7 Trends and Opportunities for Ophthalmology in Surgery Centers

1. Increasing volumes as the population ages. ASCs can expect an increase in demand for ophthalmic surgical procedures as Baby Boomers begin to age, says Richard Lee, MD, an ophthalmologist at Eastbay Eye Specialists in Oakland, Calif., who performs cases at EyeMD Laser and Surgery Center, also in Oakland, and is a member of the American Academy of Ophthalmology.

“The number of Medicare patients is expected to double in number over the next two decades as Baby Boomers begin to age, which will keep ophthalmology very busy,” says Dr. Lee. “Surgical volumes [for ophthalmology] are expected to increase 30-50 percent over those years.”

2. Continued focus on efficiency. ASCs that continue to focus on efficiency should experience continued success, say several ophthalmologists.

“Improving efficiencies and an increased focus on cost containment will allow ASCs to keep up with pressures of continued reduced reimbursements,” says Cary Silverman, MD, an ophthalmologist at River Drive Surgery Center in Elmwood Park, N.J.

ASCs’ costs are traditionally lower than hospitals for ophthalmology cases, and the savings ASCs offer should continue to bring eye cases to ASCs.

“The average facility fee at an ASC is $1000-$1,100, with hospital fees running up to three times as much in some cases, says Dr. Lee.

3. Growing case loads slowly. Even adding only one additional case per day can have a big impact on profitability.

Dr. Lee says his ASC worked to add an additional case per day for subsequent years, allowing volumes to grow slowly.

“There is this pressure to attract only the best and the fastest physicians for an ASC, and that’s fine until you run out of doctors,” says Dr. Lee. “You don’t need to do that. As you become more efficient, adding one more case a day can build your volumes over time.”|

Because of the principle of marginal costs, Dr. Lee’s ASC was able to generate a 60 percent increase in profitability from just a 16 percent increase in surgical volume in 2009, he says.

4. Multi-focal implants with cataract procedures. Physicians can offer improved patient outcomes and increase ASC revenue by offering patients a high-end muti-focal implant while undergoing cataract surgery, says Peter Colquhoun, MD, an ophthalmologist at Southwest Michigan Eye Center in Battle Creek, Mich., and a physician-owner of Brookside Surgery Center, also in Battle Creek.

Although the price of lens implants are bundled into payments for cataract surgery, if a physician and patient select a higher-end multi-focal implant, such Alcon’s ReStor IOL or Abbott’s ReZoom IOL, ASCs, at least in Michigan, can balance bill a patient for the additional cost of the lens, says Dr. Colquhoun. Balancing billing allows for cataract patients, who are often covered by Medicare, to receive the highest-level technology — a technology that Medicare would otherwise deny, he says.

5. Retinal procedures. While cataract surgery remains the most poplar ophthalmic procedure within the ASC setting, expanding to retinal procedures, such as pars plana vitrectomy, can be profitable if centers are willing to invest in the equipment needed to perform these cases. Shorter procedure times and less-invasive techniques have made retinal procedures now appropriate for the ASC setting.

“There is a long history of the ASC being mainly relegated to cataract surgery, with retina surgery traditionally being done in hospitals,” says Pravin Dugel, MD, an ophthalmologist at Retinal Consultants of Arizona in Phoenix who performs cases at Spectra Eye Institute in Sun City, Ariz., and member of the AAO. “Changes in instrumentation and reimbursement have made retinal procedures applicable for the ASC-setting, and that’s where growth [for ASCs] lies.”

Equipping an ASC for retinal procedures may cost as much as $200,000-$400,000, but can be “fantastic investment” if the physicians are committed and dedicated to the program, says Dr. Dugel.

6. Glaucoma procedures. Glaucoma procedures may also be a way for ophthalmology service lines to expand their offering and attract more cases.

Dr. David Kwiat, MD, FACS, an ophthalmologist at Kwiat Eye and Laser surgery who practices at Fulton County Ambulatory Surgery Center in Johnstown, N.Y., says his ASC is focusing on adding glaucoma procedures such as cyclophotocoagulation.

“For an ASC like ours that focus mainly on anterior segment surgery, adding glaucoma procedures should prove beneficial,” says Dr. Kwiat. “The patient benefits as well with a less invasive glaucoma treatment option and less postoperative difficulties.”

Dr. Colquhoun says his practice is considering recruiting a glaucoma specialist in the coming year, who could then perform some procedures such as implantations of mini shunts to treat glaucoma, at the ASC.

7. Oculoplastics. Although the volume of plastic surgery has dropped dramatically with the economy, Dr. Colquhoun expects some of that business to rebound in 2010. “With the economy improving in the next year, we are hoping lid corrections and other elective ophthalmic procedures, such as LASIK, will increase,” he says.

Anesthesiologist Dr. Gregory Hickman Discusses How Advances in Post-Operative Pain Control Can Improve Patient Satisfaction, Surgery Center Volume

The Andrews Institute is a nationally recognized orthopedic treatment and research center located in Gulf Breeze, Fla. The Andrews Institute features one of the most utilized athletic performance centers in the country as well as its own freestanding, multi-specialty ASC.

The reputation of the Andrews Institute attracts world-class athletes from across the country, as well as area residents, for treatment. The Andrew’s Institute’s ASC, which was opened less than three years ago, performs around 380 procedures monthly and expects continued growth in coming years. The ASC has grown and attracted new patients due to the exceptional experience patients report having at the center — a positive experience that is due largely to the center’s cutting-edge techniques in post-operative pain control, according to Dr. Gregory V. Hickman, MD, medical and anesthesia director at the Andrews Institute Ambulatory Surgery Center.

Many anesthesiologists report that pain control through regional blocks has reduced post-operative pain for their patients in addition to reducing PACU times for patients, which improves ASC efficiency. Dr. Hickman performs regional blocks with continuous catheters under ultrasound guidance for most of his cases. Dr. Hickman uses ON-Q C-bloc for his patients, he says. This allows him to minimize patients’ need for narcotics, which can have side effects such as nausea, constipation, urinary retention and grogginess, in the operating room, PACU and after discharge, he says.

“Without a continuous catheter, patients get through the first 12-18 hours fairly easily on their regional block; however, after that they hit a huge amount of intense rebound pain,” says Dr. Hickman. “With a continuous pain pump, patients turn on the pump before they go to bed on the day of their surgery and then receive approximately 100 hours of continuous infusion from the pump that, when empty, they simply remove and throw away.”

Patient satisfaction scores are very high due to the increased comfort, and the ASC is able to generate some additional income through the reimbursements on these pumps, says Dr. Hickman.

Dr. Hickman says the benefits of the center’s use of regional blocks in concert with a continuous pain pump has spread by word-of-mouth and attracted patients to the center. The pain pumps are part of the center’s goal to be “on the forefront of providing the best care possible” to its patients, says Dr. Hickman.

Learn more about the Andrews Institute.

Thank you to Rachel Stein at I-Flow Corp. for arranging the interview with Dr. Hickman. Learn more about I-Flow Corp.

Co-Management Arrangements: Comprehensive Pay for Performance

Co-management arrangements are relatively new pay-for-performance programs whereby hospitals engage physicians to manage and improve entire hospital service lines (e.g., cardiovascular, orthopedics, etc.). These arrangements place emphasis on achievement of pre-established quality and performance metrics and can offer significant improvements over traditional physician medical director involvement in hospital operations.

Under this type of arrangement, a hospital enters into a formal agreement with certain of its medical staff physicians to manage a designated hospital service line. The primary purpose is to align physician and hospital objectives while recognizing and appropriately rewarding participating physicians for their efforts in managing and improving the overall quality and efficiency of the service line.

The core elements of these arrangements are built on the belief that well-defined operational goals can be achieved when physicians and hospitals work together. Therefore, incentive-based management programs must be designed with very specific objectives and clearly defined metrics. Typically, co-management arrangements include:

• The Base Fee is a fixed payment, typically paid monthly, that provides compensation for the day-to-day time and effort of the participating physicians in overseeing, managing and improving the service line.
• The Incentive Fee is at risk and is payable to the extent that pre-determined service line objectives are met.

FMV pitfall
Several FMV pitfalls to be avoided with co-management arrangements include:

• Co-management arrangements may be at substantial regulatory risk if not appropriately structured and/or if compensation exceeds FMV.
• Certain inherent subjectivity in co-management arrangements presents significant valuation challenges.
• Recognition should be given to the fact that the duties and scope of one co-management arrangement may be vastly different from those of another co-management arrangement.
• Care must be taken to insure that redundant medical director payments are eliminated in favor of the significantly more comprehensive co-management program.

Mr. Safriet ( ssafriet@hcfmv.com ) is a principal with HealthCare Appraisers, a nationally recognized valuation and consulting firm providing services exclusively to the healthcare industry. Learn more about HealthCare Appraisers.

7 Technology and Development Concerns for GI in ASCs

GI and endoscopy are high-volume, profitable procedures for ASCs and are dependent on advancements in technology and solid business strategies from start-up on. Here are seven important concepts about technology and development you should know for a successful GI-driven ASC.

