Like every other specialty that has made the transition from hospital-only to outpatient, reimbursement, or the lack of it, is cited as the primary restraint to spinal surgery’s rapid conversion to ambulatory settings.
While inpatient hospital spinal surgery cases were predicted to increase only 10 percent by 2013, outpatient spinal surgery ases are expected to rise 342 percent by then, according to a 2003 survey by the Healthcare Advisory Board that was updated in 2006.
A confluence of factors — including increased safety, new and improved preoperative and postoperative drugs, including pain medication, better and less invasive instruments and surgical procedures and better imaging devices — have pushed the drive from inpatient hospital to ASC settings. Improved anesthesia has reduced nausea and other side effects and diminished the need for overnight stays and extended hospitalization. All of these factors have led to improved outcomes and greater patient comfort and satisfaction, ASC owners assert. As payors like Medicare and private health plans have crunched the numbers and documented the lower costs of ASC spinal procedures versus the more expensive hospital inpatient bills for the same services, they have encouraged in growing numbers the move to ASCs.
Physician specialists, such as fellowship-trained orthopedic surgeons and neurosurgeons, who were slow to embrace the transition from hospital ORs, are performing more procedures in ambulatory settings. They appreciate the faster turnarounds, greater efficiencies and control over their environment that ASCs offer.
Neurosurgeon James Lynch, MD, an owner and board chairman of the Surgery Center of Reno (Nev.) and the founder of SpineNevada, a surgical medical practice, says spinal procedures at his ASC account for only 3.5 percent of total cases but comprise 18 percent of total gross charges and 22.5 percent of total revenue.
While most spine surgeons continue to perform the vast majority of their procedures in hospital settings — from 65-80 percent — they agree that the percentage of outpatient surgeries is rising. Today the most common spinal CPT code services offered in ASCs are microdiscectomies with decompression, single and multi-level anterior discectomies, laminectomies and laminotomies, use of microscope, anterior instrumentation, allografts for spine surgery and arthrodesis anterior interbodies. Some surgeons are performing even more complex procedures in ambulatory settings.
What ASC model works best?
There continues to be debate over the best model for delivering spinal surgery services in ASCs. Some argue that single-specialty ASCs focusing on spine offer the best opportunities for physicians, patients and investors, while others contend that multidisciplinary ASCs offer a better model that further spreads the risk and assures greater longevity.
While representatives present compellingly divergent arguments for both models, spine surgeons and ASC chain executives say it’s more like “different strokes for different folks,” respectfully agreeing to disagree.
Here industry experts make the cases for each model.
Spine-focused ASCs: Planning and seeking market-based reimbursement critical to success
Neurosurgeon John Caruso, MD, is sold on the spine-focused ASC model and helped found spineonly The Parkway Neuroscience & Spine Institute in Hagerstown, Md., a comprehensive spine treatment center and integrated practice model. While a variety of different physicians practice there, the focus of their efforts are directed toward the spine. Taking a ‘Center of Excellence’ approach has worked for Parkway, Dr. Caruso says.
“We’re a pure spine center. We’re not a multispecialty ASC but an integrated specialty practice. We don’t do colonoscopies or cataracts, but we included neurosurgeons, neurologists, physical therapists, rehabilitation physicians (physiatrists), pain management specialists and chiropractors. The model makes sense,” he says. “Since we opened in 2006, business has been great.”
Dr. Caruso says organized medicine has dropped the ball in treating back and neck pain. “If you look at who provides care to those patients, it’s been a hodgepodge of professionals ranging from chiropractors and pain management physicians to spine surgeons, each chipping away at the problem,” he says. “We went away from that scattershot, uncoordinated model by growing and integrating that. Here they all overlap. We employ an electronic health record. A patient can have different points of entry and still be seen by a variety of specialists in the practice.”
He says the center offers flexible hours and a convenient location in which physician offices are located in the same facility in which they perform procedures. Dr. Caruso, one of four neurosurgeons who operate there, concedes that the bulk of his procedures continue to be performed in hospitals.
