This Week in Surgery Centers: Scott Bacon – Successfully Converting HOPDs to ASCs

Scott Bacon – Successfully Converting HOPDs to ASCs

Here’s what to expect on this week’s episode. 🎙️

🎙 As interest in the outpatient sector continues to grow, health systems are faced with an interesting question, “Should we convert our HOPD to an ASC?”

Scott Bacon is the Vice President of Business Development at Compass Surgical Partners, and here’s sharing excellent advice on how to evaluate if this is the right move for you. Scott also addresses why there’s so much interest right now and the benefits of making the switch.

🤝 Physician Alignment: The move to ASCs aids in the recruitment and retention of physicians by aligning interests between health systems and both employed and independent physicians.

💰 Cost and Managed Care: ASCs represent a more cost-effective option compared to HOPDs, offering lower reimbursement rates and facility fees, which can significantly reduce the overall cost of procedures like rotator cuff repairs and knee replacements.

🛍️ Consumer Demand: With the rise in high-deductible health plans, patients are becoming more cost-conscious and are increasingly opting for procedures in ASC settings where costs are transparent and significantly lower.

📈 Market Dynamics: The strategic decision to transition from HOPDs to ASCs involves detailed financial analysis, understanding market dynamics, and assessing the potential for increased market share and patient volume.

For health systems contemplating this shift, the key steps include thorough economic analysis, evaluation of market share growth opportunities, and considering the overall impact on ancillary services. Additionally, the decision-making process often involves collaboration with ASC development and management experts to navigate the complexities of converting or establishing new ASC facilities.

Find the full episode on Apple Podcasts, Spotify, or YouTube to hear all the details.

Episode Transcript

0:01
Welcome to This Week in Surgery Centers.

0:03
If you’re in the ASC industry, then you’re in the right place.

0:07
Every week, we’ll start the episode off by sharing an interesting conversation we had with our featured guest, and then we’ll close the episode by recapping the latest news impacting surgery centers.

0:17
We’re excited to share with you what we have.

0:19
So let’s get started and see what the industry’s been up to.

0:27
Hi, everyone.

0:28
Here’s what you can expect on today’s episode.

0:31
Our guest today is Scott Bacon.

0:33
Scott is the Vice President of Business Development at Compass Surgical Partners, and he’s here to cover how you can successfully convert a hop D into an ASC.

0:44
There are a ton of benefits to making the switch such as market growth, reimbursement differences, physician retention and high acuity case migration.

0:53
In our news recap, our first two stories will cover anesthesia.

0:57
So the first is about the current state and issues that AS CS are facing.

1:01
And then the second story is about how one facility avoided closing operating rooms by getting creative with their anesthesia coverage.

1:09
We’ll then cover the cyber attacks on change, healthcare and of course and the new segment with a positive story about a woman who became a nurse after being so inspired by the nurses who helped care for her son.

1:21
Hope everyone enjoys the episode.

1:23
And here’s what’s going on this week in surgery centers.

1:30
Scott, welcome to the show.

1:32
Nick, thanks for having me.

1:33
Excited to be here.

1:35
Scott, excited to talk through with you today HOPDS hospital outpatient departments and ASCs.

1:41
And one of the trends that we see in the market is around the conversion of HOPDS to ASCs.

1:48
And I was wondering from your perspective, what are some of the drivers of this trend?

1:53
Yeah, we’re seeing this more and more from health systems that we’re having conversations with and there are multiple drivers.

1:59
I think one of the primary drivers is physician alignment.

2:03
How can health systems recruit and retain and continue to align with both employed and independent physicians.

2:12
Another driver that’s being evaluated is their managed care aspects and relationships with the payers.

2:18
Obviously for those unaware, the ASC presents a lower cost or lower reimbursement site of service when compared to HOPDS.

2:26
How does that impact their managed care relationships and lowering the cost of care for their ultimately their patients who are their end user and their consumer.

