Blogs

Ambulatory surgery centers, an alternative to hospital outpatient departments?

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. 

Your Rating

Slack set out to kill E-mail

Started as a side project for internal use in a gaming company High revenue growth with recurring revenues Went Public by offering shares through the Direct Public Offering ...

Tire manufacturing industry, analysing the cost and margin trends

The global market for tire manufacturing stands at $180 billion. Michelin anticipates the long-term demand to rise at the rate of 5 to 10% a year in developing markets and 1 to 2% a year in mature...

Rapidly growing Indian online food delivery industry and its unrealised profits

Evolution of online food delivery industry in India Geographical penetration and scope for expansion Key players and their zeal to balance revenue and costs   Online...

An analysis of Malaysian rubber glove industry

How big is the international rubber gloves market? Reasons behind the healthy and steady growth Malaysia’s role in the industry Why are companies struggling for stable...

Failure of Amazon in China, an analysis

E-commerce market in China Online consumer product retailers in China Performance of Amazon in China   Amazon is a global e-commerce player selling a wide...

Can lithium-ion anode demand for needle coke reduce availability for electrode players?

What is needle coke? Uses of needle coke Lithium-ion battery manufacturers demand needle coke   Needle coke? Needle coke is a specialised form of petroleum coke...

Is the radio broadcasting industry in the U.S. dying? An analysis

Radio, the most powerful medium of reach in the U.S. Why the industry is moving at a slow pace? Radio’s health is still sound, will it continue in the long-term?   ...

Carbon black industry, strong potential for supernormal profitability?

What is carbon black? Its uses Impact of the environmental curbs in China   What is carbon black? Carbon black is a fine carbon powder and it is a disorderly...

Housing finance market in India. Is affordable housing driving the growth?

Overview of the housing finance sector in India Key players dominating the segment and their dynamics Factors driving aggressive demand for housing   The housing...

Indian wood panel industry, growth drivers and present trends

Current market scenario in the Indian plywood industry Growth in the housing sector and rapid urbanisation to provide the boost GST rationalization to reduce price difference...

Sri Lankan economic and political crisis

Sri Lanka’s latest political crisis, who governs the nation? Poor economic indicators adding to the nation’s woes   Sri Lanka is currently embroiled in a political crisis,...

Blockchain, an emerging concept, a disruptive technology (Part 1)

What is blockchain? How is blockchain revolutionary? Cryptocurrency, the new money ICOs, the new way of raising money Summary Blockchain is a software architecture...

Rice industry outlook 2018

Major rice producers and consumers Global rice trade Factors dominating the trade   Rice is the 3 rd largest produced agricultural commodity in the world, after...

Rise of Ant Financial, will the success story continue?

What is Ant Financial? Journey to become king of unicorn Will regulatory curbs hinder its success journey?    Ant Financial, an affiliate and integral part...

Malaysian rubber glove industry, an update

Rising global demand for gloves Impact of USP 800’s implementation and the US-China trade war on Malaysia’s rubber gloves industry Key challenges for the Malaysian rubber...

Unnoticed growth of the media and entertainment industry in India

Overall industry brief Growth of the M&E industry and its segments Major supporting elements of this growth   Media and Entertainment (M&E) is a very wide industry...

Battle for the textile and apparel industry in Southeast Asia

The reasons for China’s decreasing presence in the industry Initiatives by the governments in Southeast Asia to boost the textile trade Vietnam and Bangladesh’s quest to conquer...

Baidu’s Apollo, the underdog of autonomous driving platform

Overview of the autonomous vehicle sector in the global automobile industry Search giant Baidu’s entry into the autonomous driving space Baidu’s approach in becoming a front-runner...

OYO Rooms, an Indian start-up to enter Japan

Growth story of OYO Rooms in India Business model of OYO Rooms Analysis of strategy to enter Japan   OYO Rooms, the Indian start-up has decided to venture in Japan...

Education industry in India, an overview

Growth of private universities in the nation Future potential of the education industry in India   The education sector in India is estimated to be worth USD 91.7 billion...