ASC industry expert and Apache Health President Sean McSweeney was recently quoted in Becker’s on where the ambulatory surgery center industry is headed:

 

Question: With the ASC market approaching saturation, what does the future hold for the industry?

Sean McSweeney:

There were [approximately] 86 new ASCs in 2016 [out of] a total of approximately 5,260 [ASCs in the nation]. This means there was an increase of only 1.6 percent [regarding new] centers last year. Market saturation has been achieved.

Combine this information with several other things including:

  • 56 percent of the payer mix being commercial, according to VMG Health’s Multi-Specialty ASC Intellimarker 2017 Survey
  • A rise in awareness around surprise balance billing and legal attempts to curb this in many states
  • A rise in narrow networks
  • Patients becoming more educated and aware of the costs of healthcare and tools to calculate expected costs
  • Insurance companies making reimbursement at ASCs more difficult in the last few years, with increased documentation requirements and capped day rates, among other efforts.

Surgery centers are basically a capacity utilization game; the cost per procedure on a marginal cost basis is not great, but the fixed costs and overhead are very high. If centers can do a lot of volume, they are immensely profitable. If they cannot, they will fold.

We are increasingly seeing ASCs in the market polarizing to either very full or highly underutilized. Many that were full in past years have dropped as much as 90 percent in volume as the business shifted to other centers.

We expect more consolidation where doctors become part owners or participate financially in the ASC, or move their business elsewhere. We eventually expect some of the massive growth in the number of ASCs we saw a decade ago to reverse itself. There will be a contraction in the number of facilities with overall increased average utilization and profitability going up.”

 

You can read the full Becker’s ASC Review article.

 

Notes on The Future

We expect an intermediate term trend where there is some shifting of volume from some ASC’s to others as facilities with better management, physician recruiting, and ASC billing take more of the volume.  This may lead to some of the massive growth in the number of ASC’s we saw a decade ago to reverse itself and potentially a contraction in the number of facilities.  This should actually help the industry overall by increasing average utilization and thus driving profitability up.  The remaining ASC’s will be more competitive and are likely winners in large part due to improved revenue cycle management (including contracting) and physician recruiting (marketing).  Over the longer term we expect ambulatory surgery center case volume to continue to increase and increased capacity utilization will eventually drive both overall growth in procedure volume, as well as ultimately an increase in building more ASC’s.

 

About Apache Health

Apache Health is a revenue cycle management (RCM) analytics, benchmarking, and auditing company. The founders of Apache formerly ran a large RCM company that was acquired by a private equity group in a rollup. Apache’s predictive analytics will benchmark billing performance and project exactly how much more revenue you should earn from your existing volume of patients.  Using many factors and a blend of artificial intelligence and specialty specific benchmarks, the model projects whether changing the billing process would improve collections for your particular mix of procedures and payers. Apache Health can help you evaluate whether to outsource the billing, determine which billing company to select to maximize performance, or track inhouse billing performance improvement over time. For more information contact:

Sean McSweeney

888-422-5514