“But we’ve positioned ourselves to have an outpatient spine center to maximize efficiencies and improve quality of care. We can see more patients and make it a better experience for them,” he explains. He notes that spine procedures aren’t performed at the ASC every day, but on those days the center offers pain procedures.
He says each pain physician works during defined blocks of time, but points out that Maryland law prohibits him from keeping Parkway open overnight, necessitating that the most complex procedures be performed in hospitals.
In spite of those restrictions he believes his ASC model will continue to grow because of the pervasiveness of spine problems in America today and the maturing of the baby boomer generation.“Of all the back patients, only about 3 percent will ever need back surgery. However, they will continue to need the kinds of comprehensive back services we offer.”
Multiple spine services under one roof improve patient satisfaction
Dr. Caruso described a recent out-of-state worker’s compensation patient who had not worked in three months after a back injury. “A physician assistant saw the patient, who received an MRI scan across the hall that revealed a large disc herniation. I saw him and arranged an epidural injection in our center, and he was back to work in days after being off for months,” he recalls. “It’s an efficient model of integration that gives quick and easy access to multiple providers in a comfortable and convenient setting. It’s not all about the surgery but getting people seen effectively and efficiently. We’re looking at it from different aspects.”
Dr. Caruso, whose Parkway ASC partners with Blue Chip Surgical Center Partners, says he hopes to expand to add a neuromuscular focus as well. The ASC originally planned to partner with an orthopedic surgical group, but he says a local hospital learned of the planned deal and broke it up. “Our hospital saw this as a threat against the hospital and fractured our relationship with the orthopedic group. Muscular skeletal conditions bring about 20 percent of all people to see a physician. And we’re hoping to add that to our center.”
He says patients get to know the care team and appreciate the experience.
“Instead of shifting between doctors in distant locations and struggling to get early appointments, we offer everything under one roof. As sub-specialists, we create a lot of chaos in patients’ lives. But in an integrated center, it can work. We’ve seen patients at 6 a.m. and even on weekends and do house calls if we need to. We have care extenders and do clinics on everyday. We fit them in and work them through.”
Dr. Caruso says many patients are surprised by the number and complexity of procedures that can now be performed in an outpatient setting.
“I’ve been doing outpatient spine surgery 15 years through hospital outpatient facilities. We’re doing it in the exact same way, but it’s more comfortable for patients and more efficient for physicians. We employ the best nurses and our anesthesiologists give me great ability to take care of my patients in a patient-friendly controlled fashion that does not exist in a standard hospital stay.”
Dr. Caruso says spine-focused ASCs struggle against the perception that they will over-utilize the facilities. “Hospitals and providers and payors think we’re just going to do more. I explained to one insurer that I would be able to see more patients in a better setting, thus providing better care to their members.”
He says because ASCs operate faster and more efficiently, he can now perform five procedures by 1 p.m. and see patients the rest of the day. Because of the longer turnaround times in hospitals, he says it would often take until 6 p.m. to complete the same number of surgeries.
Getting paid remains challenging
“Our bills are always less than a hospital’s, but it’s a struggle to get paid,” Dr. Caruso says. “Medicare and Medicaid are the death knell to physicians seeking to try anything innovative. But you can’t cover your overhead, let alone make any profit, on what Medicare and Medicaid pay you. Unfortunately, the problem with commercial insurers is that they think if you accept Medicare, then that’s what they’ll pay you. I can’t do a Medicare disc in my center; CMS doesn’t recognize that as an appropriate place.”
According to Dr. Caruso, CMS has now released more CPT codes for ASCs. “CMS realized it would have saved more than $1 billion if the same procedures had been performed in ASCs instead of hospitals,” he says. “They’re slowly releasing restrictions, and commercial payors are starting to follow. They look at the last 50 cervical discs they’ve paid to hospitals and look at our outcomes and costs and see I can do it better and more efficiently. The patient satisfaction is much higher with lower infection rates and improved results. But you have to understand the model, too. Onethird of ASCs will fail. This is a huge economic undertaking.”