Technology
1. Virtual colonoscopy remains a hot topic. Although virtual colonoscopy, or computed tomography colonoscopy, is currently not covered in the ASC setting, it still remains a controversial and much discussed topic for gastroenterology in ASCs.

Virtual colonoscopy is a non-invasive diagnostic tool used to detect polyps, which could be cancerous. Proponents have touted its use because it is a more comfortable, less anxiety-causing alternative to traditional colonoscopy, which may encourage more patients to undergo screening for colon cancer.

However, if a polyp is detected, patients must then undergo a traditional diagnostic colonoscopy, which is one of the reasons it is not covered by most payors.

“Virtual colonoscopy is an excellent imaging tool,” says Dr. Sears. “It is less invasive and has a lower rate of complications but it has a number of significant limitations which will likely limit its use. It requires a full bowel prep and is a painful procedure as air is inflated in the colon and sedation is not administered (as it is during a colonoscopy).” 

He also notes some other limitations. “It is unreliable for small polyps which can represent 80 percent of polyps seen in the colon,” Dr. Sears says. “It has a high radiation exposure equivalent to 250 chest X-rays. Because of these limitations, the U.S. Preventive Task Force did not endorse it as a primary colon cancer screening tool. I do not feel it will impact screening colonoscopies, but it does offer an alternative to a barium enema in the event of an incomplete colonoscopy.”

Dr. Bermudez agrees that virtual colonoscopy won’t surpass traditional colonoscopies. “I believe the main role [of virtual colonoscopy] will be in screening average risk patients. It is possible that it will decrease the number of [traditional] colonoscopies in this group of patients. On the other hand, virtual colonoscopy will identify a number of lesions (real and not real) that will require diagnostic colonoscopies, increasing the demand for diagnostic colonoscopy,” he says.

Mr. Tanner notes, “If and when it does get CMS approval, I believe that if the technology reached some percentage of the population that is eligible for screening but will not get screened due to fear of the invasive nature of the colonoscopy, then it will be good for patient care and will have limited impact upon GI ASC patient volumes.” 

2. Capsule endoscopy’s impact on ASCs is not yet known. Capsule endoscopy, in which a patient swallows a small capsule camera that downloads digital images of the small intestine for diagnosis, is still in early phases of development. Therefore, its impact on ASCs and tradition colonoscopy is still relatively unknown.

Dr. Bermudez notes that questions regarding the device’s sensitivity and cost need to be answered before it is considered a serious alternative to colonoscopy.

Mr. Tanner also does not think it will highly impact GI in ASCs. “Capsule endoscopy is not an approved ASC procedure, and currently it is primarily used for small bowel diagnostics. In that regard it is completely different from colonoscopy and non-threatening,” he says.

3. Other new technologies are on the horizon, but may not improve on traditional colonoscopy. Endoscopy, like other medical fields, lends itself to new innovations such as chromoendoscopy, endo-capusle for colon examinations, third-eye endoscopy and narrow-band endoscopy. However, the new technology is only as effective as other non-technological procedures essential for clear screenings.

Dr. Bermudez says of new technologies, “Some of these techniques may have a significant cost that may not be justified by the potential benefits. I think that there are techniques that can significantly impact the quality of care at no cost, such as the quality of prep for colonoscopy, withdrawal time, polyp detection rate and adequate follow-up colonoscopies if polyps have been found.”

Development
1. Make sure you leave room to grow when building a new center. While you don’t want to overbuild, you should leave room for growth within the plans for a new GI-driven ASC. Not only will this help your center prepare for an increasing case load brought in by new physicians, it will also make your center more appealing to corporate partners if you end up looking for a partnership down the road.

“Most physicians start with two or three rooms in their center. A successful outpatient center lends itself to more patients, and, over time, the center will be more attractive to physician users,” says Mr. Vick. “I usually advise physicians to add one more room than they think they will need because, in the end, they will need it.”

According to Mr. Vick, one area corporate partners look at when deciding whether or not to partner with a GI center is capacity for growth. “A center won’t be worth much to a corporate partner if there is no room for growth of the business or expansion of the facility,” he says.

2. Be prepared to research corporate partners. With the right corporate partner, GI centers can see their revenue and profits increase substantially, according to Mr. Vick. The table demonstrates how one physician-managed GI endoscopy center Mr. Vick worked with improved its earnings and profits after partnering with the right management company.

	Dec. 2008	Sept. 2009	Change
	12 mo. before	12 mo. after
Net revenue	$3,030	$3,520	+16%
Net income	$780	$1,090	+40%
EBITDA	$811	$1,131	+39%
% EBITDA	27%	32%	+19%
Net revenue/case	$512	$672	+31%
EBITDA/case	$137	$216	+58%

GI centers should take the time to research and perform due diligence when exploring partnerships with a management company. Mr. Vick suggests looking at several companies’ track records with regards to same store growth, management services provided and satisfied physician-partners.

“The physician-owners need to see if a company 1) pays a fair market multiple, 2) helps their centers grow and 3) helps the physicians’ distributions to increase,” Mr. Vick says. “Ask for a wide range of references from the potential partner’s centers. The company should be willing to provide a list of all of their centers rather than cherry picking the best. I’ve received a lot of phone calls from unhappy physicians who didn’t take these steps.” 

3. The right corporate partner is not necessarily the one that offers the most money. Even if a GI center thoroughly researches corporate partners, many may be tempted to say yes to the one that offers the most money up front. However, it can be more advantageous to look at the long-term track record prior to signing an agreement.

“A company may offer a lower upfront multiple that is still competitive, but if they have a good track record, physicians may see a bigger increase in future distributions than may have occurred with a company with poorer management services but offering a higher upfront multiple,” Mr. Vick says.

Another partnership arrangement an ASC can consider is bringing in a corporate partner to purchase a minority interest during the ramp-up phase of the center. “GI centers almost always increase in value in the first few years, and you [and the current partner] can look for a majority partner once the center matures and see a much higher return on investment,” Mr. Vick says. 

4. Joint ventures with hospitals can be beneficial if the terms are right. Many GI centers look to local hospitals to help with the management of the center and to take advantage of hospital contracts and relationships with local physicians. However, like with corporate partners, GI centers should ensure that an agreement with a hospital is what is best for both partners. 

Mr. Tanner says that the benefits of a hospital partner depend upon what the hospital can add to the economic success of the joint venture. “Contributing factors to consider are 1) does the hospital own or control any group of patients or payors that the ASC would not be able to contract with absent the hospital’s participation; 2) can the hospital improve upon third-party reimbursement and to what degree; 3) can the hospital add long-term security by being a partner as opposed to an adversary; 4) can the hospital purchasing power be leveraged to secure better cost for equipment and/or supplies; and 5) if the physicians are a coalition versus a single group, does the hospital benefit substantially from providing ancillary services such as pathology or even anesthesia,” Mr. Tanner says.

Mr. Vick recommends ASCs consider bringing in a third-party management company if partnering with a hospital to make sure that the GI center continues to be operated efficiently and economically under the new ownership structure. “Most hospitals want to own 51 percent of the venture, but they don’t know how to manage GI centers,” he says. “Often, hospitals won’t offer as a good purchase price and often overburden the business with overhead costs, and the efficiency and economics of the center can suffer.”

13 Reimbursement and Business Concepts You Should Know About GI in ASCs

GI and endoscopy continue to be profitable specialties for ASCs in spite of some declines in reimbursement. Here are 13 important reimbursement, business and physician concepts you should know for your ASC.

Reimbursement
1. Reimbursement for GI centers will continue to decrease. As has been the case for the last few years, reimbursements for GI procedures have decreased across the board. This has hit ASCs especially hard as surgery centers often receive reimbursement at a percentage of hospital outpatient departments.

“We anticipate that CMS will continue to pressure facility fees in a downward fashion,” says Barry Tanner, president and CEO of Physicians Endoscopy. “It is at least conceivable that freestanding ASCs could get rates at 50 percent of HOPD rates in the next four to five years.” 

With CMS setting lower rates, a problematic trend could be seen across private insurers and third-party payors as their rates are often set relative to what CMS pays for Medicare-covered procedures. As a result, gastroenterologists and GI-driven ASCs must continue to run their centers efficiently and economically.

“Unfortunately, reimbursements are likely to steadily decline over the next few years,” says Stephen Sears, MD, a gastroenterologist in Loveland, Colo. “This effect will cause ASCs to become more efficient or to stop operating. This may also drive more cases into the hospital setting. By doing so the procedural cost will double and in the end healthcare costs will increase. To remain profitable, the GI physician must focus on delivering quality care in the most efficient manner. That can be done with better bowel preps, training, state of the art technology and assessing quality measures.”

One consequence of decreasing GI reimbursements may be a reduction in the number of Medicare patients a GI ASC sees in a year, according to Fernando Bermudez, MD, medical director, and Beth Miller, administrator, of Eastside Endoscopy Center in Saint Clair Shores, Mich.