2:37
Probably the third component that’s being evaluated is the consumer demand.

2:42
Consumers are becoming savvier with higher deductible plans and cost of care is a big driver for the patient.

2:51
And if they can minimize that cost and have that procedure safely performed in an outpatient ASC setting versus an HOPD, we’re seeing that being a driver as well.

3:04
Got it.

3:06
He gave three reasons there.

3:07
Wanted to dig in and follow up just on each of those real quick.

3:11
He mentioned the managed managed care and the cost side of the equation with procedures in ASC typically being cheaper.

3:18
What are some of the reasons that underpin that cost difference?

3:22
Well, Medicare has a different fee schedule for ASC reimbursements versus an HOPD.

3:29
So I can give a couple of examples, just average cost of care for A2 procedures we see fairly commonly at our centers a rotator cuff arthroscopic repair average cost in a hospital outpatient department is is $10,258 compared to in an ambulatory surgery center.

3:50
That facility fee cost being $6285, if you also look at a a knee replacement surgery fairly common these days, more and more that’s being done in the ambulatory surgery center setting.

4:03
The hospital costs for having that done outpatient is $18,096 and the average cost in a surgery center is 13,734.

4:14
So pretty significant cost savings when you look at it on just those two examples.

4:18
And that’s fairly indicative across the spectrum of procedures being done in the ambulatory surgery center setting.

4:25
And is it the facility fee that drives a lot of that cost difference?

4:29
That is strictly the facility fee.

4:31
The professional fee that the physician gets reimbursed stays the same.

4:35
There’s an anesthesia component to these surgeries as well, which is separately billed and a separate invoice the patient will receive as well.

4:43
OK, got it.

4:44
So that’s the cost side.

4:46
You mentioned the consumer demand side as well.

4:49
Do you think the, the price transparency regulations on the hospital started are starting to play into this or what do you see as the change in consumer education, consumer demand, consumer transparency?

5:03
I think it’s still fairly early on the price transparency.

5:06
I think it’s ultimately the right direction for healthcare and then where we’re going, it’s going to take a lot of time to implement.

5:13
I think less than 1/4 of the hospitals are have complied so far with the 21 regulation.

5:19
But consumers are becoming well educated sometimes by their peers and their neighbors.

5:26
And understanding that hey, I can have my knee replacement done and be home and and sleep in my own bed while it’s clinically very safe but also is going to be cost me less from an out of out of pocket standpoint.

5:39
But that’s driving a lot of the demand as well.

5:41
And a lot of our physician partners are having those requests come directly from their patients prior to scheduling surgeries.

5:49
Got it.

5:49
OK.

5:50
And then the third piece was on the physician side.

5:53
And so one of the one of the benefits from the ASC perspective for physicians might be the chance for equity ownership in the facility and distributions.

6:04
Do you see any other advantages that really draw physicians to prefer an ASC setting over HOPD, the kind of time and money, if you will, money.

6:14
You mentioned a lot of these partnerships are equity partnerships with the physicians having a direct economic interest, but also the time, the turnover in an ambulatory surgery center from turnover time they refer to it as in the industry when compared to a hospital setting is drastically less relatively speaking across the board.

6:36
So if we can enable a surgeon to perform more cases in a shorter period of time, they’re helping more patients and getting time back in their day.

6:45
As we evaluate these potential new centers and opportunities with physicians, it’s not uncommon for us to hear physicians leaving the operating room after being there all day at 6/7, 8:00 at night.

7:00
And if we look at their caseload and what they did that day, they could easily be done in an ambulatory surgery center by early afternoon time frame while performing the same number of cases enabling their patients to recover and discharge same day as well.

7:16
So it’s really a quality of life and giving them more time back in their day as well.

7:22
Sure.

7:23
And you mentioned on that physician side for those reasons that you talked about from a time and money perspective that ASCs can be a good strategy for physician recruitment for health systems and wanting to be competitive.

