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The biggest opportunities for ASC revenue growth in the next 10 years: 3 Qs with Dr. Henry Miller

Henry Miller, PhD, a managing director of consulting firm Berkeley Research Group, has more than 45 years of experience in healthcare, including provider payment system design, regulatory analysis and strategic planning.

Here, Dr. Miller weighs in on the top challenges and opportunities in the ASC landscape.

Note: Responses have been lightly edited for style and clarity.

Question: What is the biggest opportunity for revenue growth you see for ASCs in the next 10 years?

Dr. Henry Miller: Like everything else in healthcare, the most significant opportunity that's going to come no matter what, is older patients needing more care. There's a steady increase in the shift from inpatient to outpatient procedures. I would've said five years ago that most of the procedures that could have shifted had already, and I would expect to see less and less of that. That's true, but year after year, there continues to be a decrease in inpatient procedures and an increase in outpatient procedures, many of which go to ASCs.

New procedures being done outpatient and therefore being done in ASCs is a big opportunity for revenue growth. There are more knee and hip replacements being done outpatient, but the one orthopedic area I see the most growth opportunity in is spinal fusion cases. Those used to be done almost entirely on an inpatient basis not that long ago, and I'm seeing more and more being done outpatient. Spinal fusions are high-value procedures; the facility fee is among the highest an ASC is going to get for a procedure, making it a big opportunity.

There's also been an increase in interventional cardiology procedures performed in ASCs. Another thing I've seen too are more gynecology procedures; hysterectomies have been performed in ASCs for a long time, but it looks like there's been increasing numbers of them. However, the procedures I think are going to have the biggest impact over the next 10 years are the orthopedic procedures in that not only can they be done safely, but in addition to that they are high value. Another thing that's helping that along is that Medicare keeps revising its inpatient-only list to determine whether it'll pay for procedures on an outpatient basis. Medicare has a much bigger impact than just Medicare patients because pretty much all of the commercial insurers watch what Medicare does. So, if Medicare is paying for certain procedures to be performed on an outpatient basis, then most of the commercial insurers will pick up on that and do the same thing.

There has always been a great deal of pressure on costs, and that's in part what led to the development of the ASCs in the first place. That pressure on cost now is manifesting itself in a different way. There's a lot more opportunity in shared savings programs and pay for performance programs. To the extent the insurers that contract with health systems, I see more and more opportunity for ASCs to play a greater role. It hasn't happened as much as I've expected to so far, but nevertheless, I think that there's going to be more attention paid to including ASCs in shared savings programs because it's cheaper for the insurer.

Q: What strategies do you suggest for ASCs looking to increase patient collections?

HM: To me, one of the issues ASCs have is that they are much more limited in an administrative sense compared to hospitals. They need to control overhead and they don't have the same opportunity to build an administrative staff the same way hospitals do. In fact, the way they need to increase collections is to behave like hospitals, which generally do a good job at managing their collections. For example, when a patient is going to be admitted to the hospital, the first thing that happens is that they have a contact with the admissions department, which will contact the patient and make sure they have good insurance information. ASCs do this too, but they don't do it to the same extent as hospitals, which have also adopted a practice of posting cash prices. During this initial call with the patient, if the hospital learns they either don't want to use their insurance for some reason or if the procedure isn't covered by insurance or if the patient doesn't have insurance, hospitals can offer them the cash price, which is different from the charge.

Hospitals also use financial counselors much more effectively. If a patient has difficulty paying, they can work with them and develop a payment process they can manage. If I had to give advice to an ASC about how to improve collections, I would focus on the idea that they should think like a hospital does.

Although, smaller ASCs tend to not have the opportunity to generate the revenue they need for overhead. So, their billing and collections staff is much more like a doctor's office than a hospital.

Q: What trends or challenges do you foresee affecting ASC revenue?

HM: The things I see as a trend are hospitals buying ASCs. With ACOs and shared savings programs, hospital systems are becoming more interested in high-quality, low-cost alternatives. They're beginning to understand that they can't do the same with their hospital outpatient departments than they can with an ASC. I assume over the next couple years, there will continue to be an increase in hospital investment in ASCs.

I think the main factor that is going to affect the future of ASCs is the increase in the procedures that can be done in an ASC. I think Medicare is paying much more attention to ASCs than they used to, and they're recognizing that there are more procedures able to be performed in an outpatient setting, not only because of technology, but because of anesthesia as well. With the exception of older patients and those with more serious health problems, we'll see the majority of things like knee replacements being done in ASCs rather than in hospitals. Orthopedic procedures are really going to have an impact on the growth of ASCs going forward.

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