“Unless Congress changes the existing rules, Medicare will reduce the professional fees for procedures by 20 percent in 2010,” Dr. Bermudez says. “This won’t directly affect ASCs, but it may affect the willingness of gastroenterologists to perform endoscopies on Medicare patients and to do procedures on Medicare patients in the ASC setting.” 

Irving Pike, MD, president of Gastroenterology Consultants in Virginia Beach, Va., has seen some ways in which physicians at ASCs have tried to combat declines in reimbursement. “Several ambulatory endoscopy centers have reported to me that they have recently negotiated an increased fee schedule from non-government insurance companies. In the past when Medicare payments to facilities were decreased, insurance companies did not follow with similar cuts, but ASC fee schedules remain substantially below HOPD fee schedules. In my opinion, insurance companies do not want to discourage physicians performing endoscopy in ASCs. I think at some point it may be plausible for ASCs to move more CMS cases to the hospital and fill the slots opened at the ASC with patients covered by non-government insured patients,” he says.

2. Gaining access to HOPD rates alone is not reason enough to partner with a hospital. Although partnering with a hospital in order to gain access to outpatient department reimbursement rates can be a potentially attractive strategy, GI-driven ASCs should be aware that they may not receive access to full HOPD rates, although they may be better than current reimbursements. Since many hospitals want to own 100 percent of the GI center, physicians may be asked to give up your ownership and access to future distributions.

“HOPD rates can increase GI center facility revenue 35-40 percent for non-Medicare patients,” says Jon Vick, president of ASCs Inc.. 

“If the GI physicians are going to be owners, then the expectation of getting HOPD rates is misplaced,” Mr. Tanner says. “Better rates may be possible, but HOPD rates are highly unlikely.”

In some cases the hospital and an ASC management development company may form a joint venture that then purchases a 51 percent interest in the center, according to Mr. Vick. “I suggest partnering with a management company first and letting the company negotiate with the hospital as the hospital partner will want to control the deal,” he says. “The management company would then work on the side of the physicians and ensure that the hospital doesn’t ’steamroll’ the physicians into accepting less than the center is worth. Additionally, with the ASC management company managing the center it will retain it efficiencies and economies.” 

It is important to remember when considering this arrangement that even if a physician-owned ASC partners with a hospital, it is still a freestanding ASC and it does not become an HOPD nor does it share in the HOPD reimbursement rates, according to Rick Jacques, president and CEO of Covenant Surgical Partners. “Sometimes, however, a hospital may have such good contracts with third-party payors that a partnership with the hospital would increase the reimbursement rates with payors other than Medicare,” he says.

3. Declining pay may force GI physicians to seek new revenue opportunities. The proposed 21.5 percent cut in the physician fee schedule for specialists, including gastroenterologists, coupled with decreasing reimbursements for GI procedures, may encourage GI physicians to consider additional revenue streams.

“We believe that professional fees will continue to be pressured downward, and GI physicians will be forced to resign themselves to reduced income or to capture a portion of the technical fees,” Mr. Tanner says. “Those GI physicians that have not yet captured a portion of the technical fees through ASC ownership are increasingly under pressure to do so by forming coalitions, mergers with larger groups, etc.” 

General business concerns
1. Good case volume depends on the market. While there is no definitive average number of cases GI centers should see to remain profitable, most GI ASCs have a good referral base from which they can pull patients. However, there are some figures to keep in mind to help you determine if your center is on target.

“The key is to maximize utilization of each available procedure room,” Mr. Tanner says. “There is an average of 251 operating days per year, and full utilization for a GI procedure room operating eight hours each day would be approximately 16 cases per day (30 minute time slots per case) or roughly 4,016 annual cases. Sixteen cases per day is rarely achieved due to cancellations, no shows, etc. However aiming for 80 percent utilization is certainly reasonable (around 3,200 cases annually). Achieving that sort of utilization per room, and assuming that the ASC is not overbuilt, should result in a successful GI ASC.” 

Dr. Sears notes that physicians at the ASC where he practices average 12 procedures per day, or one every 30 minutes.

Mr. Jacques agrees that around 3,000 annual cases can lead to a successful center. “Most physicians [who use GI ASCs] have well-established practices, and it is very unlikely that those cases will go away. The key is keeping your relationships within the community strong,” he says.

2. Some GI centers have benefited from providing anesthesia. In the past, most GI procedures were performed under conscious sedation, which the gastroenterologist administered prior to the procedure, according to Mr. Jacques. Since the patient was not fully sedated, monitoring by an anesthesiologist was not necessary. However, over the past decade, the trend with GI procedures has moved toward monitored anesthesia, using drugs such as propofol, which must be administered by an anesthesiologist or CRNA. 

“I believe that monitored anesthesia care is fast becoming the standard of care,” Mr. Jacques says. “Patients who are under monitored anesthesia often allow physicians to provide a more successful colonoscopy, because they are more comfortable. Under conscious sedation, although the patient may not remember the procedure, they are still awake and uncomfortable, which may cause them to react and compromise how well the colonoscopy is performed.”

Mr. Jacques notes that centers have three options to keep them in compliance with what states mandate regarding anesthesia administration: 1) the physicians who own the ASC arrange to ‘employ’ an anesthesiologist or anesthetist who provides anesthesia through their private practice, 2) the ASC employs its own anesthesiologist or 3) the ASC contracts with an independent anesthesiology practice. 

However, anesthesia is not covered for many GI procedures, so some gastroenterologists have benefited by directing the administration by propofol. Mr. Tanner cautions that if physicians choose to do this, they must be aware of the regulations in their area regarding anesthesia administration.

Dr. Pike also notes a trend towards anesthesia in GI procedures but cautions that colonoscopies performed while the patient is under propofol have not been indicated for use by many gastroenterology societies. 

“It is true some ASCs have turned to various models of anesthesia as an additional source of revenue,” he says. “I have seen information estimating that currently 40 percent of GI endoscopy is performed with deep sedation involving propofol. One concern I have about this practice is that as the total cost of GI endoscopy increases due to the additional cost of providing anesthesia [and] the payment for both the professional fee for the endoscopy and anesthesia will be cut to control overall cost to insurers. It should be noted that the three GI societies have jointly written a letter indicating the opinion deep sedation with propofol administered by anesthesiologists or CRNAs is not warranted for standard GI endoscopic procedures.”

3. Beware of potential kickback scenarios with contract anesthesia companies. As more GI centers consider providing anesthesia services, they may look to an outside company to assist them with the process. Mr. Jacques warns that some companies may enter into joint ventures with GI centers in ways that “push the envelope” with regard to the law.

“Some companies have been extremely aggressive when approaching gastroenterologists about these joint ventures,” he says. “We’ve seen gastroenterologists approached at a much higher rate over the past 1.5 years. Some scenarios have the company essentially providing kickbacks to the gastroenterologists for the contract to provide anesthesiology services to the center. The government is now looking very hard at these ‘pay for play’ arrangements.” 

Procedures and gastroenterologist issues
1. The number of procedures performed per endoscopy case can lead to lower reimbursements for secondary procedures. According to Mr. Tanner, the typical number of procedures per endoscopy case is 1.10-1.20. Many payors, including Medicare, often reimburse any secondary procedures at a much lower rate, which can affect revenue and efficiency in the ASC.

“The number of procedures per case impacts upon revenue per case because for many payors, the second and third procedures are reimbursed at half and then 25 percent of the first procedure,” Mr. Tanner says. “Therefore, valuable procedure room time is being utilized at an ever decreasing rate. If the facility is essentially fully utilized, the impact is not as strong; however, if an ASC is struggling with utilization, then it may not be profitable to perform these secondary procedures at one time.” 

2. Payment data for some of the most common procedures in GI ASCs. Here are 2008 CMS payment data for some of the most commonly performed GI procedures in ASCs.

Upper stomach-intestine scope for biopsy (CPT 43239)

• average submitted charge: $1,451
• average allowed charge $408
• average payment: $321

Scope of colon for diagnosis (CPT 45378)

• average submitted charge: $1,502
• average allowed charge: $422
• average payment: $330

Scope of colon with biopsy (CPT 45380)

• average submitted charge: $1,549
• average allowed charge: $406
• average payment: $318

3. With the number of certified gastroenterologists decreasing, it is important to focus on recruiting. As with many medical professionals, the number of practicing gastroenterologists is decreasing as physicians retire or leave practice, and the number of GI physicians coming out of medical school is not enough to sustain the rate of departing physicians. A recent New York Times report indicated an additional 1,050 GI physicians is needed by 2020 to meet the demand, with current employment around 10,390 as reported in the Times. According to Mr. Tanner, around 20 percent (2,000-2,500) of practicing GI physicians are at or close to retirement, and only 300 GI fellows graduate each year. Thus, competition for new, talented GI physicians is high.

“Recruiting new physicians is difficult especially because there is such a demand for their services,” Mr. Tanner says. “They can literally pick a place on the map where they want to work and go there with near certainty of getting a good job. This makes it more difficult for smaller, more out of the mainstream communities to find and recruit GI physicians. Many physicians graduating today are seeking a better quality of life, and, for them, the employment model is a better option.”

