The Perverse Incentive of Hospital-Centric Care

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The Explosive Growth of ASCs

The model of hospital-centric care is giving way to specialists and ambulatory settings. The US currently has 9200 ambulatory surgery centers, surgical offices, and surgical clinics, with more breaking ground every single week. These facilities, often hospital affiliated, aren’t just ready, they’re custom built to provide surgical care to patients that do not require the full freight of a hospital, doing so with the same record on outcomes in less time at a lower cost. They also free up hospital resources by allowing for more focus on sicker patients.

Everything about this sounds like it’s a fantastic solution for several complexities plaguing US healthcare, from physician burnout to access to care, even cost. Unfortunately, as the saying goes, “institutions will try to preserve the problem to which they are the solution.”

Like most elements, it comes down to money, but in this instance, it’s not about available funding. It’s about revenue extraction at a bottleneck.

A Well-Funded Roadblock

First, most ASC and office-based procedures are done by specialists and, until very recently, independently operating specialists. And unfortunately, while there are exceptions, the calculus of federal funding under Value-Based Care is much more focused on the economy of scale- funding primary care for the most people possible. It makes sense from a utilitarian perspective- do the most good with the available resources. Unfortunately, it also creates a perverse economic incentive for risk bearing payer and provider organizations to use all available resources to preserve the current model. They are, after all, the recipient of shared savings from CMS. They can then perform any procedures in-house. While there’s no doubt these organizations are invested in providing as much care as possible in as timely a manner as possible, if a patient gets sicker waiting for a procedure, their RAF increases. If the risk bearing organization can continue to keep them stable, the shared savings they receive from CMS increases, meaning they have no financial incentive to render that care any faster than they are.

Even Private Payers March to CMS’s Drum

The next obvious question is, “Okay, that’s federal populations, why does it affect private payer lines of business?” Because, fundamentally, where regulation for federal coverage, and where federal funding goes, so goes healthcare. This applies to policy as well. Telehealth didn’t become a default option for anyone under any sort of coverage, even at the height of the pandemic, until CMS announced an emergency authorization amending site-of-service restrictions for Medicare, Medicare Advantage, Medicaid, and ACA patients. Now it’s ubiquitous.

And so, we are returned to our premise: “Institutions will try to preserve the problem to which they are the solution.”

The Inevitability of Ambulatory Surgery

Now, the cost savings from making better use of ASCs and similar office-based sites (which now outnumber hospitals by to the tune of 9200 to 6050 across the country), have caught the attention of large health systems. That’s why there’s been such a boom in growth. They can take full advantage of the second and third sites of service while retaining absolute control over the patient’s care at a lower cost. Additionally, hospitals have the ability to negotiate rates with payers at a much more generous level for themselves than individual providers, practices, or groups. By building their own ASCs, they can charge same-similar facility fees to payers while taking advantage of the efficiency and reduced costs of ASCs, driving revenue higher.

There is a silver-lining, though. As noted, ASCs already outnumber hospitals, and with more being built every single day, there will be a tipping point where payers and CMS both say to hospitals, “We’re not paying you the same facility fees for outpatient care.” Hospitals will then use their own strength to push back and negotiate a new standard fee schedule for outpatient surgery that standardizes payments.

Specialists Provide Primary Care: Change My Mind.

That doesn’t mean we shouldn’t be pushing now, though. Even on days when it feels like surgeons are fighting for their life to deliver care and be appropriately compensated, we have to remember we are still growing. The perception of specialists being somehow separate from the delivery of life changing primary care is finally beginning to shatter as a more holistic model of healthcare weaves its way through policy. Still, we encourage providers, independent practices, and facilities need to be engaging with CMS, pushing back on payers, and making as much noise as possible. The value we provide to patients isn’t an “eventually” fix. We’re here, many of us have been here for nearly thirty years with an unwavering track record of healthy patients and happier clinicians. We are a fundamental part of healthcare, picking up the slack that hospitals can’t, across urban and rural settings. We’re getting patients care faster than they could before, and the sooner ambulatory sites of service receive the compensation they not just deserve but need to survive and thrive, the better it’s going to be for every life we touch.