ON THE WAY OUT: Analyzing the Trend Toward Outpatient Anesthesia

-->October 7, 2019Billing & Compliance Alerts

    Conventional wisdom holds that the better-paying cases are migrating from the traditional inpatient setting to outpatient venues. This explains why today’s larger practices are so focused on growing their surgicenter business.  They view it as a matter of financial survival. Many surgeons will bring their older, sicker Medicare patients to the hospital, while they book their younger, healthier patients at an ambulatory surgical center (ASC). As is so often the case in today’s complex medical market, the conventional wisdom is not wrong; but there is more to the story. As practices consider their expansion options, they need to pay special attention to some rather interesting developments.

    Crunching the Numbers

    In general terms, it is true that the average inpatient case at a large community hospital will generate about 15 units per case, while the average outpatient case only results in 10 to 12 units per case. The differentiator is the acuity of care required. Hospitals are designed to handle complex cases and patients who may need to recover in the facility, while the intent of the ASC is to be able to get patients in and out on the same day. The inpatient cases may also require additional services such as invasive monitoring. If we add in a higher percentage of public payer cases (Medicare and Medicaid) to the hospital mix, the typical result is a significant difference in the net yield per billed ASA unit.  It is not uncommon for there to be a $10 per unit variance, with the ambulatory venue resulting in a higher yield per hour of anesthesia time than in the hospital. Some of our clients have looked at these basic facts and decided to move away from hospital-based services altogether. However, this is not an option for most groups.

    So, what are the realities that complicate this conventional view of the distinction between inpatient and outpatient venues? Let’s pull the lens back and put this discussion in perspective. We have pulled data for a period of five years so we could evaluate the impact of overall practice growth and the evolution of cases from the inpatient setting to outpatient venues in the Chart One above (Sample Volume Trends). This sample represents case volumes for 16 large practices in 7 states. All practices have at least one main hospital facility and a variety of ASCs. The first point to note is that all of the practices saw significant growth through 2018, and then things slowed somewhat. You will note that the outpatient case volumes were higher than the inpatient volumes and have tended to grow somewhat faster. Ultimately, though, the percentage of outpatient cases did not change dramatically.

    All is Not as it Seems

    We do tend to assume that the payer mix is not as good for inpatient cases as in the ASCs. To monitor this, we use a high-level measure that we refer to as the Public Payer Percentage (PPP). This consists of all Medicare and Medicaid plans, i.e., the plans for which rates are set by state and federal governments. As the chart below indicates, there has been a higher percentage of public plans in the hospital; but this is changing. A growing percentage of Medicare patients are being seen in the outpatient venues. This is no doubt a function of the increasing volume of Medicare endoscopy patients being seen on an outpatient basis.

    All of this raises a question about what kinds of cases are migrating to the outpatient environment. Using our sample of clients referenced above, we have identified the top six surgical procedures that have migrated over the last five years, as indicated in Chart Three below.  Keep in mind that the inpatient setting is indicated by place of service (POS) 21, while POS 22 indicates cases in the hospital outpatient setting.

    Wisdom: Beyond the Conventional

    So, what is the take-away from all this data? When evaluating opportunities for practice expansion, it is important to perform appropriate due diligence to ensure that the additional venue will actually enhance the value of the practice. Assumptions about the profitability of an ASC can be dangerous. Three factors must be carefully evaluated and assessed. First, the payer mix must provide a yield per unit that is comparable to or better than the overall average yield for the rest of the practice. Second, surgical volumes should be adequate and consistent to justify the necessary manpower needed to meet coverage requirements. Third, make sure the future looks positive. Not all ASCs survive.

    If you want assistance in evaluating expansion opportunities feel free to contact your Medac account executive who will be happy to help.

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