Although the outlook for recruiting new physicians may seem grim, Mr. Tanner notes some new physicians may be looking for options outside of the employment model. “There are still many entrepreneurial physicians not seeking employment, but they are looking for ownership in an ASC knowing that the ASC will be responsible for a significant portion of their total medical practice income,” he says.

4. Single-specialty GI ASCs have a lot to offer gastroenterologists. Although some concern has been raised by the trend of many specialists and practices seeking employment with local hospitals, single-specialty GI ASCs offer gastroenterologists an additional source of income and autonomy that may not be available through the hospital. As a result, ASCs should demonstrate the potential benefits of ASC ownership to physicians looking to partner with the center.

“Many GI physicians who have ownership in a single-specialty ASC earn a substantial amount of ancillary income from their ASC ownership, sometimes as much as they earn from their professional fees,” Mr. Jacques says. “A single-specialty ASC is an excellent recruiting tool for practices, because it gives the practice the ability to offer new physicians ownership in the center. A hospital trying to recruit physicians to their [facility] might not be able to offer the new physician the same ancillary income potential an independently-owned, single-specialty ASC can. Typically, once a hospital buys a physician practice and ASC, the physician income decreases substantially.” 

Dr. Sears notes that some GI specialists may turn to the hospital to avoid feeling the financial hit of reduced reimbursements, but that reason alone is not enough for all GI physicians to turn away from private practice and ASCs. “I feel that remaining as a private practitioner, I have more to offer than as a salaried hospital employee,” he says. “In order to keep the edge on the hospitals, we will need to focus on an equivalent or better product for the same cost. Patients will be able to see what procedures cost at different facilities and in the future may refuse to be treated in the hospital setting due to the additional charges.”

5. Although GI physicians aren’t running to the hospitals, primary care physicians are. Primary care physicians, who refer cases to gastroenterologists, are increasingly employed by hospitals. As a result, GI centers and their physicians should develop a positive relationship with hospitals.

“We have seen a significant number of PCPs employed by the hospitals,” says Dr. Bermudez. “This gives the hospitals significant leverage in the referral pattern to specialists, and it is very important that specialists, including gastroenterologists, maintain a good relationship with the hospital and work more like a partner than a competitor.”

6. Surgery centers should look to grow their referral base. When it comes to recruiting new physicians to your surgery center, looking within the local community still remains one of the best tactics. According to Mr. Jacques, there are probably unaffiliated physicians nearby who would jump at the opportunity to invest and perform cases at a single-specialty center, if approached properly and given a fair proposal.

“In order to grow, you also need to expand your referral base,” Mr. Jacques says. “Look into the areas of the community that are not getting screened for colon cancer. The same tried and true techniques that have worked in building a physician’s practice are still successful. Make sure you are consistently making call backs and follow-ups to local referring physicians.”

7. Salary information for gastroenterologists. In respect to other surgical and medical specialties, salaries for gastroenterologists have increased at an average rate. For example, the median salary in 2008 was $389,385, up 3.93 percent from 2007, compared with a 6.58 percent increase for ophthalmologists and a 5.80 percent for orthopedic surgeons over the same period, according to data from the American Medical Group Association’s 2009 Medical Group Compensation and Financial Survey. The average starting salary for GI physicians was $275,000, according to the same report.

Here are regional median salaries for gastroenterologists, according to the AMGA:

• East — $401,615
• West — $385,611
• South — $385,542
• North — $394,417

National Surgical Hospitals Opens New Surgical Hospital in Corpus Christi, Texas

Chicago-based National Surgical Hospitals, an owner, operator and developer of surgical hospitals and surgery centers in partnership with local physicians, has opened its newest surgical hospital, South Texas Surgical Hospital, in Corpus Christi, Texas, according to an NSH news release.

The 63,000-square-foot surgical hospital, adjacent to the Company’s Coastal Bend Surgery Center, is equipped with five operating rooms and 33 inpatient beds, according to the release. Surgeons will provide a range multi-specialty surgical care, including orthopedics, general surgery, gynecology, otolaryngology and other surgical specialties.

NSH will operate the new hospital in partnership with a group of 55 area physicians. This is the company’s fifteenth surgical hospital and its fifth surgical hospital in Texas.

“Like all of our surgical hospitals, South Texas offers a specialized approach to quality healthcare, playing an important role in the continuum of surgical care,” John G. Rex-Waller, chairman, president and CEO of NSH, said in the release. “We think our ability to offer expanded healthcare choices to consumers in South Texas will bring greater cost efficiency and convenience to the area while creating increased practice efficiencies for the surgeons who utilize our facility.”

Read the release on South Texas Surgical Hospital.

Learn more about National Surgical Hospitals.

“Fable Hospital” Illustrates ROI from Evidence-Based Design

To demonstrate the return on investment on evidence-based design elements, the Center for Health Design in 2004 imagined a hospital that would include key features of recently built or redesigned facilities. Numerous research studies have shown that these design elements reduce costs and increase patients and employee satisfaction.

Fable Hospital, an imagined $240 million replacement hospital with 300 beds, would have the following design innovations, with their projected extra costs:

1. Larger private patient rooms: $4,717,500. These rooms add space for family, staff activities and in-room procedures.
2. Acuity-adaptable rooms: $816,000. Includes technology hook-ups so that patients don’t have to be moved as their conditions change. 
3. Larger windows: $150,000. To let in more light, the typical three-foot-by-five-foot window in patient rooms is enlarged to five feet by eight feet.
4. Larger double-door bathrooms: $1,509,600. This enables caregivers to more easily assist patients to and from the bathroom.
5. Hand-hygiene: $1,071,000. Hand-washing sink is installed at the doorway of each patient room and alcohol-based hand-rub dispenser is put at the bedside. 
6. Decentralized nursing stations: $556,800. Alcoves near beds provide a charting surface and access to information technology.
7. HEPA filters: $270,000. High-efficiency particulate air filters improve filtration of incoming outside air and eliminate recirculated air. 
8. Noise-reduction: $430,000. Carpet and special wall and ceiling tiles absorb sound and wireless communications eliminate overhead paging.
9. Additional family & social spaces: $510,000. A family-style great room and family kitchen placed on each patient floor.
10. Health information centers: $95,200. Centers on each floor offer brochures, books, videotapes and Internet access to patients, visitors and staff.
11. Meditation room: $61,200. Quiet spaces for family and staff meditation are located on each patient floor.
12. Staff gym: $342,500. This facility includes exercise equipment, changing rooms, toilets and showers.
13. Artwork: $450,000. This figure represents the additional artwork allowance beyond the typical budget. 
14. Healing gardens: $1,050,000. Figure includes meditation garden, strolling garden, pond, outdoor meeting area, outdoor dining and children’s playground.

TOTAL EXTRA COSTS: $12 million added to the construction budget.

Also based on studies, the center came up with the following projected savings and revenue due to the new features in the hospital’s first year of operation:

1. Reduction in patient falls: $2,452,800 savings. 
2. Reduction in patient transfers: $3,893,200 savings.
3. Reduction in nosocomial infections: $80,640 savings.
4. Reduction in drug costs: $1,216,666 savings.
5. Reduction in nursing turnover: $164,000 savings.
6. Increased market share: $2,108,100 increased revenue.
7. Increased philanthropy: $1,500,000 increased revenue.

TOTAL REVENUE & SAVINGS: $11,475,406 in the first year of operation.

Source: Center for Health Design

Medical homes in practice

Healthcare is notorious for trying out solutions that seem to work in theory, only to watch them collapse in practice. Like throwing spaghetti at the wall, players from all segments have experimented, looking for new ideas that might stick.

The most recent concept that is showing real sticking power is the patient-centered medical home.

Since 2006, more than 30 states have initiated projects to apply the medical-home concept to Medicaid and Children’s Health Insurance Programs. Reduced costs, better support for chronic care and improved population health are the impetus behind the local efforts, which comprehensively hold the potential to effect system change, piece by piece.

Although no two projects are identical, all reflect core principles of aligning reimbursement, supporting primary-care practices, measuring results and scaling the model beyond an initial pilot phase. Early results have shown promise, which is inspiring more payers and providers to adopt the model.

The general arrangement of a team of clinicians providing a home base of individualized, coordinated care and prevention emerged through the American Academy of Pediatrics in the 1960s for specific pediatric populations. It wasn’t until recent years—as the industry began to focus more on healthcare value—that the medical-home idea was identified as a potential formula for improvement of service delivery within broader primary care practice.

In 2007, four major physician groups defined a set of joint principles to describe a patient-centered medical home, which was soon followed by the creation of the Patient-Centered Primary Care Collaborative (PCPCC), which represents employers, plans, providers and other organizations that endorse the principles. The National Committee for Quality Assurance (NCQA) is currently in the process of updating standards for its medical-home recognition program, which were initially released in January 2008.

Policymakers and the healthcare industry continue to assess the local projects, anxious to determine their financial worth and their promise for large-scale implementation.

