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Outpatient surgery providers examine how to thrive in current economy
(Editor's note: In this special issue of Same-Day Surgery, we explore the impact of the current economy on outpatient surgery. We've included a status report, an economic outlook, an examination of the impact of the Obama administration, and cost-cutting tips.)
A decline in elective surgeries. Fuel surcharges. Hospitals and surgery centers cutting costs, but some still having to close. The economy is having an impact on outpatient surgery at all types of facilities and at all levels.
"We're all concerned, clearly, about the economy," says Kathy Bryant, president of the Ambulatory Surgery Center Association. "Many of our concerns are the same: that people have a means for paying for health care in the future."
Bryant wonders if this is what providers faced in The Great Depression. "I assume most of us think, this is as bad as it's going to get," but the news just keeps getting worse, she adds.
Thirty percent of hospitals have reported a moderate to significant decline in patients seeking elective procedures, according to a report from the American Hospital Association (AHA).1 Ambulatory surgery visits are down 0.6% for the third quarter of 2008, compared to the third quarter of 2007, according to DATABANK data included in the AHA report. According to The Wall Street Journal, knee replacements fell 18.6% between March 2007 and March 2008.2
Most hospitals are seeing an increase in the proportion of charity care, and the need for subsidized services is increasing, according to the AHA report.
Sixty percent of hospitals that responded to an AHA survey recently indicated they would make cuts or consider reducing administrative costs, while more than half had reduced staff or are considering such reductions.3
"Some hospitals are reducing staffing levels on slow days on a day-by-day basis," says Stephen W. Earnhart, MS, president and CEO of Earnhart & Associates, an Austin, TX-based ambulatory surgery consulting firm. "Most of the surgery centers having been doing that for some time," he adds.
Managers are more cautious, Bryant says. "So if you were considering adding another person, you might not be adding one," she adds.
There might be repercussions, according to a recent report from The Joint Commission.4 Staffing shortages lead to increased wait times for surgeries, as well as canceled surgeries, according to information quoted in the report.5
And staffing isn't all that has been affected. "Some programs are cutting back on patient transportation, reducing free meals for surgeons and staff, and generally just belt tightening," Earnhart says.
Forty-five percent of hospitals are delaying purchases of clinical technology or equipment, the AHA report said. Even new surgery centers are being cautious, according to Beverly A. Kirchner, RN, BSN, CNOR, CASC, president of Genesee Associates in Dallas, which develops, manages, and consults with freestanding surgery centers.
Kirchner is getting ready to open a surgery center. While she is planning to spend $6 million on equipment in the next six months, "we're more cautious about what we buy, and we really negotiated hard to get rock-bottom prices on what we buy," Kirchner reports.
One vendor says manufacturers are starting to reduce their prices. "Surgery centers are getting a lot more cost-effective, cost-efficient, and cost-concerned," says David Brucker, marketing development manager for Ethicon Endo-Surgery in Cincinnati. "Vendors are having to cut costs to stay competitive."
Some vendors are more cooperative than others, according to Earnhart. "We are finding that vendors are less willing to offer to let expensive equipment sit in a facility for periods of time — trial periods — without a commitment of purchase," he says. "We are also noticing that vendors are requiring personal guarantees on new surgery centers, even those centers with strong hospital partners."
Some equipment vendors are very concerned, Kirchner says. "Sales reps are panicking; they're afraid hospital systems and surgery center systems will stop buying equipment, and they won't make their numbers," she says. There could be positive and negative impacts, Kirchner says. "They may drop costs for some of those of us who are still developing centers. On the bad side, they won't have enough reps out there to service us."
So what should you do? "Do not make long-term changes for a short-term problem," Earnhart suggests. "Continue your marketing programs, and implement whatever revenue programs you are or were pursuing in the past."
Do not overreact, he emphasizes. "Health care is the best industry to be working in right now," Earnhart says. "Cut back on expenses that make sense in any economy, and expand programs that would make sense anytime."
Many see the current situation as "doom and gloom," but most of the world's economic changes are due, for the most part, to poor business practices in sectors such as banking, Earnhart reports. "In Texas, we have a saying, 'If you want to make an omelet, you have to break a few eggs.' Well, the eggs are breaking, and the end result will be pleasant," he says. "The financial structure in the next year or two will be a much stronger and stable place to do business."
