Looking Ahead

While adding ophthalmology services may not produce impressively high profit margins, ambulatory surgery centers (ASCs) may find that case volume, driven by cataract surgeries in particular, could boost revenue streams. Many ophthalmology-related procedures, including cataracts, can be performed quickly and can fill up an empty OR for an entire morning or afternoon. A 2008 survey from VMG Health Intellimarker stated that ophthalmology is the third highest specialty in total case volume, representing 15 percent of all case volumes in the United States. The Centers for Disease Control and Prevention (CDC)’s recent report on outpatient surgery confirms that there were 3.1 million cataract surgeries completed in 2006.1

“I’ve seen surgeons do four (procedures) in an hour,” says Dick Minors, director of access services and sales administration at SightPath Medical. “But I’d say on average, a surgeon can do three in an hour. So the (surgeons and staff) can turn around a room quickly and have another procedure up and running in a short amount of time.”

Minors acknowledges the small profit margins associated with cataract surgeries but compares them to orthopedic cases: “Although you make a large gross margin on an orthopedic case, you might be able to do three, four or five cataract procedures in the same time that you’re doing that one orthopedic case. I think in fairness, you’d have to say that the margins per case are not big, but they can do a lot of cases in a morning.”

Baby boomers and their eye-care needs are partially driving the spike in cataract procedures. By 2010, the older population is projected to be at 40 million, due to the fact that the baby boomer generation will turn 65 in 2011. This will result in a doubling of the older population by 2030, growing from 35 million to 72 million. And many of those seniors will be in need of cataract surgery, states Ann Deters, a member of the cataract division staff at Vantage Outsourcing.

“The older population will continue to grow at a faster pace than the total population and this trend will continue well into the 21st century.” She continues, “With this scenario present, expanding residency training programs to their maximum capacity will maintain the current national ophthalmologist-to-population ratio. But, it will not be enough to address the shift in demographics as baby boomers age. Bottom line is that we need to start putting things in place over the next 12 years in order to meet the growing demand of cataract patients.”

Another issue for adding ophthalmology is the equipment and the costs involved. Melissa Waldroup, a product manager in the ophthalmology division of Leica Microsystems, states that new, state-of-the-art equipment for ophthalmic procedures is readily available, and can have a dramatic effect on saving case times.

“In considering something like a new surgical microscope, which is a high-dollar capital budget expense, physicians and facilitators should look at how this piece of equipment will do more than give a good view. New microscopes offer features like auto reset, rotatable beam splitters, small footprint and programmable preference lists, which can together save eight minutes per case.”

One way that surgery centers can improve profit margins is through outsourcing, says Minors. “I think the other part is if I owned a surgery center, and it was a multispecialty surgery center, I would look to bring a service in. Because if you’re just going to bring in one ophthalmologist or two — ophthalmologists are like other doctors — they’ll either stay or they may not stay. Is it really smart to buy the $300,000 worth of equipment, instrumentation and capital, then six months later, the physician leaves? Even after you lose one surgeon and gain another, it doesn’t mean they’re going to like the same equipment. And there isn’t just one company’s product that’s popular out there.”

For multispecialty surgery centers who want to utilize their space without making any capital expenditures, outsourcing is the best way to go, Minors believes. “I think the combination of the aforementioned programs works quite nicely in that they’ve got an OR; they want to fill it with procedures one day a week or two days a week all morning.”

Another factor could be reimbursement from the Centers for Medicare and Medicaid Services (CMS). Unlike other specialties that have taken a considerable hit in payments, ophthalmology has stayed relatively free of reductions in recent years. There is, however, a planned cut of 2 percent coming in Medicare’s payment schedule for 2010. But not to worry, states Waldroup.

“It is still a worthy specialty to get into, even with the state of Medicare and the future outlook,” says Waldroup. “Ophthalmology still seems of the highest volume of cases of any other specialty. The volume seen still makes this specialty profitable, but with the outlook of Medicare, hospitals will need to tighten their belt, and ASCs will either continue to fight for higher reimbursement rates or be absorbed into hospitals.

“Truth be told,” says Minors, “it depends on what you look at with Medicare reimbursement. There’s an ambulatory surgery center reimbursement and there’s a hospital reimbursement. And of course, there’s the provider side or the surgeon side. And the provider side has been going down. I want to say, every year it goes down a few dollars. A lot of people would say it hasn’t gone down a lot, but if you’re a surgeon, you might say if it goes down $5 to $8 per year, that’s a lot. It’s a mixed bag because ASC (reimbursement) has been going down the last few years. Actually for about two or three years, it stayed the same — $979 per procedure and then it’s come down $10 or $15. But hospitals for the last seven or eight years have actually gone up every year; four to six percent every year.” He also feels that because surgery centers don’t have all the expenses hospitals do is a big reason why Medicare chooses to pay hospitals more. He also warns that ASCs also need to and are exceptionally on top of their costs, and what they’ll accept, to avoid the sting of reimbursement reductions.

Deters also believes CMS, other than the upcoming reduction in 2010, will not significantly reduce reimbursement for cataract procedures. She points out that the ophthalmology industry did take significant hits received over the past 10 to 20 years from Medicare, and doesn’t feel that they would delve any deeper in ophthalmology. “I feel CMS is looking to other fields, such as orthopedics, for reimbursement reductions.”

Reference

1. Cullen KA, et al. Ambulatory Surgery in the United States, 2006. Centers for Disease Control and Prevention, National Health Statistics Reports No. 11. Jan. 28, 2009.

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