MANAGED HEALTHCARE EXECUTIVE recently brought together a roundtable of executive thought leaders to discuss the issues related to patient-centered medical homes. The panel includes:

• Paul Grundy, MD, chairman of the Patient-Centered Primary Care Collaborative and director of healthcare technology and strategic initiatives at IBM;
• Lori Heim, MD, president, American Academy of Family Physicians;
• Len Nichols, economist, New America Foundation;
• Jerry Salkowe, MD, vice president of clinical quality improvement, MVP Healthcare; and
• C. Edwin Webb, PharmD, associate executive director, American College of Clinical Pharmacy

MHE: What do you see as the long term potential of applying the medical-home model in the next five to 10 years?

Grundy: The early pilots’ results are—well, first of all, they’re early—but I think they’re quite impressive. The PCPCC presented data from 10 of those pilots to the White House a few months ago, and what we’re seeing is better integrated, coordinated care.

When you have comprehensive, accountable, accessible, integrated, coordinated care, that results in lower downstream costs. We’re seeing hospitalizations dropping by 20%. We’re seeing hospitalization readmissions dropping by 40%. We’re seeing emergency room utilization dropping by 12% when patients have access to more robust, integrated primary care—which is better upstream care. That bodes well for the future, in which we really need to look at value creation.

Salkowe: The enthusiasm is growing by leaps and bounds outside of the pilots, so physicians who have been either ignoring or sitting back and watching what the earlier doctors did aren’t sitting back and watching anymore. They’re getting very engaged and very interested in pursuing [NCQA recognition] and many of the features in medical homes now, even if they’re not an active part of an organized pilot.

Heim: I see the medical home being integral when you look forward to whether or not it’s an ACO [accountable care organization] or just more generally talking about value-based design. As hospitals and big health organizations begin to look at this, how they integrate with the small practice is going to be one of the biggest challenges.

If you look at the North Carolina Community Care project, that was community based. It showed incredible cost savings and increases in quality, but that was another way to virtually link a bunch of community based practices, which is going to be one of the models we’ll have to accept because large health organizations are not going to be in all communities. But yet, the hospitals and the communities are still going to have to figure out a way to control the costs. And the other critical component then is getting the IT linked up.

MHE: Some say medical homes will not solve the problem of fragmented care. Primary care will continued to be siloed apart from subspecialists. Do you foresee that?

Heim: If people are saying that medical homes will further fragment care, I don’t think they understand the model because it’s the opposite that’s true. The basic tenet of the medical home is the personal physician is the coordinator of the care, and there’s integration of the patient’s needs, not only when they walk into the office, but by taking advantage of knowing your population and doing population management, using IT and tools and a team approach to coordinate that care.

Without something like the ACOs and aligning incentives, we have a mismatch in terms of how much the subspecialists and the other members of the team are brought into integrating that care. I definitely would say it’s not going to go in the opposite direction.

Webb: I’m not sure we could fragment healthcare any worse than it is right now, particularly across professions and disciplines. One of the things that is exciting to the pharmacist community is the potential for the medical home model to integrate across professional care concerns—again, assuming that we can find mechanisms to realign payment incentives, also understanding it’s obviously not possible to have a pharmacist in every three- or four-person medical practice in the United States.

Community Care in North Carolina has done an excellent job of integrating pharmacists’ services as part of the team in a virtual environment across several small- and medium-size practices. The only way we can integrate health professionals into a team is with the medical home because the current payment methodology and our cottage-based industry of silos just isn’t doing the job anymore.

Grundy: From the standpoint of the patient, the patient wants to see the specialist or the person who focuses on a certain part of the body as part of their medical home team. When they need a hip replaced, they have more than a hip. They have a whole bunch of other parts that somehow interconnect, and there has to be medication management adjudication, for example. There have to be linkages and integration, and that’s not happening now at all.

There are places in the United States where it will cost $177,000 for the last six months of life and other places where it costs $17,000. When you look at the places where it costs us seven times as much, what you’ll find is seven specialists doing seven different things—none of it linked, none of it coordinated, none of it integrated, and some of it, by the way, toxic to what the other providers are doing.

I just happened to be in New Mexico at Presbyterian Hospital recently and in Dallas and Tulsa where they’re doing a fantastic job of actually integrating the specialists into the medical home, where everybody’s practicing at the top of their license. In Tulsa, the primary care docs will email the specialists and integrate and pay for an email consult, which the specialists love, and the primary care docs love, but most importantly, the patients love it because it keeps them from wasting half a day [at a medical appointment] when the primary care doc’s doing a good job.

I would agree that whoever asks that question doesn’t understand the model.

Salkowe: There is one aspect of this we need to be conscious of. There are individuals who have one major chronic illness, and 90% of their care is being provided by a specialist: a gastroenterologist, rheumatologists or an oncologist, for example. And health plans are expected to and allow such a specialist to function as a PCP, even though we know that the focus of that care is on specialty needs, and there may be gaps in preventive health needs or other unrelated health conditions. That’s an important reality.

Now, I think we all agree that in a well managed medical home, care that specialist is providing is enhanced because of the improved communication coordination with other physicians that invariably are involved, whether it’s preventive services or hypertension or something else. There is a bit of hesitancy on the part of some of the specialists because of the scenario and uncertainty of whether a PCP should be treating everything. What happens when I have a patient where I really need to be out in front in terms of making decisions?

Heim: There are certainly many patients that I have had over the years, when the oncologist is functioning as the patient-centered medical home. I have no problem with that. From the standpoint of being recognized as a patient-centered medical home, that’s different than a subspecialist who then begins to assume the majority of the care and becomes the director. The problem is that oftentimes they’re handling maybe 70% of what’s currently going on in that patient’s life. However much of the other stuff gets either ignored or sidelined.

So if a rheumatologist becomes the patient-centered medical home, then in order to make sure that they are truly functioning in the whole aspect of managing that patient, they need to fulfill some sort of recognition program. In order for this model to work, you have to realign the payment. That would not be a major barrier if the payment were going to switch from the patient’s PCP to a subspecialist as the designated patient-centered medical home and have the payment model then switch over to that of a patient-centered medical home. That’s not a problem so long as they are then willing to take on the requirement to manage or coordinate the entire care of the patient.

MHE: What is the best strategy for reimbursement in medical home models?

Salkowe: The model that most programs seem to circle around is one that preserves perhaps 60% of the compensation as traditional fee-for-service reimbursement with the other 40% divided between process measures, care management activities and outcomes. The numbers that I’m generally seeing are 30% for the care management piece and 10% for the outcomes piece, although from the early projects where the outcomes just haven’t been measured yet, it may focus solely on care management.

That seems to get us to the dollars that are needed for support, the additional resources the practices need, whether it’s trained staff or new systems, and also to include the extra remuneration that’s needed to really engage the primary care physicians and the work around this new model.

Nichols: I like the structure that Jerry just described, and it makes a whole lot of sense, especially in transition, which is what we’re going to be in probably for three to 10 years—with a fee-for-service base but with a lot of incentives packed around care management and outcomes. Those proportions may very well change over time and may be different in different parts of the country.

The most creative thing we can do in the pilots that we hope come out of healthcare reform is to work out different kinds of shared-savings models. What’s an average cost for a diabetic? You think about the number of diabetics and different comorbidities and you can work out an expected expenditure over the year, including, in my view, expected hospitalizations and utilizations of specialists.

Then instead of holding a primary care team or even a formal medical home at risk, you could have them share in the savings that they might achieve if they hit the targets to achieve savings. Then you really do align incentives. A 2.0 model might include some incentives back to the patient so they too can see a real monetary gain in participating, because after all, health is a participation sport. You want the patients very much engaged. It’s unambiguously true we have to find a way to leverage our rather short supply of primary care professionals, in particular as we think about expanding coverage and access to care in the next five years.

Heim: One of the concerns that I’ve had with shared savings is it being time-limited. If you look at the efficiencies you will gain over time, eventually those efficiencies are going to diminish. Have you thought about making sure that the shared savings don’t become the major component of the blended payment model?

For example, I was in the Air Force for 25 years and after I had a stable population and managed them, I had already found disease and managed it and achieved significant cost savings and decreasing utilization. But then we reached a steady state, relatively. Were you saying, Len, that would be something on top of a designated funding stream for the blended payments?

Nichols: Well, Lori, remember I used the word ‘transition,’ and you are talking about a steady state and a longrun. I would agree that the ideal would be we will get to a place where all patients, especially those with chronic illnesses, are managed optimally and there are no savings to be reached out of the system. I think we all know we are a very long way from there.

What I’m talking about is a mechanism that can enable us to turbo-charge the transition. Ultimately I think you’re right. You would want to go to a more blended payment at the end, but I don’t see how you get from here to there fast without a shared savings component.

It enables you to reach beyond the primary care team to enable the hospital and the specialist and the pharmacist and everybody else to participate. That has a greater potential for aligning interests quicker in a way that is much more likely to be transformative. And yes, once we’ve reached the level of efficiency you reached with your patients in the Air Force, it’ll be a different world. But we’re a long way from there.