7:36
What do you see on the physician retention side?

7:38
Do you feel like providing the ASC option to physicians and physicians feeling like they have a good set up from an ASC perspective makes them stickier to that health system, less likely to live and that’s sticky or sticky is a good word for two reasons.

7:54
One, I think we enabling them to be a part of an aid gives them more control in the equipment selections, the staffing, how we set it up.

8:05
We really work towards ensuring the physicians have a voice at the table in these ambulatory surgery centers, which tends to be a little unique from what they’re used to in the hospital.

8:15
Setting #2 is around the retention is making sure that this is an option for them as an employed surgeon.

8:24
More and more health systems are permitting their employed surgeons to directly invest in these ASC partnerships.

8:31
The health system’s not there yet and not comfortable with that.

8:34
It there is risk that that their surgeons from an employed standpoint could leave to go to another hospital system across town that may offer this the differentiator or leave and go join a private practice because of this opportunity.

8:49
Yep, that makes total sense.

8:51
Scott, wanted to circle back and and talk about, we’ve talked about the cost side.

8:57
So traditionally for HOPDS, there has been a reimbursement difference and a reimbursement advantage over AS CS.

9:05
Have you seen that declining over time And as you kind of look in your crystal ball over the next 5-10 years, what do you anticipate happening to that cost advantage reimbursement, well, site neutrality payments have been discussed while not in regulate or have not come to fruition yet.

9:22
I I don’t think that it’s off the table in the next 5 to 10 years as we’re seeing the data the for outcomes or for cases being performed in ambulatory surgery centers meeting or a lot of times exceeding those of a hospital outpatient apartment.

9:40
I think CMS and the payers, commercial payers will start to understand that there’s a clinical benefit to having patients have these cases performed in an ambulatory surgery center setting.

9:53
So I think that is just going to continue to exasperate over time as the clinical outcomes and the data shows that these are high quality operating environments when compared to a hospital outpatient department.

10:07
Got it.

10:09
So so how do health systems think about this?

10:12
Right?

10:12
You cited, you know, 3 advantages potentially from a health systems perspective as they think about physician recruitment and retention, as they think about the cost of of care, as they think about consumer demand, especially consumer demand over time as you play that in the future.

10:27
So for health systems that are kind of bought into this and say, hey, we want to have more of an ASC strategy and presence, we potentially want to think about converting some HOPDS to ASCs.

10:39
Where do you start?

10:40
What’s the first couple steps in the process?

10:42
Yeah, it’s a great question and it can be overwhelming on the front end.

10:46
I’d say the first is it’s a very thorough economic analysis.

10:50
Obviously if they shift these cases from an HOPD to an ASC, they’re overnight going to be reimbursed less.

10:58
So why would a health system want to make less money they over overnight and and what are the offsetting sometimes non financial factors that would impact that decision.

11:11
So I think the the detailed financial analysis as to what is the ultimate impact to the hospital just on that case volume.

11:19
The the flip side of that coin is what is the corresponding or ancillary strategies that may be impacted all the ancillary service lines that are tied to that surgical procedure.

11:34
Some examples of that are pathology imaging, pathology imaging, PT therapy, there’s there’s all types of ancillary services that are based around one patient surgical procedure and what are the impacts to that.

11:50
The probably the bigger impact to evaluate is what’s our opportunity to grow our market share?

11:56
How could a new facility in alignment with physician partners in that entity?

12:03
How can we grow the utilization of our market share with physician alignment?

12:09
That could look like putting an ASC in a new geography which is a lower cost to build that.

12:15
Then putting up a new hospital outpatient department recruiting and retracting a new service lines or or simply more independent physicians who potentially are performing cases at a hospital across town enabling them to then have an ownership interest in utilization of a an ambulatory surgery center that’s more conveniently located to them.

12:40
It’s all of those, it’s it’s a, it’s not a one recipe for success.

