Making bank with an ambulatory surgery center

For many physicians, simply owning a medical practice brings in a good living. In this same vein, an increasing number of physicians are sole owners of ambulatory surgery centers (ASCs)—modern centers that offer surgery, diagnostic services, and preventive interventions.

ASCs compete with hospitals to provide outpatient surgeries, as well as providing high-quality care and positive clinical outcomes, according to the Ambulatory Surgery Center Association (ASCA).^[] And they've become a formidable force in healthcare that brought in $77 billion in 2019, according to the consulting firm, insightSLICE.^[]

What do ASCs do?

ASCs cater to a host of patient populations and provide diverse interventions including gallbladder, small-joint, and cataract surgeries. According to the ASCA, the top five Medicare-certified ASCs specialize (in decreasing order) in orthopedics, pain, ophthalmology, endoscopy, and plastic surgery. Although opening and operating an ASC can be complex, the majority of them are owned by physicians.

Benefits of ASCs

ASCs offer various advantages over their hospital counterparts, according to the authors of a review published in the Journal of Spine Surgery.^[]

According to this review, ASCs are more productive, efficient, and less expensive than outpatient centers at hospitals. Patients end up paying less and physicians take a larger share of the profits. The authors felt ASCs contribute to cost control in the healthcare industry overall by decreasing costs without compromising quality of care.

“It is no secret that professional fee reimbursement for physicians has continued to decline over the last few decades," the authors added. They observed that revenue generated from ancillaries such as ASCs “can offset some of the decline in professional fees that physicians have experienced.”

ASCs also are nimbler, with a smaller size and less hierarchy than in hospitals, the review concluded. ASCs can better focus on more consistent management goals and better alignment between incentives for providers and the visions of their managers or owners.

ASCs can offer a smaller list of specialized surgeries, boosting efficiency. Specialization drops costs, in healthcare as in other industries. For instance, an ASC needs only to purchase the equipment it needs and takes up less practice space with fewer types of procedures performed. Another benefit is the higher quality control that comes with fewer procedures to concentrate on.

The authors quantified cost benefits to patients. The patient cost of a cataract surgery, for instance, is $490 at a hospital compared with $193 at an ASC. For endoscopy, the cost is $139 in a hospital vs $68 in an ASC.

The allure of ASCs has not only enticed physicians. Other public and private stakeholders are investing heavily in the automation of diagnosis and treatment toward the goal of “smart” ASCs to improve outcomes.

Complexities of ASCs

Various ASC ownership models exist, with physicians, hospitals, and management companies typically being the chief stakeholders. In the US, 90% of ASCs have at least some physician ownership, with 65% solely owned by physicians.

Physician entrepreneurship and leadership in ASCs fuels these doctors to take active roles in financial planning and resource allocation to generate maximum profit.

Various complexities and concerns surround the successful operation of an ASC, including the following:

• ASC ownership by physicians must comply with Stark Laws

• Physicians need to manage the ASC’s day-to-day operations

• Physician owners need to perform at least one-third of the procedures done at the ASC

• Physicians need to pay fair market value for their ownership stakes

It can be challenging for individual physicians who own small surgery ASCs to contract with insurers. To cope with contracting and administrative concerns, sole physician owners can employ a management service without relinquishing equity. The cost is usually between 3% and 7% of the ASC’s net revenues.