Webb: The blended payment model approach that PCPCC has recommended has one other interprofessional political advantage, and that is it defuses some of the potential battles at the feeding trough of fee-for-service. If all members of the team are participating in a blended payment approach, that brings revenue into the medical home based on those performance parameters, then the physician-directed leadership of the practice can then pick and choose among the various members of the team who are needed to be involved in the care of a particular patient at a particular time. There’s not that kind of competition for the fee-for-service dollars among the providers blended into a payment model that rewards team performance rather than individual fee-for-service performance.

As a profession that’s been fighting for years and years to have its non-dispensing services recognized under Medicare Part B—pharmacists have been fighting that battle for 10 or 15 years—this may be a very good thing in terms of an approach that blends all of the qualities that have been mentioned already because that really is what will generate patient-centric care among all the team members.

Grundy: I think there’s another constituency that we need to include in the considerations around shared savings. There’s also the reality that our employers are not competitive in a world market, and in many ways that’s because of healthcare costs. We have large numbers of individuals who can’t afford insurance so some of the savings really needs to come back to those who are actually paying for the healthcare…which will allow them to be more competitive with other parts of the world where healthcare may be more heavily subsidized by the government.

Nichols: That’s right and trust me, they can get their share of the same things, too. I definitely would concur in the short run, the best thing we could do is incentivize clinicians to work together across the traditional silos. Then I’m pretty sure the employers and plans will figure out how to get their piece of that.

MHE: Are behavioral health professionals increasingly being included as part of the medical home?

Grundy: I was in Albuquerque at Presbyterian, and they had a very integrated behavioral health model and a very integrated pharmacy model. The combination was really magic. We were seeing medication-management education and behavior-management education that was enhancing care and amplifying and cadencing the message that the primary care provider was delivering—on ’steroids.’ I mean, it was really impressive.

I was in Dubuque, Iowa, with a primary care provider who was seeing an 84-year-old nun. The issue with her was medication management and care coordination. Once the relationship part of it was established with the primary care provider, it migrated over to a nurse care coordinator working with the pharmacist who was working with a behavioralist with a team approach to care for the next year. I saw that mapped out for the nun, and it had gone over well enough to the point that she really began to understand it and give feedback.

MHE: With all these easily accessible services, what about the potential for increased utilization?

Webb: Particularly with regard to the use of medications, the some of the evidence from the model in North Carolina does indicate that in some cases, the medication-use costs go up. But with a concomitant reduction in consumption of some of the other more expensive services, particularly emergency department business and things like that, the increased utilization of some things may well be a very good thing and what the patient may benefit from most. You have to look at utilization across the entire spectrum of service consumption rather than just in the silos.

Grundy: From the perspective of the buyer of care, we really do want to see increased utilization of appropriate medication, and we want our patients to be healthy and productive. For us, the cost of the care is just the tip of the iceberg. We also have the whole issue of productivity. So it’s really a matter of appropriate utilization addressing both under- and overutilization of services. It’s a win-win for the pharmaceutical companies because increased utilization means they sell more medication, also a win for us because we want our folks healthy and productive. The best way to do that is for them to take their medication and comply with wellness instructions and other things.

Heim: Look at some of the data that came out of the Kaiser Foundation surveying patients. Twelve percent of the patients said the doctor had to redo a test or procedure because they didn’t have the earlier test results. So those are the low hanging fruit. We can decrease unnecessary procedures just from that standpoint alone.

MHE: How do we measure the success of medical homes? How can we quantify whether they’re doing any good?

Grundy: The state of Vermont’s early studies indicate a 7% reduction in overall costs. That’s a real bending of the curve. That’s data, right? We’re seeing improved outcomes in terms of indicators of compliance with diabetic management and asthma management. I was just at a physician’s practice in Florida where he used to have on average of one patient a month hospitalized for asthma. In the past 19 months, he’s only had one asthma hospitalization, and that’s data, right? We’re beginning to see pretty robust data and would love comments from other folks on that.

Nichols: I think another aspect of measuring success has to do with the experience of care both from the patient and the physician perspective. For this to be sustainable, patients need to recognize that this is something different, and it’s something different that they really like. It may not be an easy sell for some patients who’ve just been accustomed to picking a specialist out of the yellow pages or calling a friend to see who to go to next.

From the provider’s side, there are two big issues around the experience. There’s a lot of work up front [in creating a medical-home model] so it’s important that physicians see this as being something very positive, something that they advocate to their colleagues. But perhaps even more importantly is one of the underlying driving factors, which is the critical state of primary care in this country and the need to convince more and more of the upcoming graduates from medical school to pursue primary care as a field. The more convincing stories there are about the positive experience that these models are bringing to practice, the more likely we’ll succeed from that perspective.

MHE: What cautions do you have for the industry regarding medical homes?

Heim: Coming from the TransforMED demonstration project that AAFP did, we learned you have to provide enough resources to pull this off. It has to be adequately financed, and the transformation process can be stressful. So provide strong leadership to enable that to occur. The other problem that we’ve seen is that many of the projects have too short a timeline. They’re looking for a quick return on investment in less than two years, and two years is probably the bare minimum.

Nichols: Payers have to have a realistic timeline, and I do think five years is a much better frame. It’s easy for a think-tank guy to say, but I just think that’s the reality. The clinicians will tell you the same thing because of the up-front investment.

I would also hasten to emphasize my favorite phrase from Ronald Reagan: ‘Trust but verify.’ The people who claim that these models don’t work are stuck in defending the status quo, fee-for-service, unaccountable model. They’re just afraid of change, that’s part of it, but they don’t want to move to a world in which they’re going to be held accountable and things are going to be measured.

Not every patient is going to go to some quantitative provider comparison on a Web site, but enough will as we evolve as a society. Look at the number of people using smart phones. And now we’re going to move to a world in which if you can’t show that your treatment modalities and your health plan are achieving outcomes as good as [top-rated] systems and medical homes and health plans, you’re going to be at a competitive disadvantage.

Just look at the companies that…are in many ways poised for the new world because they’ve invested in information systems and information management, and selected forward-thinking and better organized providers. The other plans are really going to have to step up and participate in that ‘trust but verify’ competition or risk very serious competitive problems.

Grundy: That is not an easy transition for the providers to make. We learned in working with MVP Healthcare and others that we need to help pay for the process of this transformation. We’re dealing with oftentimes small groups of providers that are trying to survive on either a -1% margin or a 1% margin. We need to instill a bit of hope in them. If we’re reaping the benefit of that, we as the buyers have to begin to pay for the process of this transformation.

Heim: What we hear most from people who are practicing in a patient-centered medical home is that they feel like they’re back to practicing medicine the way they were trained to. They’re back to taking care of their friends, their patients and their communities, and that is incredibly rewarding for them.

Salkowe: I think just one area that we need to be careful with is the enthusiasm around this topic and the eagerness to move forward.

There’s been a tendency to slip outside of the structured pilots and just throw money at the medical home by financially recognizing providers solely based on recognition rather than how well they’re coordinating and managing the care of their patients.

The practice transformation that’s required goes well beyond whatever any individual recognition can possibly measure. In the pilots, for the most part, there’s been a structure that’s enabled practices to learn from each other and to share and develop communitywide resources. It’s going to take some time for resources to be well enough established in a community that all physicians in the community might be able to readily become a part of this.

We just need to be careful that we don’t get ahead of that infrastructure development and make sure we’ve figured out how to do this right before it becomes a standard for everybody.

Heim: Jerry, are you talking about concern whether or not the NCQA recognition program now truly recognizes those things that are of value?

Salkowe: No. I think it does recognize those things that are of value. It’s necessary, but I don’t think it’s sufficient. Over time we’ll come up with additional measures that will help, but testing itself never really tells the whole story, particularly in something like this, which isn’t just about what an individual practice does. It’s really about what’s happening in a community and how that practice interfaces with the community. Unless you have the right infrastructure in place, a practice might pass the test and really still not be able to deliver on the promise.

Webb: One of the challenges that we face is being flexible enough to recognize that how you construct these teams virtually in small communities and small practices is going to take a lot more creativity. It’s a lot more difficult to do than in those settings where you have large physician groups or managed care organizations or hospital-based teams where that functionality has been existent for a long time.

Particularly from the pharmacy side, we’re looking to create models that integrate pharmacists into the team in a very creative and constructive way. For the small medical practices, the best way to do that remains to be defined… With IT and with virtual framework, it’s entirely possible to do this even if we can’t all be physically present in this mythical place called the medical home.

Squeeze out waste

Understandably, the painstaking scrutiny of healthcare costs has reached a fever pitch. While administration is a relatively small percentage of the overall costs in the system, the pressure is on payers to trim as much waste from their operations as possible.

Administrative costs—or any outlays that are not specifically tied to medical care—are a political hot button. Insurers defend what they spend on tasks such as case management and disease management as well as investments in technology as necessary spending that results in net savings and improved health. Some critics of the insurance industry characterize administrative costs as nothing more than profits and executive compensation and seek legislation to control how premium dollars are spent.

In fact, 15 states have implemented laws dictating minimum medical loss ratios (MLRs), ranging from 50% to 80%. In 2008, California Governor Arnold Schwarzenegger vetoed a bill that would have forced insurers to maintain an MLR of 85%.

