When performing outpatient procedures, many orthopaedic surgeons operate in either an ambulatory surgery center (ASC) or a hospital-based outpatient department (HOPD). Although some of the workflows and services offered may appear similar between the two, the background operations are substantially different from business and regulatory perspectives.

An HOPD is owned by and typically attached to a hospital, whereas an ASC is considered a standalone facility. However, the difference between an ASC and HOPD specifically refers to the regulations that apply to the center; therefore, a “freestanding” surgery center can still be classified as an HOPD if it is within a 35-mile radius of the hospital and falls under the same financial and administrative contracts. Similarly, a facility can be operated by a hospital and still maintain ASC status if it is an independent entity financially and administratively with its own Medicare agreement. Furthermore, ASCs must comply with the ASC Covered Procedures List, which is aimed at ensuring that procedures with the appropriate level of risk are performed in these freestanding centers.

Cost differences

The regulations and conditions that differentiate ASCs and HOPDs are primarily reflected in cost. Payment rates for the same procedures are lower in ASCs than in HOPDs. Procedures performed in ASCs are reported to cost Medicare 53 percent of the amount paid to HOPDs. According to current data from Medicare’s Procedure Price Lookup tool, Medicare payments for knee arthroscopy are $1,005 to ASCs versus $2,098 to HOPDs, with similar differentials in procedures such as knee arthroplasty ($5,914 versus $9,349, respectively) and open reduction internal fixation (ORIF) of a lateral malleolus fracture ($2,854 versus $4,559, respectively).

The cost differences can have significant effects on the healthcare system. The Center on Health Care Markets and Consumer Welfare at the University of California, Berkeley reported that in 2011, procedures performed in ASCs saved the Medicare program $2.3 billion, with an estimated potential savings of $57.6 billion over the next 10 years. The cost savings also may impact patients in terms of lower copayments and potentially even lower commercial insurance rates. Medicare data show that out-of-pocket costs for patients are also lower for some orthopaedic procedures such as knee arthroscopy ($251 at ASCs versus $524 at HOPDs) and ankle ORIF ($713 versus $1,139, respectively). When combined with the shift toward value-based care, this could contribute to ASCs capturing a greater proportion of the market.

The cost differential between HOPDs and ASCs is partially due to the way payment rates were updated for inflation over time. HOPD payment rates were updated based on the hospital market basket, which is a fixed weight index of costs or services at a later time and can be more predictable, as it is based on factors directly related to the cost of providing medical care. ASC payment updates, in contrast, are subject to the Consumer Price Index for All Urban Consumers, which measures the rising costs of all goods, which are rising more slowly than the cost of medical care.

Advantages of an ASC

ASCs have been shown to have greater efficiency with no differences in complication rates compared to HOPDs. A narrower scope of procedures performed in the ASC setting allows for more specialized care and high patient satisfaction due to smaller and more personalized teams. Selection of technology and scheduling preferences can be more tailored to subspecialties and can place ASCs at an advantage from an operational perspective compared to the HOPD setting. In some ASCs, the option for physician ownership leads to increased autonomy and incentivization, which can translate into increased quality of care due to the effect of direct accountability and alignment of goals between the physician and the surgery center. Physicians who have ownership in an ASC may be more motivated to change or comply with cost-saving or quality-improvement measures that would increase the value of care.

Advantages of an HOPD

The downsides of physician ownership, however, are the financial risks and losses of investment that physicians or owners can sustain. The potential for conflicts of interest in providing care at a facility where the surgeon can profit financially has been raised as well. However, the converse is true, as many hospitals now have employed physician models to include orthopaedic surgeons.

Some ASCs have therefore chosen to convert to HOPD centers. This may result in loss of physician ownership. In that model, a center must operate under the hospital’s regulations and administrative decisions. For physicians, HOPDs allow for more predictable payments for surgical care provided. However, payments may be less than what they could earn in ASCs where they have ownership. In the setting of the current reimbursement gap, HOPDs can have the advantages of higher reimbursement rates and lower costs.

Current trends

Over the past 30 years, the role and number of ASCs have grown considerably, with many orthopaedic procedures increasingly transitioning to the ASC setting. Despite their popularity, growth has slowed recently, with some ASCs choosing to convert to HOPDs to minimize the risks described herein and others terminating their participation in the Medicare program due to the reimbursement gap.

As a result of the transitions, solutions such as comanagement agreements have been developed to allow physicians some leadership in the management of HOPDs without the financial risks associated with ownership of ASCs.

Current efforts to equalize payments between ASCs and HOPDs, along with the addition of several key procedures to the ASC Covered Procedures List, will likely impact the ASC and HOPD market. The changes, as well as a shift toward value-based care, will play important roles in the future of systems that support outpatient orthopaedic procedures.

Miho J. Tanaka, MD, is director of the Women’s Sports Medicine Program at Massachusetts General Hospital and a faculty member at Harvard Medical School. She is a member of the AAOS Health Care Systems Committee.

References

1. Regent Surgical Health: HOPD to ASC Conversion: Now or Later with Transition to Value-based Care. Available at: https://ss-usa.s3.amazonaws.com/c/2236/media/5ac3c9ae0b59f/RSH-HOPD-0318.pdf. Accessed August 19, 2019.
2. University of California, Berkeley: Medicare Cost Savings Tied to Ambulatory Surgery Centers. Available at: https://www.ascaconnect.org/HigherLogic/System/DownloadDocumentFile.ashx?DocumentFileKey=7b33b916-f3f1-42e5-a646-35cc2f38fe4d&forceDialog=0. Accessed August 19, 2019.
3. Centers for Medicare & Medicaid Services: Market Basket Definitions and General Information. Available at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/downloads/info.pdf. Accessed August 19, 2019.
4. Medicare.gov: Price Procedure Lookup. Available at: https://www.medicare.gov/procedure-price-lookup/cost/. Accessed August 28, 2019.