12:45
It’s really understanding the market, the physician dynamics, the current future market share of the health system.

12:52
And then secondarily is some health systems also have involvement with a managed care policy for their patient base.

13:01
So are they involved in a commercial insurance plan?

13:05
And what’s the corresponding impact on the back end if we can lower the cost of care for some of these patients?

13:13
Got it.

13:14
And you you touched on the market share side in the geography side and just want to double click on that because it seems like these health systems, they think about their ASC strategy.

13:25
You can go about it some different ways, right?

13:27
You could go about it through acquisition, you could go about it through de Novo, you could go about it for through an HOPD conversion if you have existing HOPDS.

13:36
How have you seen health systems evaluate that trade off of hey, should we build you know new de Novo AS CS versus possibly looking to convert existing HOPDS.

13:49
Again it’s AI think we typically recommend starting with the financial analysis and and running a parallel course.

13:55
What does it look like from a cost and timeline perspective to convert an existing HOPD?

14:02
And alternatively, what would it look like if we maintain that that existing HOPD but built a de Novo center in from a cost and timeline perspective?

14:13
Geographically, is the HOPD where you want those ASC cases done or does it make sense to broaden the reach of the health system into a new or corresponding market, so it’s really a cost analysis?

14:26
And then how do they backfill or utilize that existing HOPD space?

14:31
Will they backfill it with other specialties?

14:33
Will they convert it to another type of service line within the health system?

14:39
So all of that goes into play, real estate, existing space needs, future space needs, where’s the population growth of the patient base and the physician community in that market.

14:52
So it’s again it’s not a one-size-fits-all, it’s a very dynamic financial and kind of very much non financial analysis that needs to be done.

15:03
Yep.

15:04
It it seems like there’s some thought and analysis, as you mentioned, and a lot of variables that go into the decision.

15:11
How do health systems typically approach this?

15:14
Do they have, is this a person, Is this a department that kind of does this analysis or are these external consultants?

15:22
What?

15:22
What’s kind of the range of ways that you’ve seen health systems, you know, structure the analysis or put responsibility around it?

15:32
Yeah.

15:33
So more and more health systems are evaluating joint venture partnerships in these ambulatory surgery centers with ASC development and management specialty companies.

15:46
Similar to HST being the kind of the expert in the ASC space, There are companies out there that are experts in the evaluation process and then the execution component to that strategy as well once it’s finalized.

16:02
So most, most health systems are starting to bring in that external resource who has experience running these ambulatory surgery centers much lower cost service so that they operated very differently than their traditional HOPD setting.

16:20
So it’s a different mindset, it’s a different calculation.

16:22
Some health systems have that expertise in in house, but I would say more and more today are looking to outsource or align with third party experts in that realm.

16:34
Yeah, it it makes sense just given I’m sure all the learnings that go into this that that you don’t want to start from scratch every time and I’m sure you can learn.

16:41
I’m sure the companies that specialize this learn a lot every time and they can apply that to the new cases.

16:47
Scott, on that thought wanted to ask you about lessons learned.

16:51
What, what did you see in the industry from a lessons learned perspective from health systems that are approached their ASC strategy and and learnings from that they can be applied elsewhere?

17:02
Sure.

17:02
Many.

17:03
I would say first and foremost is underestimating the cost to convert an HOPD and the timeline associated with that just because it’s successfully performing HOPD cases today to relicense that space as an ambulatory surgery center may be different guidelines or different requirements for the physical plant.

17:28
So there may be construction involved, you know how long does that the design, the permitting, the construction, the relicensure process take, what is the cost to do that that needs to be, how do we fund that cost over that period of time.

17:43
And I think most importantly is where do they can they ensure that they have a home for those cases to be done elsewhere, what during that conversion process on, on paper, it seems like it may be an easy kind of flip the switch and overnight it’s an ASC.

18:01
In reality, it’s a much more complex conversion process from a time, intensity and cost standpoint.