According to America’s Health Insurance Plans, in a 2008 study conducted by PricewaterhouseCoopers (PwC), 87 cents of every premium dollar goes to healthcare and medical services, and just 3 cents goes toward profits.

PASSING THE BLAME

Governments are taking some steps that could eventually result in lower healthcare costs, such as smoking bans in public places and removing soda and sugary snacks from school vending machines. On Jan. 1, 2010, California became the first state to ban the use of trans fats in restaurants and bakeries. New York City adopted a similar ban several years ago.

Nonetheless, it was inevitable that scrutiny would intensify on payers and their efforts to reduce costs and minimize wasted resources in the system, and now that it has, they’re possibly receiving more blame than is fair.

“When people look at waste in claims processing, for example, they assume [all of the money is being wasted] by insurers, when a lot of it is wasted by providers,” says Mark Merlis, a health policy consultant who has written several papers on the topic of healthcare waste. “But in fairness to providers, they have to comply with many different insurers’ administrative processes, so we should be doing as much as we can to promote uniform transactions.”

Merlis says the more uniformity that can be achieved among payers, the more money the system overall is going to save. Market complexity makes it difficult to identify who is “committing” the waste. Furthermore, cutting waste from one area might simply shift costs to another. For example, in an attempt to fight losses from fraud, payers could investigate more claims in detail, but that will delay payments to providers, damaging relations and potentially resulting in legal action under prompt payment laws.

TECHNOLOGY TO THE RESCUE

The siloed yet sprawling nature of the U.S. healthcare system—payers, physicians, pharmaceutical companies, hospitals, government agencies and consumers—means that waste elimination isn’t as easy as making an individual organization operate more efficiently.

Some Americans, including some physicians, believe a shift to a single payer system would simplify healthcare administration, but the large majority is firmly opposed to such a change. As Merlis points out in his paper, “Simplifying Administration of Health Insurance” (January 2009), complexity is not just a byproduct of the insurance system—it is what insurers are selling.

“The value-added of the managed care industry consists of the very features that make insurance complicated: different coverage rules and formularies, authorization requirements and careful scrutiny of claims, and so on,” he writes. “The variations are what differentiate one plan from another, and competition and uniformity may be conflicting goals.”

Still, that doesn’t mean plans can’t improve their internal operations and their relationships with other healthcare stakeholders. There are also high hopes that technology can eliminate some waste in the system, and at least one project is proving that to be true.

In 2008, Blue Shield of California (BSC) created its Partnership in Operational Excellence and Transparency (POET) transactions-tracking tool to improve payment accuracy and dispute resolution, speed claims turnaround, and increase operational transparency. The program is available online for 90 of the hospitals Blue Shield of California contracts with across the state.

“POET has been enhancing our working relationships with network hospitals by providing opportunities for data-driven discussions that directly improve operational efficiencies,” says Juan Davila, the plan’s senior vice president for network management. “Using key claims performance indicators and transparent claims data, we work jointly with our facilities to target and prioritize impactful process improvements.”

Davila says the claims-processing related improvements have been impressive, and the benefits of improved relations with network providers are even more so.

“We wanted to show that we were really trying to get at the root of the problem,” he says. “We paid for the system up-front, and we were increasing our transparency to them, as opposed to trying to cover up our errors. We genuinely wanted to develop a more collaborative relationship with our network hospitals, and that’s changed the way we think of each other in a very positive way.”

The hospital association of Southern California recently approached BSC to help the association with another large-scale project.

“I have been in this business for 20 years and have never gotten a phone call like that before,” Davila says.

Within administrative functions, such as those BSC is addressing, it’s hard to know exactly what is waste. A 2008 study by PwC’s Health Research Institute, “The Price of Excess: Identifying Waste in Healthcare Spending,” points out that “inefficiency” and “waste” are not interchangeable terms; the former is merely one component of the latter.

Authors define waste as costs that could have been avoided without a negative impact on quality, which is similar to the definition used by the Institute of Medicine and the authors of another watershed study conducted by Thomson Reuters in October 2009: expenses that don’t add value.

WHERE TO FIND WASTE

The PwC research estimates that slightly more than half of all healthcare spending ($1.2 trillion of the annual $2.2 trillion spent) is wasteful and breaks it into three categories:

• Behavioral waste, which accounts for $303 billion to $493 billion each year;
• Clinical waste, accounting for $312 billion annually; and
• Operational waste, which consumes $126 billion to $315 billion.

The study further breaks the operational waste segment down into four subsets:

• Claims processing, which accounts for $21 billion to $210 billion in waste;
• Inefficient use of technology ($81 billion to $88 billion);
• Staff turnover ($21 billion); and
• Paper prescriptions ($4 billion).

The research by New York-based Thomson Reuters Healthcare Analytics (October 2009) is slightly less pessimistic, estimating that each year, between $600 billion and $850 billion of healthcare spending is wasted.

The study, “Where Can $700 Billion in Waste Be Cut Annually from the U.S. Healthcare System?” identifies six primary culprits:

• Unnecessary care (40% of waste), accounting for $250 billion to $325 billion;
• Fraud (19%), $125 billion to $175 billion;
• Administrative inefficiency (17%), $100 billion to $150 billion;
• Healthcare provider errors (12%), $75 billion to $100 billion;
• Preventable conditions (6%), $25 billion to $50 billion; and
• Lack of care coordination (6%), $25 billion to $50 billion.

Those figures are so staggering that the system can’t expect to “cut” its way out of them, according to Bob Kelley, Thomson Reuters’ vice president of healthcare analytics and author of the report.

“Simple external controls on cost and utilization will not work, and any effort to control costs by eliminating waste must be careful to consider possible unintended impact on access to appropriate and necessary care,” he says. “We should expect that any change to the system of care that improves its performance will require a realignment of the types and levels of professional and facility resources and the relationships among these resources.”

The best solutions will effect positive changes and recognize that the healthcare market dynamic is much different from other product or service markets. Most consumers believe that their access to all potentially useful services is a right.

“We need to shift the public’s perception and expectation [of quality] away from ‘more services is better’ to ‘the care that will most likely result in the outcomes that are best for me,’” he says. “Simultaneously, we must begin to reward physicians for providing this type of care, and recognize and pay for the required time and effort.”

CONSUMER BAD HABITS

Shifting public perception is critical, because for many Americans, “waste in healthcare” brings to mind images of bloated, lethargic mega-plans with outdated technologies and overpaid, fat-cat executives. Although the U.S. Centers for Disease Control and Prevention estimate that fully half of the nation’s deaths each year are the result of bad and avoidable habits, most Americans, rather than look in the mirror, latch onto headlines about excessive health plan profits and executive bonuses.

When consumers learned that former UnitedHealth Group CEO William McGuire received more than $124 million in total compensation in 2005, it’s understandable that many of them reacted with indignation. While the public’s sensitivity to what they perceive as excessive income is at an all-time high, salaries and bonuses paid to health plan executives are a very small number in a very large sum, according to Dan Munro, principal with The DMM Group.

“If you added up all of the executive bonuses and salaries for the entire healthcare industry, it would just be a drop in the bucket compared to the other costs,” he says. “Healthcare is nothing at all like Wall Street, where firms are racing to pay back their Troubled Asset Relief Program funds because they want to go back to handing out those huge bonuses again.”

Merlis agrees, saying executive compensation “might look ugly when you see how much money certain people are being paid, but it’s really not a driver of healthcare expenses.”

It’s clear that politicians are doing what they can to foster greater use of technology in healthcare, particularly with federal funding included in the stimulus package to spur greater adoption of electronic medical records, which are not yet widely adopted.

“The government is trying to encourage the meaningful use of electronic health records,” Munro says. “For the first time, the government is mandating that EHR applications engage the consumer. If you tell most EHR vendors that you’re going to develop a patient-focused system, they’ll laugh at you. They have always been provider-focused, because that’s where the money is.”

An EHR system can cost millions of dollars, so small providers are less likely to adopt them simply because of the cost. The government has realized that use of health IT won’t progress if it doesn’t engage the consumer, Munro says.

THE OPPORTUNITIES ARE REAL

To further explore IT’s opportunities to improve healthcare, Kelley and Thomson Reuters are working on a follow-up whitepaper highlighting specific initiatives that have been successful in eliminating waste, or that show the potential to do so.

“There are certainly high expectations for the contributions of IT to both improved quality and reduced waste,” he says. “Many of these initiatives are either directly related to new or enhanced IT applications or require IT system support to enable new relationships between providers, or between providers and patients.”

Examples of the first type include electronic medical records, health information exchanges, and clinical registries. Examples of the second type include patient-centered medical homes and bundled or episode-based payment systems.

“I think that these opportunities are real, but changes in the systems of care and the relationships among providers and patients will be required if the great potential for these solutions is to be ultimately realized,” he says.

According to Davila, BSC’s POET program is improving efficiencies at the larger system level.