He says his practice left a 7,000 square-foot facility to merge with the orthopedic group committing to a 26,500 square-foot building. The merger unraveled, leaving Parkway to fill the facility, which includes 18 physician exam rooms, one OR and eight recovery rooms. Physical therapy and rehabilitation are available on site, along with imaging and chiropractic. “We have the ability to expand to another 30,000 square-feet,” he says.
Dr. Caruso says at first Parkway remained out of most payors’ networks until it developed a track record of quality and efficiency. “They saw that their members were well cared for and eventually came around,” he says. “Nobody wants to pay for services. They always begin by saying, ‘We’ll pay 105 percent of Medicare.’ But that doesn’t work for us. My partners and I have been in practice for quite a while, so we waited them out and negotiated a much more favorable rate than if we’d signed their initial contract offers. We had a very good return on our investment in the first year. We’ve been successful from the get go.”
He concedes that most of his work is still done in hospitals, but predicts rapid changes.
“Things are coming to ASCs,” the 44-year-old surgeon says. “When I first started doing cervical discs we kept people in the ICU for two days with drains. Now in my center they’re in and out in two hours. This model works. I can go directly to employers. One-third of worker’s compensation is back pain and problems, and we’re providing a model of efficient and effective care where people can be engaged in their own recovery.”
Hospital changes from enemy to friend
Dr. Caruso says the local hospital, Washington County Hospital in Hagerstown, went from seeing him as a “rogue entrepreneurial physician” to an ally. “I’m working with the hospital to bring in inpatients,” he says. “Their case volume didn’t go down, and the hospital is still making money. We’ve made them better. They’re getting involved in improving their efficiency and effectiveness as well. Now they’re seeing this model as beneficial to the community and not a threat to them.”
Dr. Caruso says scheduling, a hallmark for every ASC, is also vital to spinefocused ASCs.
“My hospital’s turnover time between procedures was 68 minutes, compared to seven minutes at my ASC,” he says. “I sometimes spend more time waiting for the case than in doing the case. We’re showing them how to be more efficient. We’re controlling pharmaceutical costs and schedules and organizing care into patterns. We’re always asking, ‘Can we do better?’ If you keep asking that question, the answer will be ‘yes, we can.’ You just need the willingness and determination to do it.”
Careful planning important
Jeff Leland, managing partner of Blue Chip Surgery Center Partners, says spine-focused ASCs can become successful if efficiency is a primary focus.
“In my view the way you build a successful spine center is by choosing partners correctly and sizing the facility appropriately,” he says. “Our spine surgery centers may be only open two-and one-half days a week, but surgery centers are largely fixed-cost businesses. So if you can keep your total cost downs, it can work. At the end of the day, the trick is figuring out how to obtain proper reimbursement. In our spine surgery centers, we can do far fewer cases but have to be properly reimbursed to make this a win-win. The competition for a spine surgery center is the hospital, not other ASCs. Successful spine ASCs position reimbursement on what hospitals get paid while capturing some of that savings for the partners.”
Mr. Leland says a typical spine surgeon brings 60-120 cases annually to an ASC.
“That’s not so many cases compared to some specialties, and because the case volume is relatively low, the successful spine ASC must be reimbursed properly,” he reiterates. “There’s an art form to getting proper reimbursement. You have to stay “out of network” for a while to help the payors appreciate how much they’re paying that they don’t have to. In every instance, our eventual goal in all centers is to be largely ‘in-network.’”
He says in a multi-disciplinary ASC, the other non-spine doctors will often not want to remain out-of-network very long. “ It creates challenges they’re not willing to accept. The competition for typical multi-specialty surgery center is not in-patient hospitals, but other ASCs. It really gets down to ability to contract effectively,” Mr. Leland explains. “Most contract negotiators in the ASC business use cost information when they think of contracting, however, with spine cases, they ought to be reimbursed higher than some nominal mark-up on cost. In Blue Chip managed spine ASCs, it’s based on value, on what is the market rate for spine cases. We don’t talk about costs at all. We look at what the market is paying. It’s not rocket science.”
He says the biggest problem Blue Chip and its spine ASCs face is that payors don’t have cell-designed and well-understood algorithms for understanding the payor’s costs and often the payors do not understand how to evaluate value.