18:11
Got it.

18:14
That’s a good one.

18:14
OK, Scott, final question for you here.

18:17
And we do this each week with all of our guests.

18:19
What’s one thing our listeners can do this week to improve their surgery centers?

18:25
Great question.

18:26
My my wheels are turning.

18:27
I would say first and foremost, we take very seriously compass the care being delivered to each and in every individual patient.

18:37
It’s a very serious life event for a family and and the patient on the table and that that care is delivered by the front end clinical staff at the ambulatory surgery center.

18:49
So what can be done this week?

18:50
I would say make sure your clinical team on site delivering that patient care understands they’re valued, understands their how important they are to each and every patient that comes across that table And and really just thank them for their work, their commitment and their passion that they deliver these patients day in and day out.

19:14
Awesome.

19:14
That’s what it’s all about.

19:16
Scott, thanks for joining us this week.

19:18
Nick, appreciate it.

19:19
Thanks so much.

19:24
As always, it has been a busy week in healthcare, so let’s jump right in.

19:29
The issue of anesthesia coverage is a significant challenge facing surgery centers right now.

19:35
Several ASC admins were cited in this ASC Focus article, sharing that maintaining anaesthesia provider staffing is a constant concern and even if you have the necessary coverage, the threat of being understaffed looms constantly.

19:49
So how did we get here?

19:51
Doctor Derek Fleming of Midwest Physicians Anaesthesia Services explains that this stems from a severe shortage of anaesthesia providers, compounded by decreasing reimbursement rates for their services.

20:04
The factors contributing to the shortage include early retirements prompted by COVID and aging workforce, and an increased demand for anaesthesia services across various medical settings.

20:16
The competition for anaesthesia providers has become particularly fierce with hospitals, which often offer more attractive working conditions and compensation.

20:26
This has made it increasingly difficult for AS CS to compete, especially since they typically operate at a faster pace and may offer lower rates.

20:35
So to combat these issues, some, AS CS are now employing their own anaesthesia teams, are offering subsidies to private groups.

20:43
This is a strategy traditionally employed by hospitals, but is becoming more common in the ASC setting as they seek to ensure adequate staffing levels.

20:52
So what else can you do?

20:54
ASC leaders are also advised to foster open and trusting relationships with providers.

20:59
Anesthesia providers specifically create a collaborative and inclusive environment, offer leadership opportunities and engage anesthesia providers in the AS CS quality and policy discussions to hopefully improve retention and loyalty.

21:14
So given all the issues that have occurred due to the anaesthesia staffing shortages, please make sure you remain proactive and are always in planning mode for anaesthesia coverage and try to have a Plan B and Plan C where possible if you can.

21:30
And I want to continue this anesthesia discussion into the second story because I really hate to present a problem without a solution.

21:39
So let’s talk about how Columbia Orthopaedic Group in Missouri avoided shutting down to a short to due to a shortage in anesthesia coverage which was directly impacting their ability to schedule and conduct surgeries.

21:54
So Andrew Lovewell is the CEO of Columbia Orthopaedic Group and he is sharing how this their anaesthesia staffing shortage was threatening their operations.

22:04
And he stated and I quote we were going to maybe potentially shut down rooms or we had to shut down rooms intermittently.

22:11
That hurts the bottom line, because if you can’t do surgery, you can’t figure out how to pay all the costs associated with running a big ASC like ours.

22:20
OK, So what did they do?

22:22
Columbia Orthopaedic Group took a bold step by shifting its model and employing its own anaesthesia group, A move away from the traditional outsourcing of these services.

22:32
This decision wasn’t just about filling a gap.

22:35
It was about aligning incentives for growth, improving the compensation and benefits for the anaesthesiologist and ensuring the surgery center could maintain top talent and quick case turnovers.

22:48
So Lovewell emphasizes the importance of adapting to the anaesthesia crisis facing AS CS nationwide, highlighting the need for quick, efficient operations that meet the high demands of their environment.