“Historically, when we would show up to renegotiate a contract, the hospital representative would say, ‘My people are telling me that you don’t pay your claims right, you don’t handle appeals well, and you owe us X million dollars. Before we recontract, I need you to fix that.’ The result, inevitably, was a lot of negative energy.”

To solve the problem, BSC worked with a third-party vendor to develop a system that enables participating hospitals to review 24 months of processed claims information and performance metrics on the POET Hospital Dashboard, an online performance analytics portal specifically designed for those hospitals.

Those facilities routinely receive quarterly claim summary reports that provide information on key indicators such as cycle time; submission type; denial volume and reasons for denial; appeal volume, outcomes, and reasons; and claim volume for patients with Bluecard, a national program that allows any Blue member to receive care from another Blue company when traveling or living outside of their usual service area.

“It’s all right there in black and white for everyone to see,” Davila says. “One national hospital system was upset because they thought we weren’t paying as quickly as we should, until POET revealed the problem: We were paying the claim in 12 days, but it was taking them 25 days to get the claim to us. The system showed them exactly where the process was broken so they could fix it.”

PHYSICIANS’ WEIGH THEIR COSTS

The need for such transparency is significant, according to research from the American Medical Assn. Its second annual National Insurer Report Card study attempts to diagnose the strengths and weaknesses of the claims processing systems used by eight of the nation’s largest health insurers. Five of the eight plans showed improvements in the median amount of time necessary to respond to providers’ claims, but the report estimates that providers still divert as much as 14% of their revenue to ensure they are receiving accurate payments.

Physicians reported spending three hours weekly interacting with plans in 2006, according to a Web Exclusive produced by Health Affairs in May 2009. When time is converted to dollars, the cost to practices is estimated at $23 billion to $31 billion annually, or 6.9% of all U.S. expenditures for physician and clinical services. Further, 45.9% of physicians surveyed for the report said the cost of dealing with health plans had “increased a lot.”

The report goes on to note that administrative cost cannot be reduced to zero dollars and that interactions that cost money also can produce benefit, such as prior authorization, which can reduce inappropriate use.

5 Steps to Creating a Balanced Pain Management Surgery Center

Pain management can be a profitable addition to a surgery center. However, due to the nature of the specialty, balance is essential to the success of pain management.

Mike Heifferon, Ph.D, MBA, chief operating officer, and Marie Masztak, RN, BEd, vice president of nursing, of Deca Health, a management, billing and development company specializing in interventional pain management services, provide the following five steps to creating a balanced pain management practice in your ASC.

What is a balanced pain management practice?
Mr. Heifferon says that a balanced practice is based upon four different relevant benchmarking standards — financial, patient, provider and staff perspectives. According to Mr. Heiffron, a high performing pain management practice will be in the 90th percentile on each of these areas in benchmarking surveys.

Each area measures different competencies of the practice. “The financial perspective comes from the point of view of collections and net income,” Mr. Heiffron says. “The patient perspective looks at patient satisfaction and outcomes. The provider perspective looks at the provider satisfaction and productivity. The staff perspective looks at the staff satisfaction and productivity.”

In order to keep track of how your pain management practice is performing, Mr. Heifferon suggests using metrics to measure areas like satisfaction and productivity at least monthly, if not daily or weekly. “The more frequently you measure the results, the more frequently you will be able to take action and improve performance,” he says.

Step one: Recruit good physicians
Dedicated, talented physicians are essential to any successful service line in an ASC. Because of increased scrutiny over procedure overuse and abuse, surgery centers need to ensure that their interventional pain physicians are qualified and dedicated to proper patient care. According to Mr. Heifferon, the Accreditation Association for Ambulatory Health Care requires that all physicians performing pain management at an ASC should be certified.

Mr. Heifferon and Ms. Masztak agree that pain management physicians should be board certified and/or fellowship trained. Other areas to consider are the physician’s experience with the procedures he or she will be performing and the percent of the physician’s new patients who will receive procedures according to evidence-based medicine.

Mr. Heifferon recommends bringing in physicians who want to be partners in the center or who are existing partners that aren’t making maximum use of the center. “Both parties have the same risk [in this scenario.] When the physician is not partnered with the center, they look at things, such as cost effectiveness, time off, etc., differently,” he says.

Another issue to keep in mind when bringing pain management physicians on board is the importance of separation of office practices from that of the ASC. According to Ms. Masztak, the Medicare (CMS) Guidelines require separation of the surgery center from the office in order for the surgery center to be accredited. Therefore, the physician can see patients in the office at designated times prior to or after the completion of procedures.

Step two: Meet with and educate referring physicians
Marketing is an essential tool to a surgery center’s success, and when it comes to interventional pain management, education is an essential part of marketing. Mr. Heifferon and Ms. Masztak suggest that ASCs should devote one full-time equivalent position (ideally, two part-time staffers) to marketing efforts.

Meeting with referring physicians is an important part of this step, according to Mr. Heifferon and Ms. Masztak. Representatives from the ASC should provide physicians with information regarding customer and physician satisfaction at the center as well as educational material on pain management and how it can enhance their patient’s care.

“It is important to demonstrate to new physicians that performing pain management procedures in the ASC allows them to collect a facility fee while providing high quality and safe services to their pain patients,” Mr. Heifferon says.

Ms. Masztak says, “One aspect of care that can enhance access for patients into pain management is by promoting a good working relationship between the physicians of the ASC and the neurologists/orthopedists to gain same day access by following preset guidelines for intervention — what we call Fast Track MD.  Another would be when patients have experienced a pain management intervention previously, they are able to fast track their own care by following set guidelines for expedited care — what we call Fast Track Patient.”

Another important step, according to Ms. Masztak, is to educate the community on pain management and chronic pain treatment. “You want to create awareness and to educate physicians (and community) on what the surgery center does and show that it is about helping, rather than ’stealing,’ patients,” she says.

Step three: Consider the patient’s experience
As pain management is a high-volume specialty, addressing the patient’s experience is essential to the service line’s success. “We set a patient satisfaction goal of 98 percent at our centers,” Mr. Heifferon says. “When centers have patient satisfaction scores in the 90s, that is still good, but it is important to ask what they consider an issue (such as no-show rates) and to continually improve.”

Prior to adding pain management to your ASC, Mr. Heifferon suggests looking at three areas — patient flow, wait time and time from admission to discharge. “You need to respect the patients time as much as your own,” he says. “Because of the nature of an ambulatory surgery (need for another person to drive/pick up patient, etc.) it is important to be able to give the patient a close approximation of the amount of time they will spend at the center.”

For this reason, ASCs need to ensure they will be able to handle the patient load and the quick turnover time needed for pain procedures, which are typically about 15 minutes in length. The short procedure times often mean patients will wait longer in prep and recovery than in the actual time it takes to perform the procedure. Therefore, efficiency is critical.

Physician output may also be affected by poor patient satisfaction, according to Mr. Heifferon and Ms. Masztak. “Poor patient outcomes can often result in a physician using pain management or the surgery center less,” Mr. Heifferon says. “You may not know this until you drill down to and examine trends on a physician level.”

Step four: Understand payor issues specific to pain management
Communication is essential to ensuring the ASC and physician are reimbursed properly for pain management procedures. “You need to check whether a patient’s insurance covers the pain management procedures and make sure the billing department is aware of co-pays or what current outstanding debt may be,” says Ms. Masztak. “Also, communicate with the patient to know whether insurance is covering the procedure and with the physician to make sure medical necessity is demonstrated.”

Mr. Heifferon says it is important to communicate any costs to the patient prior to the procedure.

Mr. Heifferon and Ms. Masztak offer the following advice for ensuring proper billing and reimbursement of pain management procedures in your surgery center:

• Know your billing guidelines per insurance carrier for pain management procedure.
• Make sure the physician’s and ASC’s charges match exactly.
• The correct levels must be billed, so it is important to know the difference between disc levels and in-between levels and have this clarified on the physician’s report as necessary.
• Know modifiers that pertain to the ASC and its procedures.
• Anesthesia is billed per insurance carrier guidelines, so be aware of what is and can be used for the procedure.

Step five: Offer profitable procedures
As with any service line offered in your ASC, providing the right mix of procedures is essential to success. It is essential that all procedures be verified for insurance coverage in the ASC prior to the physician performing the procedure.

The following eight procedures are identified by Mr. Heiffron and Ms. Masztak as the most common performed in a surgery center:

• SI steroid joint injection
• Cervical epidural steroid injection
• Lumbar epidural steroid injection
• Spinal Cord Stimulator Trials are done to evaluate whether this is the best mechanism to control chronic pain
• Cervical facet injection
• Lumbar facet injection
• Transforaminal epidural steroid injections and selective nerve blocks
• Radiofrequency ablation procedures. It is important to not that prior to adding RFA to a surgical center, proper cost and volume analysis is necessary. These units are expensive and if volume is not adequate, then a per case arrangement with the unit cost built into the supplies often can be arranged.

“With the constant downward pressure on professional reimbursement, interventional pain management physicians should be looking for alternative sources of income and for reductions in practice overhead expense. Participation in an ASC offers an opportunity for both,” says Mr. Heifferon.

Learn more about Deca Health.

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