ASCs at a Tipping Point: The New Reality of Surgical Services for Health Systems

For decades, surgeries performed in hospital operating rooms (ORs) have been among the most profitable services in healthcare. As a result, most hospitals regard inpatient (IP) surgery as their crown jewel. It makes money, and hospitals without high surgical volumes have struggled financially. Attracting busy surgeons has been a mainstay strategy, and at times it has seemed as if hospitals’ business development efforts have been geared primarily toward securing surgery volumes. Neurosurgery, cardiac surgery, and orthopedics have traditionally been the most prestigious and profitable programs at hospitals.

In contrast, health systems have had a love-hate relationship with ambulatory surgery centers (ASCs). Only when push came to shove—when facing the catastrophic loss of hundreds of cases, or a medical staff rebellion—have most hospitals been willing to consider joint ventures with surgeons interested in ASCs. Many other hospitals watched helplessly as “their” cases left for ASCs in which they had no ownership interest.

ASCs are not a new idea—they have been with us for over 40 years—but interest in them is escalating. There are over 5,000 Medicare-certified ASCs in the United States, and the number continues to grow, as do their service capabilities. Consider the following developments:

• In early 2017, UnitedHealth Group announced a $2.3 billion acquisition of Surgical Care Affiliates.
• In 2015, Tenet Health formed a $2.6 billion joint venture with USPI.
• A northeastern health system intends to develop a network of more than 30 ASCs.
• A southwestern health system has plans to develop more than 20 ASCs, with an in-house ASC management company to support the network.
• A southeastern health system is seeking to develop or acquire more than 10 centers in its market area.

Clearly, the IP-dominated paradigm for surgery is evolving rapidly, with some of the most profitable cases transitioning to ASCs. Forward-looking health systems are investing heavily in this shift—in some cases strategically reducing IP revenue to better position their systems for the future. Dozens of health systems have already made this change, and many more are in the process. We believe that ASCs are at a tipping point in the evolution of health care delivery, and hospitals without a comprehensive ambulatory surgery strategy are putting their institutions at great risk.

Published June 21, 2017