While ASCs remain largely independent, consolidation is still on the rise in the industry and a number of factors shape ASC independence.
Compensation and reimbursement issues
In November 2024, CMS finalized a 94-cent (2.83%) conversion factor decrease from 2024. The physician fee schedule conversion factor for 2025 is $32.35, down from $33.29 in 2024. Physicians and medical groups have expressed concern over the decrease in reimbursements, sharing that year-over-year decreases are proving unsustainable for many.
"It's forcing independent ASCs to be bought out by larger entities because they can't sustain themselves," Bill Rhoades, COO of Harrisburg (Pa.) Endoscopy & Surgery, told Becker's. "Their return on investment is lower than expected."
Billing issues with payers were a major area of concern among independent ASCs and a possible reason for seeking a hospital or health system partnership, according to L.E.K. Consulting's "2024 ASC Insights Study."
"Payers tend to only want to talk to you if you're a part of or affiliated with a health system," Kristopher Kitz, CEO of Wyatt Surgery Center in Tucson, Ariz., told Becker's. "If you're not, payers typically will try to not talk to you or offer only really bad rates."
However, there could be hope for ASCs facing similar issues with reimbursement. On Nov. 1, Sens Bill Cassidy, MD, R-La., and Maggie Hassan, D,-N.H., published a paper pushing for site-neural payments, explaining how the policy could reduce healthcare costs for patients while creating parity for reimbursement rates between HOPDS and ASCs.
"While many factors drive health spending, rising healthcare costs have in part resulted from an increase in consolidation among hospitals and outpatient care settings — such as physician offices and ambulatory centers," according to the paper. While two-thirds of doctors practiced independently or in non-hospital settings a decade ago, today, at least half of physicians are hospital-employed. At the same time, patients are more frequently receiving care in outpatient facilities, and inpatient admissions to the hospitals are trending downward."
Inflation and operational challenges
Inflation specifically in healthcare, continues to rise. The Medicare Economic Index, which measures medical practice cost inflation, increased 4.6% in 2023, the highest in the last 23 years.
"While supplies and staffing have always been the top two expenses, the rate at which they are increasing has accelerated," Traci Albers, CEO of Surgical Management Professionals in Sioux Falls, S.D., told Becker's.
Ms. Albers cited staffing as another major obstacle for ASCs, particularly regarding anesthesia providers.
"In addition, anesthesia is now a cost for many ASCs that previously did not have to subsidize their providers," she said. "While the impact of increased staffing costs varies by region, shortages with surgical techs and radiology staff, for example, are pushing salary costs upward. Since COVID-19, supply and pharmaceutical costs have grown more rapidly than reimbursement, and I do not foresee that changing soon. Lastly, with increasing anesthesia shortages, increasing salaries, and stagnant reimbursement, ASCs are now subsidizing anesthesia."
Possible momentum toward independence among employed physicians
While many factors point toward increased consolidation in the ASC industry in coming years, some data indicate that physicians may be becoming less satisfied with hospital employment and are seeking new avenues for independent practice.
Consulting firm Bain & Co. recently released its "Frontline of Health Survey" in an October blog post, which highlighted that nearly 25% of physicians in health system-led organizations are debating a change in employers, compared to 14% in physician-led practices.
Many physicians cite reasons such as reimbursement declines, regulatory burdens, a lack of leverage with payers and soaring practice costs as reasons for shifting to independent practices. But Bain's survey suggests that physicians are increasingly less satisfied with this tradeoff.
Among physicians in physician-led practices, 78% said their organizations have effective processes and workflows, compared with just 59% of those in hospital-led organizations. Those in physician-led practice also reported 81% satisfaction with their involvement in strategic decision-making, compared to just 50% in hospital-led practices.
And some ASC developers, like Ker Leader Medical, are answering this shift with a business strategy that centers practice independence.
Woodrow Moore, one of the founders of Ker Medical, told Becker's about the organization's commitment to supporting independent ASCs. He emphasized their ability to provide high-quality care through strong physician leadership.
"We believe that physician leadership results in better-quality healthcare," Mr. Moore said. "Independent ASCs prioritize physician governance and leadership, which strengthens their ability to remain independent. This independence is closely tied to providing comprehensive patient care through ancillary services."