“Reimbursement is critically important and one must also know how to manage costs and design for a low volume of cases. Knowing we’ll only do 1,500 cases, not 4,000, helps us to plan and price our services correctly,” he says. “We turn out the lights.”
Staffing appropriately keeps costs manageable
Mr. Leland says Blue Chip’s spine-focused ASCs are able to staff with only two to three full-time staff and a handful of per diem employees. He says the spine surgeons each work in the surgery center only one day a week or a few days a month so the surgery center will often recruit the surgeon’s hospital-based nurses and staff to work in the spine ASC on a per diem basis.
“That allows us to keep our fixed costs really low. Three years ago, we formed this business with the idea of doing outpatient spine right from the beginning. It was the game plan from day one,” he says. “We have to train staff and choose our markets well. The reason we’re successful with outpatient spine is we do it in an organized and methodical way. And we’re careful to do it well.”
Mr. Leland says the spine center referrals come from doctors. “People don’t call us directly to request spine surgery,” he says. “The physician practice is the portal. We don’t even have to advertise. All of our patients come from other doctors. We don’t have walk-ins. It’s all based on relationships with doctors. We don’t view ourselves as competing with pain management centers and chiropractors. Most of our partners are neurosurgeons and orthopedic spine surgeons.”
Beth Ann Johnson, RN, vice president of clinical systems for Blue Chip, says six of the company’s nine ASCs offer spine surgery.
She says one of the most critical things to doing spine surgery effectively in an outpatient environment is anesthesia.
“That can be a real deal-breaker,” she says. “An ASC doing spine needs great anesthesia delivered by anesthesia providers experienced in giving anesthesia in outpatient settings. That’s crucial. Patients need to feel good enough to go home in a few hours. It’s important that they have not been given the impression that they will need extended care in a medical setting. We educate everyone, from the staff in the physician offices to the receptionists at the ASC that the patient can expect to go home within a couple hours of their procedure.”
One ASC’s answer to the outpatient limitations on spine surgery
Ken Pettine, MD, a board-certified orthopedic surgeon specializing in spine surgery and coowner of the Loveland (Colo.) Surgery Center, says his ASC is spine-focused and offers pain management, orthopedics, urology, ENT, podiatry and anesthesiology services in a state-of-theart facility with three operating rooms.
While acknowledging challenges with the spinecentered model, Dr. Pettine says he’s figured out a way to make it work.
“We have a unique situation. We are an ASC with a convalescent license,” he explains. “Most states only allow an ASC to keep a patient for 23 hours; Colorado allows a convalescent license. And that’s the key. It allows us to transfer patients from our recovery room and enables me to do 90 percent of my spine surgery at the ASC. Anybody in the country can do what we’re doing, subject to state regulations.”
Because of the adjoining convalescent center, in which he holds an ownership stake, Dr. Pettine says he can more perform more difficult and complex surgeries at his ASC for less money than hospitals charge.
However, securing good contracts is vital. “We were non-participating (out of network) for about one year,” he recalls. “You’re paid more out of network, but insurers recognized our high quality and lower costs, and we got the contracts we needed. There’s no way any hospitals can compete with us.”
He says eight physician partners own the ASC with National Surgical Care, which manages the center.
“If you ask most spine surgeons whether they would rather operate under my conditions in an ASC or in a hospital, they would choose an ASC,” he says. “We have a 12-minute average turnaround, compared to an hour to an hour and a half for hospitals. We have no staff turnover and offer experienced personnel, and I can do an operation at least 20-30 percent faster because I have the same personnel working with me everyday. There’s a lower infection risk, patients spend less time under anesthesia and we have better pain control with a one-to-one nurse/ patient ratio. In hospitals these patients would spend three to five days recovering, but in ours they’re out in 48 hours.”
Taking a leadership role
Dr. Pettine says that Loveland currently is conducting 10 FDA-approved studies of spinal implants. “We’re doing more spine surgery research in our ASC than all the Colorado hospitals combined,” Dr. Pettine says. “We probably do more than 400 major artificial disc replacements and major spine procedures per year. Anybody can do what we’re doing. You either build an ASC next to a rehab hospital or nursing home or establish a relationship with an existing facility nearby. We arrange to have our patients transferred there from our recovery room.”