23:01
So by bringing anaesthesiologists in house and enhancing their employment package, Columbia Orthopaedics aims to create a more attractive and efficient workplace that stands out in the competitive healthcare market.

23:13
Now I know not every surgery center will be able to go this path due to size and operating budget and all of that, but if you are a larger group, it is something that you might want to really consider.

23:26
But overall, this approach represents A mindset shift in handling anaesthesia services as a whole, viewing them as a critical business line rather than just kind of this peripheral third party service.

23:39
And it also reflects A broader necessary trend as highlighting highlighted in our first story where Ases are increasingly seeking innovative solutions to stay operational and competitive amidst widespread anaesthesia staffing challenges.

23:53
So I hope between those first two stories, it might give you some good ideas or at least inspire you as to how you can solve your own anaesthesia staffing challenges if you are experiencing any.

24:05
All right, switching gears away from anaesthesia for now.

24:08
As you have likely heard, United Health owned tech company change Healthcare has been hit hard by a significant cyber attack with system shut down for over a week due to ransom due to a ransomware attack.

24:23
This disruption has significantly impacted providers stalling pharmacy operations and various other essential services.

24:31
So Change Healthcare is is an integral part of the healthcare infrastructure, offering a slew of services including payment processing, billing, prescription handling and data analytics.

24:43
For context of how vast this disruption is, the firm processes 15 billion healthcare transactions annually and touches one in every three patient records.

24:55
So as you can imagine, the fallout from this cyber attack is extensive.

24:59
Healthcare systems have reported a range of problems, from disrupted revenue management to delays in prescription processing.

25:06
And despite assurances, there has been no clear timeline for when services will return to normal.

25:11
Now I’m recording this on Monday, March 4th.

25:15
You’re likely listening to it a week later, so hopefully by now there will be an update.

25:20
But as of today, there’s been no clear timeline for when services will return to normal, and this has forced healthcare providers to adopt manual workarounds, which are less efficient and more time consuming than their digital counterparts, as we know.

25:34
And the ransomware group Alf V, also known as Black Cat, has stepped forward claiming responsibility for the breach.

25:43
So this incident really underscores the rising cyber risks in healthcare, highlighted by a staggering increase in data breaches and ransomware attacks in recent years.

25:54
The attack on Change Healthcare serves as a reminder of the healthcare industry’s vulnerabilities and the pressing need for airtight cybersecurity measures, and healthcare entities are advised to prepare for such incidents with contingency plans.

26:11
Yet these healthcare ecosystems have such a complex and interconnected nature.

26:16
It does make it very challenging to isolate and protect against cyber threats, but so just another wake up call that is emphasizing the need for tight cybersecurity protocols and preparedness.

26:29
And to end our new segment on a positive note, Callie Burnett’s son Spencer was born with congenital heart defects and spent nearly two months in the NICU.

26:38
This life altering experience LED Burnett, formerly involved in a family family business, to become a NICU nurse at Riley Hospital for Children in Indianapolis, the very place that provided critical care for Spencer, her son after his birth.

26:54
Her first hand experience with the hospitals caring staff during a frightening time inspired Burnett to pursue nursing, aiming to provide the same support and care to other families facing similar challenges.

27:06
After completing nursing school, which she described as tough but well worth it, Burnett knew her heart belonged at Riley Hospital for Children where today as a NICU nurse she offers a unique perspective to anxious parents, sharing her empathy and understanding rooted in her own experiences.

27:24
Meanwhile, Spencer is now an energetic second grader and avid sports enthusiast, and he continues to thrive, bringing joy and laughter to those around him.

27:35
And that news story officially wraps up this week’s podcast.

27:39
Thank you, as always, for spending a few minutes of your week with us.

27:42
Make sure to subscribe or leave a review on whichever platform you’re listening from.

27:47
I hope you have a great day and we will see you again next week.