UnitedHealth Group’s recently announced acquisition of Surgical Care Affiliates (SCA) represents the latest signal that the $30 billion ambulatory surgery center (ASC) segment is moving to the forefront of the rapidly evolving healthcare market. L.E.K. Consulting looked at the various factors favoring further share gains for these types of facilities and what has fueled the market growth.
Over the past decade, market growth has been fueled in large part by an increase in the number of surgeries, a general movement toward outpatient settings, and a particular shift of volume away from hospital outpatient departments (HOPDs) toward ASCs (see Figure 1). In 2015, the ASC segment accounted for around 35% of surgeries, representing approximately 10% of surgical care revenue.
According to the executive report, “On average, surgeries performed in ASCs cost 60% of what the same procedure would cost in the HOPD setting, as ASCs have lower overhead costs compared with hospitals and thus are reimbursed at a lower rate. The potential for ongoing cost reductions and increased efficiency points to further ASC growth, particularly as value-based care continues to gain traction.”
Looking back, the period from 2004 to 2010 saw the largest increase in the number of ASC facilities as growth reached a robust 4% to 5% CAGR, with more modest gains over the ensuing five years (1% to 2% CAGR). During 2010-2015, the number of ASC operating rooms (ORs) increased 2% to 3% per year as new construction increasingly skewed toward larger facilities and existing facilities added OR capacity.
According to L.E.K. Consulting, as the sector matures, its growth is slowing but it is steadily consolidating on two levels. In local markets, 44% of facilities now have three or more ORs, up 5% from 2010. Nationally, leading ASC management companies have consolidated an additional 5% of facilities since 2010 to reach 17% share in 2015, while at the same time being acquired themselves by large healthcare organizations.
ASC volume and per-case net revenue are expected to trend higher over the next five years, growing at approximately 3% and 3% to 5% per year, respectively. In particular, spine and orthopedic procedures are expected to see substantial growth in ASC share of volume as medical practice advances pave the way for more complex, higher-acuity cases to be handled away from the hospital campus.
While slightly more than 20% of ASCs are currently operated by professional management companies, the majority (nearly 60%) remain physician-owned independents. According to L.E.K. Consulting, “Going forward increased emphasis on value-based care, along with more sophisticated MCO contracting practices, could encourage more standalone practices to join with these management firms. In addition, hospitals are increasingly looking to build or acquire ASCs to extend their footprint.”
Predictions for the future include the analysis that top-line growth will remain solid as ASC procedure growth is projected to drive procedure growth of 4% per operating room. An additional factor for growth is the increase of revenue per procedure.
According to L.E.K. Consulting, ASCs are maturing rapidly from a cottage industry to a leading sector in the transformation of healthcare. Expect continued growth and consolidation in the U.S.” OSM