Are you prepared for what is coming?
There is no crystal ball to consult, so how do you know what to expect, in terms of the impact of the economy?
It's difficult to spot trend trends yet, says Kathy Bryant, president of the Ambulatory Surgery Center Association. "Interestingly, where I would have expected to cut back — in plastic surgery — people have said not necessarily so," she says. "Some people have money and are spending it."
That thought is echoed by Stephen W. Earnhart, MS, president and CEO of Earnhart & Associates, an Austin-based ambulatory surgery consulting firm. ". . . [I]f anything, we are purchasing new equipment and expanding procedures to make additional revenue in programs such as bariatric surgery and more cosmetic procedures such as tattoo removal," he reports.
The aging population should bring increased cases, says Beverly A. Kirchner, RN, BSN, CNOR, CASC, president of Genesee Associates in Dallas, which develops, manages, and consults with freestanding surgery centers. "I've read that you'll see up to a 20% increase in surgery in the next five to seven years, due to baby boomers."
However, some sources say that procedures that rely mostly on self-pay, such as bariatric surgery, will be vulnerable. Outpatient surgery providers might start seeing an increase in self-insured and in COBRA coverage, Earnhart predicts. Those thoughts are echoed in a new report from The Joint Commission.1 Hospitals can expect increases in publicly insured patients and uncompensated care due to an aging population and a continuing decline in employer-sponsored insurance, according to The Joint Commission. "This is expected to create more competition for the fewer patients to whom costs may be shifted," it says.
For hospitals to be economically viable, they must follow certain principles, which include addressing how general acute hospitals and specialty hospitals can both fulfill the social mission for health care delivery, The Joint Commission says.
The American Hospital Association (AHA) is urging congressional assistance for general acute hospitals. The AHA has urged Congress to place moratoria on Medicaid payment cuts to hospital outpatient services.2
"Hospitals are not immune to the pressures of a worsening economy," the association said. "Any changes to Medicaid and Medicare payments directly impact the health of our facilities and the patients we serve."
Will new president mean less reimbursement?
All health care providers, including those in outpatient surgery, might face less reimbursement under health care reforms implemented by President-elect Barack Obama, according to Kathy Bryant, president of the Ambulatory Surgery Center (ASC) Association.
"It's difficult to do anything with no money in the federal budget," she says. With Obama promoting policies that would expand access to health insurance, there might be a tendency to cut health care reimbursement to pay for that access, she adds. "Maybe not ASCs specifically, but providers in general, and we'd be part of that," Bryant says.
In addition to health care reform, President-elect Obama faces economic woes, says Rich Umbdenstock, president and CEO, American Hospital Association. "The ballooning federal deficit and severely constrained state budgets mean that Washington will have to find ways to trim the federal budget and stem the tide of red ink," he says.
Any changes to the current health care system are likely to be incremental, Bryant predicts. "There will be changes that expand access that will mean the number of uninsured goes down," she says. "But for the most part, the system we already have will be the way we get health insurance."
President-elect Obama showed pragmatism on the campaign trail, which is positive because the "successful path to health care reform will be a phased approach," Umbdenstock says. "Finding and implementing solutions to our health care challenges is a big job, and we believe that doing it in a thoughtful and coordinated manner and getting it right the first time is more important than getting it done first."
In terms of health care reform, Obama is just one person, Bryant says, "and I'm not even sure he's even the most important person." She points to Sen. Edward Kennedy, D-MA, a longtime Senate leader on health care; Sen. Max Baucus, D-MT, chairman of the Senate Finance Committee; and Sen. Ron Wyden, D-OR, a longtime proponent of universal health insurance, as key figures.
The appointment of Senate Majority Leader Tom Daschle, D-SD, to serve as secretary of the Department of Health and Human Services is "interesting," Bryant says. "I don't think Daschle has an incredible amount of experience in health care," she says. However, he's a "quick learner," and has given a significant amount of support to Obama, Bryant says. "He'll have the ear of Obama, given all of his support of him," she adds. "It's good when people are in sync." (Editor's note: For a full copy of Obama's health care reform plan, go to www.barackobama.com/pdf/issues.)