Dr. Pettine says his ASC was named a Blue Cross and Blue Shield Center of Excellence. “We’re presenting outcomes data at a conference this summer on over 500 instrumented spine cases and demonstrate how we have improved safety and efficiency,” he says. “At the same time, we’ve saved BCBS 60 percent over hospital charges on the same procedures.”
He says healthcare in the United States will change, and the winners will be providers who can do spine surgery with safety, efficacy, high quality and cost savings. “That’s what President Obama is looking for, and I think we’re an example of that new model of care,” he says.
Dr. Pettine says there are no spinal procedures he would not perform at Loveland.
“We’re busy five days a week. My partners perform about 70 percent of their spine work here, because they do more Medicare and Medicaid and do that in the hospital. But I’m spoiled now and don’t want to work at the hospital anymore.”
Multi-disciplinary ASCs offer spine surgery, but hedge bets
David Abraham, MD, a board-certified orthopedic surgeon fellowship trained in spine surgery with the Reading (Pa.) Spine and Neck Center, says opening a spine-centered ASC in a state like Maryland may make sense there because of restrictive laws requiring ASCs to focus on a single specialty.
“But it wouldn’t work here [in Pennsylvania],” says Dr. Abraham. “I’ve always said a spine-only ASC would flop. The problem is Medicare does not recognize nor reimburse for all outpatient spine procedures and Medicare beneficiaries make up one-third of my cases. If one-third of my cases are with Medicare beneficiaries and can’t be done in my ASC, I’m going to need three other spine guys to fill that gap to keep the ASC busy. I’ve heard some of these spine-only places don’t do enough cases to keep their ASCs open. It doesn’t seem like a viable business model.”
He says many older spine surgeons still believe that doing spine procedures in an ASC is risky business because it wasn’t done when they were undergoing their training. “Back then, everything was done in hospitals, and really good outpatient anesthesia wasn’t available,” he says. “It’s different today. There has been an evolution of technology and comforts that have brought many more spine cases to ASC settings.”
He says the Reading ASC is a multi-specialty ASC that opened nine years ago and partnered with Ambulatory Surgery Centers of America. He says that while it offers a full range of spine services, he chose to team up with other types of surgeons to produce a multi-specialty center that offers greater opportunity for institutional longevity and spreading the economic risks.
“If the work I do can only keep the center busy two days a week but others working there can expand its use to five days a week, my investment is better protected by that outside revenue stream,” he says.
Payors slow to embrace spine-focused ASCs
Dr. Abraham points out that some insurers don’t like spine-focused centers. He says a typical spine surgeon performs 70 percent inpatient and 30 percent outpatient surgery. Some spine surgeons who do surgery may also do pain injections or refer to a colleague within the center with a pain management practice across town.
He says the limitation of a spine-only center is that the majority of spine surgery is still done in inpatient settings, with Medicare and some large insurers only agreeing to reimburse some procedures in a hospital setting.
“In a best case scenario if all payors allowed me to perform spine procedures in ambulatory settings, I would probably only be able to do 40 percent of the ASC’s case volume. And if you factor in Medicare and insurers, it might be down to 20-25 percent. Therein lays the problem,” he says.
That contrasts with hand and foot surgeons, who can do 90 percent of their work in outpatient settings. “I think the multi-specialty model works the best by including sports medicine, orthopedics, ophthalmology, pain management, GI and ENT,” he says.
He believes a multi-specialty spine center should include different types of medical specialists covering the entire gamut of spine care, including nonoperative spine specialists, pain management physicians and fellowshiptrained spine surgeons.
Dr. Abraham says medicine is to blame for the confusion surrounding how to treat back pain. “We have done a poor job of organizing protocols for managing back pain,” he says. “We didn’t get a lecture in medical school about spine care, but they did take two weeks to learn about sub-Saharan diseases you’ll never see in real life. We didn’t spend any real time learning about the number two reason people see a doctor: back pain.”
