With all of the recent news from payers, 2019 is the year that the floodgates opened for ambulatory surgery centers (ASCs). This belief of mine was reinforced when I attended the 2019 Becker's ASC Annual Meeting, which took place Oct. 24-26 in Chicago. Payers, commercial or government, know that ASCs are about half of the cost of a hospital and have amassed increasing evidence of equal if not better outcomes than the hospital itself for the appropriate patient pool. These groups are now making big moves to realize significant cost savings from shifting the site of care.

Here are some examples of payer actions this year:

• In September, United Healthcare announced that it will implement prior authorization requirements and site-of-service medical necessity reviews for certain procedures if they are requested to be performed in the hospital outpatient setting (effective November or December for many states).
• In July, CMS proposed adding total knee replacementsto the ASC-approved list for 2020 as well as increasing ASC payment rates. Along with this proposal, CMS very directly stated that the payment change “will also help to promote site neutrality between hospitals and ASCs and encourage the migration of services from the hospital setting to the lower-cost ASC setting.” In addition, six percutaneous coronary intervention procedures have been proposed for ASCs. By removing total hip arthroplasty from the inpatient-only list, it's only a matter of time before those are also approved for the ASC setting. (On Nov. 1, CMS announced that it had finalized these changes.)

• Effective in March, Blue Cross Blue Shield of Minnesota (BCBS MN) no longer covered procedures such as endoscopies and colonoscopies at a hospital if an ASC within 25 miles offers the same services at a lower cost. BCBS MN then implemented the same policy for ear, nose and throat procedures, effective July 1.
• Other insurers have been implementing similar policies or offering lower co-pays to steer patients to ASCs over hospital outpatient.

While medical improvements in areas such as minimally invasive procedures, pain management and infection control are what enabled procedures to be performed in ASCs, payers are the new, central driving force, actively pushing these procedures to the site of care. However, payers are not the only driver. Two others are playing a key role:

1. Patients: Given that patients often pay a hefty portion of their procedure cost out of pocket, there's incentive for them to choose ASCs. With more educated consumers and greater price transparency, patients are choosing to have their procedures performed in an ASC if they are of the right medical profile. For a lower cost and a better experience, and equal (if not better) outcomes than the hospital, wouldn’t you also choose an ASC?

2. Physicians: There are also strong financial and professional incentives for physicians to own and practice at an ASC. Financially, surgeons who own a portion of an ASC share directly in the profits of that small business. This can often mean a significant increase in compensation for surgeons who own a high-performing center. On the professional front, physicians can gain independence from hospital control by joining an ASC. With fewer than one-third of physicians self-identifying as independent practice owners or partners today, the ASC offers an opportunity to escape hospital control over a physician's decisions on patient care. Furthermore, ASCs provide surgeons more time to do what they enjoy and what they were trained to do. Surgeons going from performing three or four procedures at a hospital to seven or eight procedures at an ASC is not uncommon. Finally, there's also the benefit of the reduced administrative burden.

So what could happen next in the provider landscape? As more procedures move to the ASC setting, here’s what we can expect, along with some questions to ponder.

• Rules could expand to include 48-hour stays at ASCs. At the Becker’s ASC event, speaker Dr. Louis Levitt, vice president of The Centers for Advanced Orthopaedics, estimated that 48-hour stays could solve 90% of the surgery needs in the country. How will ASCs need to adapt their operations? What will happen to their cost structure?
• ASCs will look to acquire or partner with post-acute facilities. If ASC payments become tied to outcomes (like Comprehensive Care for Joint Replacement), then ASCs can’t rely on the procedure alone for a positive long-term outcome. They’ll need to work with other entities like rehab clinics, skilled nursing facilities and homecare agencies to influence further downstream in the continuum of care. We are already seeing ASCs joining clinically integrated networks to account for this.
• More hospitals would close. Those that remain will care for the sickest, riskiest patients or provide urgent care for trauma or obstetrics, for example. As hospitals are often one of the largest employers in their geography, what will this mean for the economy and communities?

Here’s what medtech manufacturers will need to do:

• Start seeing ASCs as legitimate customers instead of interesting anomalies, if you haven’t already. Once you accept the shift to ASCs, however rapidly it occurs, you can act on it and enable change.
• Construct the value proposition for the new decision-maker. While the hospital has a value analysis committee with numerous roles, such as administrators, surgeons, nurses, procurement and supply chain managers, the ASC has physician-owners. This role is part care provider, part P&L owner and part administrator, and it has the considerations of all those separate roles all wrapped into one. Medtech needs to develop a clear and compelling value proposition that caters to this one role who is weighing the trade-offs between cost, outcomes, service, efficiency, ease of use, etc. Those who do this successfully will become the ASC’s partner of choice.
• Develop offerings to deliver on your newly defined ASC value proposition. As I alluded to above, ASC physician-owners and operators have many headaches outside of medical equipment cost when running their business. For these business owners, staffing, sterilization and stock space are top pain points, which are different than or more heightened compared to the hospital. Therefore, medtech’s value to ASCs can’t just be about reduced price and the basic portfolio offering. They will also need to redefine their offerings to ASCs to address their true pain points to remain competitive.
• Redefine the partnership with hospitals. As hospitals are “raided” of their lower-acuity, high-profit patient population by ASCs, only vulnerable, higher-acuity, higher-risk patients will be treated there. Medtech will have a new opportunity to help their hospital customers prepare for this shift and help them achieve better outcomes, improved efficiency and enhanced patient experience for predominantly complex cases.

These are but a few changes that medtech companies may have to make to outcompete and survive in the new provider landscape. I’ll leave you with a wild idea to consider in this evolution: Could medtech companies become part owners of ASCs to truly control more of the patient journey and outcomes?