With the U.S. recession lingering for more than 20 months now, a little good news would be most welcome. While the results of a recent survey conducted by the Accreditation Association for Ambulatory Health Care (AAAHC)’s Institute for Quality Improvement add to the doom and gloom, there is a silver lining in the dark clouds — ambulatory surgery centers (ASCs) will weather this storm if owners/operators are smart about adapting their operations to the current economic climate.
The study, which was completed by 985 ambulatory healthcare organizations, reported that 60 percent of respondents were experiencing a decrease in demand for services over the past 12 months, with 11 percent of these reporting a decrease of 20 percent or greater.
Of the organizations, which represented all geographic areas of the U.S., 64 percent were owned by physicians, 12 percent by hospitals and physicians, 10 percent by public/governmental bodies, 5 percent by physicians and corporations and 4 percent by corporations. The greatest decrease in volume of services was reported by physician-owned organizations (69 percent).
While the ASC industry is certainly robust — recent data say that ambulatory care in the U.S. accounts for 35 million surgeries and procedures — there are certain surgical specialties that remain among the hardest hit by the recession.
“The medical specialties seeing the greatest decreases included not only those providing elective services, such as cosmetic surgery, but also those that offer basic services such as pediatrics, obstetrics/gynecology, urology, general or oral surgery, ENT, pain medicine, gastroenterology and orthopedics,” says Kuznets. The greatest decreases in demand were reported for high-cost procedures (reported by 35 percent), services that were self-paid by the patient (51 percent), and elective procedures (57 percent). A higher proportion of organizations reporting decreases were located in the Midwest, Southeast and Southwest.
The survey revealed that 76 percent of respondents reported a negative impact on patients’ ability to pay co-pays or deductibles. Many other healthcare consumers who are able to afford to pay for elective surgical services are sensing that bargains are to be had in the medical marketplace. “Providers of aesthetic procedures are among the hardest hit,” Kuznets says, “and they are seeing consumers who are shopping around. The message we see in the marketplace is that if you either wait for prices to drop or if you shop around, you should get a great price on a procedure from a great surgeon. I think some consumers will continue to spend out of their own pockets if they can get a decent price. It’s not going to be for cataracts and colonoscopies, of course.”
Kuznets explains, “The survey results are particularly interesting to a lot of people because they show that some sectors are really feeling the pinch, while other sectors are perhaps concerned and many are in a ‘watchful waiting’ mode, where they are trying to be as conservative as possible with their finances and their business practices,”
No matter where ASC owners/operators are on the “panic scale” these days, the common denominator is concern about the trickle-down effect. “Healthcare consumers are not coming in, therefore ASCs are not making capital equipment purchases or making new hires, and so there are going to be significant ramifications in other sectors in the economy because of this, just as there have been generally when consumers don’t make purchases,” Kuznets says. “Surgery centers are now such an integral part of the U.S. economy that people need to be aware of how much they impact other sectors and are in return impacted by the rest of the economy.”
According to the survey, two-thirds (67 percent) of respondents reported that the economy has had a negative impact on making capital purchases (44 percent), purchasing supplies (31 percent), hiring or retaining staff (29 percent), purchasing services (12 percent), floating payroll expenses (9 percent), giving raises or bonuses (2 percent), staffing hours (2 percent) and wages (1 percent).
Kuznets says that a number of ASCs are endeavoring to avoid layoffs. “They want to keep their good workers, even though there may not be an increase in their hours or pay – because cutting their wages is demoralizing. They are probably making less, but at least ASCs are trying to keep them employed.”
That heroic effort is coming at a time when ASCs must not only decrease their prices, but include these prices in their marking materials to appease healthcare consumers wanting improved transparency. The recession is affecting other business practices, including increasing collections from patients and payors. Through written comments, survey respondents expressed concern about notable increases in patients’ delaying, cancelling or not showing up for appointments due to unmanageable co-pays/deductibles or the fear of losing a job for taking time away from work. Comments also pointed to ASC owners/operators’ concerns about a general need for “belt-tightening” and that the recession will linger excessively, creating a problematic future filled with bad debt, uncompensated care and escalating costs.
That said, Kuznets reminds the industry of its incredible flexibility and its ability to weather storms in the past. “Surgery centers are adaptive and they have made a number of important adaptations to better withstand a faltering economy,” she says. “Surgery centers also are very nimble; they are able to shift hours, change their procedure mix, they can even close for a day if necessary. They are able to seek out lower supply costs, they don’t get themselves stuck in huge long-term contracts for the most part, and they are very flexible organizations able to respond to tougher times. With a change of procedure mix comes a change in payors, and a little bit of suffering goes along with it because, for example, instead of dealing with private payors, you are dealing with more public payors (with whom organizations may be less well acquainted). But surgery centers are very adept and will figure out how to work the system.”
That includes scrutinizing how the money flows in and out of an ASC, according to Kuznets. “One of the reasons we did the survey was to show surgery centers how others are coping with the economic downturn,” she says. “We do see varied reports on the economy, but we think, for the most part, that our AAAHC-accredited organizations will make it through this,” she adds. “It will be tough, but it’s time for centers to think creatively. They have done all of the logical things, such as decreasing the facility’s hours or moving procedures to different days. But it’s also a reminder to re-examine things like supply costs; because of what happened with gas prices last year they may be paying more now and may have not renegotiated these contracts. Be sure to look closely at all suppliers, at scheduling options, at everything that will impact a facility’s bottom line. A number of folks are looking at their benefits costs; they should be shopping around, just like consumers. Yes, it takes time, but you may have more time right now.”
Kuznets continues, “When you look at some of the business practices that surgery centers have already put into place, yes, they have streamlined things a great deal and they may feel they have done as much as they can — a lot of them probably have cut to the bone, so to speak. But every time we do our benchmarking studies, someone has found a new way to be more efficient. If any sector can get it together enough to weather this economy, this is probably it. The people in this sector are entrepreneurial, they are very aware of the issues they have with their businesses and they are ready to do what’s necessary to remain viable.”