Are ASCs in for another rough Q1?

By Carrie Pallardy
This article is reprinted from Becker’s ASC Review

Harsh winter weather and underwhelming financial results were the hallmarks of the first quarter of 2014 in the ambulatory surgery center industry. Winter is threatening to bring another round of record low temperatures in 2015, and the challenges of 2014, if anything, have intensified. How can ASCs prepare for the new year?

2014 retrospective

The opening quarter of 2014 was undeniably difficult for the ASC industry, but if nothing else it can serve as a lesson for the times ahead. Here are key points from the first quarter results of eight public ASC companies.

AmSurg. AmSurg’s revenue increased marginally, 2 percent from $258.2 million in the first quarter of 2013 to $263.1 million. Same-center revenues declined 2 percent.
Foundation Healthcare. Foundation Healthcare’s revenue was up 18 percent to $22.1 million for the first quarter of 2014.
Hospital Corporation of America. HCA’s net income inched upwards 0.9 percent to a total of $347 million. The company’s net revenue had a larger bump of 4.6 percent to $8.83 billion.
Medical Facilities Corporation. MFC reported $72.9 million in revenue, consistent with the amount reported in the first quarter of 2013.
Northstar Healthcare. Northstar reported a 194.1 percent growth spurt in net patient service revenue, from $4.1 million in the first quarter of 2013 to $12.1 million.
Surgical Care Affiliates. SCA’s total net operating revenues, excluding centers the company does not own a controlling interest in, increased 2.1 percent to $196 million. System-wide net operating revenues rose 8.7 percent.
Symbion. Symbion’s revenue rose slightly from $130.38 million in the first quarter of 2013 to $133.97 million in the opening quarter of 2014.
United Surgical Partners International. USPI reported consolidated net revenues of $145.3 million, compared to $145.1 million during the same period in 2013.

The majority of these companies reported flat financial results or slight increases in revenue and income. AmSurg, SCA and USPI all made reference to the impact severe winter weather had on patient volume and financial performance in the news releases announcing the quarter’s results. Aside from winter woes, ASC companies had to contend with the onset of high deductible insurance plans and expanding effects of healthcare reform.

What to expect in 2015

Though predicting the future of healthcare is an uncertain exercise, the new year is just around the corner. Many forces that will shape the upcoming first quarter are already at play. High deductible plans, just beginning to roll out in 2014, will have an even greater impact in 2015 as more patients become insured and select these types of plans. “We will see a state of flux as high deductible plans gain traction,” says Joe Zasa, managing partner of ASD Management. Patient volumes may suffer another dip in the opening of 2015.

While ASC leaders may not have control over when patients with high deductible plans decide to schedule elective procedures, they can compensate. For example, ASC physicians can schedule heavy Medicare case loads for early in the year, as Medicare deductibles are not nearly as high as the $5,000 or more deductible plans that are rapidly becoming commonplace.

If another brutal winter is in store, ASCs can steel themselves for an onslaught of cold and possible closures. For example, Charlotte (N.C.) Surgery Center closed in winter of this year due to weather, but was able to reopen and perform 44 scheduled surgeries without missing a beat with the help of an online pre-admission solution.

Healthcare reform is not only affecting providers, but is also reshaping the payer landscape. Payers are facing the same fierce pressures to cut costs and produce quality results. “Many centers were lulled by their ‘success’ when reimbursement for out-of-network claims was very high,” says Mr. Zasa. OON volume, while still leveraged in some markets, is drastically dwindling. More and more ASCs are making the move to in-network.

Armed with the knowledge, in part, of what lies ahead for the beginning of 2015, ASC leaders can prepare their centers. “Each ASC is different and must find its niche. It must find ways to grow, recruit and be more efficient,” says Mr. Zasa. The best positioned ASCs and companies will be those that shoulder a certain amount of risk. Whether that risk is a gamble like AmSurg’s acquisition of Sheridan and Surgery Partner’s acquisition of Symbion, a new joint venture or narrow network participation, diversification can pave the way to a stronger first quarter and overall 2015.

Reprinted with permission from Becker’s ASC Review.
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