more interested in the short term gain rather than building a sustainable business.
ASC costs can be significantly lower than those incurred if the procedure is performed at a hospital. And outcomes can be better. But, and it is a rather big but, both may be due more to better patient mix served at ASCs than some inherent superiority – ASC patients typically are healthier, have lower severity, and therefore are much less likely to need the support services available at a hospital.
ASCs are accused, with some justification, of taking only the ‘good’ cases, leaving the older, sicker, less-well-reimbursed cases to the hospital OR. Thus, when an ASC opens, the community hospital across the street sees a decline in profitable cases, an increase in severity, and an increase in complications and less-than-optimal outcomes. This in turn drives up the hospital’s costs, which likely leads to higher charges.
Over time, the ASC looks even better – patients have better outcomes, and, except when the owners engage in inappropriately-high pricing, costs are lower.
But the community’s costs go up.
And herein lies another reason health care reform is complex, difficult, and necessary. The free market is working well; ASCs are generating solid returns, patients, investors, and physicians are happy while costs go up. ASCs can be, and in many cases are, part of the answer. But this ‘free market’, while benefiting some, looks to be damaging the whole.
Like any health care facilityASCs can be good or bad, but some of the people who run them are just plain ugly.

One thought on “ASCs — good, bad, or just ugly?”

  1. The workers compensation community better be careful what they wish for. They could end up like several communities here in Alaska where the hospitals run the show…at least right now they have a choice of facilities to use.

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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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