Blog Post March 15, 2018 Navigating Legal and Operational Issues: ASCs as a Part of the Solution Authors Amy Coletti I. Naya Kehayes At the Nossaman/CASA spring conference that was held in Los Angeles, lawyers and administrators gathered to collaborate on how ASCs can be an important solution in the healthcare industry. ECG was a sponsor of this event. The focus was on ASCs, which are integral to the healthcare industry and can present value and savings to payers. Some of the key takeaways from the conference included the following: ASCs continue to be a key player in healthcare delivery, as payers and employer groups are demanding cost reductions for the total cost of care for patients/employees.There is an increased demand for ASCs to enter into JVs with health systems.Independent ASCs are desirable to payers, as health system JVs usually will not realize the same level of savings.During the conference, ECG’s Naya Kehayes participated on the Opportunities and Limitations for ASCs in a Value-Based Environment panel, which also included Anna Gimble of UnitedHealthcare, Lisa Rock of National Medical Billing Services, and Ian Andes of Envision Healthcare. This panel discussed the future of ASCs, and some of the major themes the group touched upon were the following: ASCs are performing higher-acuity cases that can migrate out of the hospital setting.The OON Model has a waning life expectancy in the opinion of many, although some continue to use the model despite the increased risks of reduced access to patients with benefits.Value-based care will be an important driver for ASCs in the coming years.The Commercial Bundled Payments Model is new for ASCs.The total cost of care will be reduced through direct contracting with self-funded payers.The second half of the panel discussion centered around Developing a Business Case and Proving Your Value to Payers. The dialogue began with a focus on the power of data, looking at what analytics ASCs will need to present to payers. Also discussed was aligning incentives for patients, providers, and payers to create a more successful care system. Finally, the conversation touched upon the rate of investment in ASCs and how the higher the investment, the more return is seen. Some of the key takeaways were the following: The Power of Data: ASC-Specific Information for PayersAlignment of Incentives for the Three Ps: Patient, Provider, PayerDefining value in the ASC space for immediate value (e.g., multispecialty) versus long term (e.g., GI)Rate Investment in the ASC: Pay More, Get MoreOne of the highlights of the meeting was a session on ASC Valuations, Succession Planning, and Maximizing Profits with Matt Searles, Managing Partner, Merritt Healthcare; John Vick, President, ASCs Inc.; and Kevin McDonough, Managing Director, VMG Health. They spoke about where cases should be performed, noting they should occur in the setting that is the most efficient, which might mean transferring some volume away from the surgery center. While higher-acuity surgeries are clearly progressing in their shift out of hospitals and into ASCs, some lower-acuity procedures that are currently performed in ASCs are shifting to the physician’s office. In January, the migration of surgery to the outpatient setting was further supported by CMS with the removal of total knee arthroplasty (CPT code 27447) from the inpatient-only list and approval for the HOPD setting. This is a common trend for patient migration to progress from the hospital to HOPD setting, followed by approval for ASCs. Therefore, this is a sign that CMS may approve total knee replacements for ASCs soon. EBITDA multiples for ASC transactions continue to remain high because PE firms are increasing their interest and participation in this space, which is driving up the multiples for ASCs. In addition, hospitals realize they need to partner with ASCs to be successful in the future as more procedures shift out of the hospital setting. ASCs are part of the solution. ASCs can present value and savings to payers and are an integral part of the healthcare system in addressing healthcare costs. Payers are working on alternative payment methodologies and incentive strategies to direct volume with proven outcomes to ASCs, and some payers are considering bundles for ASCs. This will increase competition with hospitals, which should plan their ambulatory strategy—doing so will be critical to value-based care, physician alignment, and long-term success.