In that absence, other healing professions began focusing on back care, he says, including chiropractors, homeopaths, acupuncturists, osteopaths and others.
“That’s been very confusing to the public,” he says. “Historically, we haven’t managed spine care well. We’re trying to introduce scientific rigor and organization to what is a very disorganized area of medicine.”
Dr. Abraham says he performs the surgeries the same way whether in a hospital or ASC setting. “The concept of doing something less or differently argues against quality of care,” he suggests. “If you mess with the foundation of good results, you will have a lot of failed procedures.
Spine-focused ASCs a ‘risky business’
The Surgery Center of Reno’s Dr. Lynch also believes it’s a risky proposition for an ASC to rely on a single medical specialty. “It places the ASC in a vulnerable position, particularly with the uncertainty of our current economic climate,” he says. Like Dr. Abraham, he says going out of network to obtain higher reimbursements can adversely impact patients.
“Insurers are clamping down on this. Patients are having more difficulty with out-of-network benefits and it’s asking a lot of them to pay that much extra money,” he says. “People don’t have the extra money to match these big out of network co-pays.”
Dr. Lynch also directs spine services for Regent Surgical Health, the Surgery Center of Reno’s managing partner. He says outpatient spine has great growth potential. “Spine is the last specialty to catch up and go outpatient. It’s a hot topic with huge projected growth.”
The Surgery Center of Reno has 30 physician owners who perform 50 percent of the ASC’s cases. It includes three neurosurgeons, two pain management specialists, three ENT specialists, four orthopedic surgeons, a general and bariatric surgery program with four surgeons, two ophthalmologists, two podiatrists and a urology/lithotripsy group.
Single-specialty spine may be a risky proposition
Dr. Lynch says Regent won’t even start an ASC now with a single-specialty focus.
“It’s a one trick pony, a high-risk proposition, regardless of where you are located. When you are only open two and one-half days a week, you’re more likely to have higher staff attrition,” he says. “And it’s hard to get part-time staff, pay them well and retain them. They want the guaranteed hours.”
“Most ASCs are not successful focusing only on spine,” Dr. Lynch says. “You can’t know what’s happening five years down the road. And you can’t predict what’s coming next in reimbursement, so you need to diversify.”
He says spine or high-end orthopedics can lose money if done incorrectly.
“Our ASC’s small minority ownership prevents us from making big mistakes, like dealing with implants, carve outs and equipment purchases,” Dr. Lynch says. “We have such an overlap, setting up pain injections, referrals back and forth. It’s gravy. It’s insane not to do that. Why would you do a single-specialty when it doesn’t make sense? It’s like putting all your eggs in one basket, and just because you focus on one spec doesn’t mean you do it better than anyone else.”
He says bringing ENT and spine together can generate big profits for ASCs. “ENT is high volume. Spine procedures fluctuate in volume but offer high reimbursement.”
Sometimes partnering with hospitals is a wise decision
Dr. Lynch encourages ASCs to explore partnering with local hospitals as a way to grow the spine business.
“So many people see hospitals as adversaries, but aligning with them can work. They can be one of your best anchored tenants,” he says, “and partnering with them can help you get loans. They won’t disappear overnight either.”
“Hospitals have insurance contracts and better rates,” Dr. Lynch says. “There are other advantages as well. Because of them we have intraoperative monitoring. We make money off partnering with hospitals. It’s the same thing with implants, because of our relationship with both Regent and St. Mary’s Regional Medical Center (a Catholic Healthcare West hospital in Reno). The old relationship paradigm was adversarial. But by the nature of spine surgery, we have to do cases in the hospital. This is a give and take. So it makes sense to have to have a good working relationship.”
Dr. Lynch says his ASC has a presence on the hospital campus. “I operate at the hospital two days a week. We market with them. What we’re doing is a win-win. That’s how you keep everyone happy,” he says. “It’s an ideal model for us. I call it a triple crown if have good corporate and hospital partners. Our ASC returns 30-40 percent ROI on cash investment year to year. Pain, GI and ENT are the high-volume procedures that keep people coming in, pay the bills and keep staff employed. Everything else on top of that is profit.”