Headwinds and Tailwinds Shaping ASC Performance

Digital Debut

Headwinds and Tailwinds Shaping ASC Performance

Be proactive to stay on course

Asked to consider the challenges and opportunities ASCs will confront in 2024, Colin Park, managing director for VMG Health in Dallas, Texas, says, “The biggest difficulties concern expenses.” He puts staffing costs at the forefront.

"When comparing ASC staff costs today to where they were just a few years ago, they are significantly higher," Park says. "In addition, in some markets, ASCs are still needing to rely upon expensive contract labor."

Meg Stagliano, RN, vice president of business development at RWJBarnabas Health in West Orange, New Jersey, expects wages to continue climbing and competition for staff to become more challenging.

"In the hospital world, there are a lot of union negotiations happening," says Stagliano, who is also the president of the New Jersey Association of Ambulatory Surgery Centers. "When new contracts are signed, ASCs experience the impact within a few months. In the past, ASC wages were largely isolated from hospital wages. Now we are feeling increased pressure to be more competitive with hospitals around wages and benefits, which is difficult."

Another expense of great concern to Stagliano surrounds anesthesia coverage. A shortage of anesthesiologists has driven up their wages and introduced a new challenge for ASCs, she says. "For the first time, ASCs are being asked to pay stipends to their anesthesiologists. This is a big change for our industry."

Stipends are placing a significant burden on ASCs' bottom lines, Park says. "Anesthesia stipends are needed to continue ensuring complete coverage for existing procedures. This expense does not drive additional revenue."

The current economic environment is straining ASCs in other ways. Inflation is increasing supply and implant costs, often outpacing reimbursement growth, Park says, while higher interest rates are creating financial headaches for ASCs making capital investments. "Facilities that must make large equipment purchases to support growth or replace old equipment are finding it is a lot more costly to borrow the money to do so compared to a few years ago."

On a positive note, reimbursement is becoming more favorable to ASCs, Park says. "Payers prefer the ASC as a lower-cost environment, and physicians like performing procedures in the ASC setting. This shared appreciation is leading to greater financial alignment."

The continued outmigration of surgical care from hospitals opens the door for ASCs to perform new procedures and grow their volume, Stagliano says. "With Medicare approving more codes for ASCs, we are seeing more complex specialties and cases come to our centers. Cardiology is going to be the next forefront for ASCs, and we will continue to see more total joint, orthopedic and spine cases. When the complexity of cases ASCs perform goes higher, this leads to higher reimbursement."

Stagliano sees an opportunity for ASCs performing more complex procedures to carve out niches in their marketplaces. "Becoming a center of excellence and one your community identifies with certain procedures can help you differentiate your ASC and be more competitive."

Potential changes to certificate of need (CON) laws could help spur growth in the ASC industry, Park says. "South Carolina is peeling back its CON rules, which represents an opportunity for the development of new ASCs. South Carolina may be the first CON domino to fall, and then we may see surrounding states following suit in reforming and repealing their laws. This could result in the development of new centers along the East Coast."

ASCs should take the time to understand and work to account for how headwinds and tailwinds will likely affect their operations, Stagliano says. "Come up with a strategic and five-year plan for where you see your centers going. If ASCs hope to remain competitive, they must be proactive."