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MEGATRENDS in Outpatient Surgery
Four powerful forces that will shape the future of outpatient surgery.
Yasmine Iqbal
Publish Date: June 9, 2008   |  Tags:   News
History, said a philosopher, is the only vantage point from which men can see the age in which they are living. Every now and then, it behooves us to take a break from our daily duties, climb that hill, and gain some perspective on how the past may portend our future. To help you do this, we have identified a few of the broad trends in healthcare and looked at how they are influencing the practice of outpatient surgery. We hope, in some small way, this will help you pave the way to a more successful tomorrow.

1. Surgery grows in leaps and bounds
In the late 1970s, ophthalmic surgeons had to wait until cataracts were ripe before exposing the anterior chamber and plucking them out like grapes. Patients then had to recuperate in the hospital for a week or more with their heads sandbagged to prevent vitreous from expulsing through the wound, and often the best they could hope for was 20/50 vision with the aid of thick glasses that assumed the focusing power of the natural lens. Today, thanks to minimally invasive techniques, cataract surgery literally takes minutes, and some patients walk away with unaided 20/20 vision.

Indeed, technological leaps like ultrasound, computerization, digital imaging, miniaturization of instruments, local/regional anesthesia, improved patient monitoring, and advances in pain control have made surgery more successful, shorter, less painful, and, as a result, much more desirable. "The advent of minimally invasive techniques such as endoscopy and laparoscopy have changed the face of surgery in the last 20 years," says Lawrence Pinkner, MD, president of the American Association of Ambulatory Surgery Centers (AAASC). These advances, combined with the aging of the baby boomers, have fueled an explosion of surgery that will continue for years to come. From 1981 to 1998, the number of surgical procedures performed in the US doubled (from 20 to 40 million). SMG Marketing predicts this number will increase another 25 percent-to more than 50 million-by 2006. During this time, the number of elderly persons will also increase, by a full 80 percent by 2025, according to the US Census.

Outpatient surgery, in particular, will continue to boom. Since the early 1980s, the number of outpatient surgeries has risen by as much as 30 percent in some years while the number of inpatient procedures has decreased every year. During the next five years, the number of outpatient surgeries in this country is expected to continue growing by approximately 4 percent annually, at which time it will account for 83 percent of all surgeries done in the US, according to SMG. Alan Marco, MD, assistant professor of anesthesiology at the Medical College of Ohio, predicts that reduced-side effect pain relief regimens and advances in disposable regional analgesia devices are just two of the many advances that will continue to make this shift possible.

Experts believe elective surgeries will remain a hot segment of this outpatient market. Between 1996 and 2000, the number of refractive surgeries (namely, LASIK) grew by nearly 60 percent, from 500,000 to 1.2 million. In addition, the number of cosmetic procedures exploded, with liposuction and breast augmentation as the most popular cosmetic surgical procedures, according to the American Society for Aesthetic Plastic Surgery.

2. Patient care decentralizes
The 1980s signaled the beginning of the end of healthcare's halcyon days. In an attempt to check climbing healthcare spending in the public and private sectors, Congress instructed Medicare administrators to begin paying prospectively and to cut reimbursements drastically. Recently, Medicare implemented a 5.4 percent across-the-board rate cut for all physician services. This came on the heels of four cuts over the past 11 years that, according to the American Medical Association, resulted in an average annual increase of only 1.1 percent, or about 13 percent less than the annual increase in practice costs. A dramatic example of these cuts is the cataract surgery reimbursement, which shrank from as high as $3,500 to less than $700 per case.

These cost containment efforts coincided with the move toward more, shorter, better, and less painful procedures, and physicians feeling the pinch of reform saw in the outpatient trend an opportunity to restore and grow their incomes. "Hospitals were ideal for very sick patients or trauma cases, but physicians were among the first to see the need for facilities that would perform surgery on otherwise healthy patients, with no delays and more efficient pre- and post-op care," says Mike Lipomi, CEO of the Stanislaus Surgical Hospital, built in 1984 as an ASC. The result has been a rapid decentralization of care away from the traditional hospital setting. Thirty years ago, all surgery was done inside the hospital. Today, according to SMG Marketing, approximately 37 percent of all surgeries and 47 percent of outpatient surgeries are performed in a freestanding ASC or office surgery suite.

More ASCs
With the release of the first ASC payment rates in 1982, Medicare gave physician ASC owners the ability to collect both physician and facility fees. Accordingly, the number of ASCs has grown by close to 200 facilities a year during the past decade, according to the Office of Inspector General. Today, physicians perform over 7 million surgical procedures annually in close to 3,500 freestanding ASCs.

Thanks in part to the relaxation or elimination of certificate of need (CON) regulations in many states, the number of ASCs is still growing. According to U.S. Bancorp Piper Jaffray Equity Research, 14 states repealed CON laws during the past several years. The main impetus behind the repeals, according to Michael Barnes, a San Diego-based healthcare consultant who was instrumental in the repeal of Ohio's CON law, is to open the market, foster even more competition, and thereby further contain healthcare costs. In the Columbus, Ohio area alone, Mr. Barnes says approximately five new ASCs have cropped up since that state's CON was repealed in 1995. Currently, according to Piper Jaffray, 24 states still have broad-reaching CON laws and 13 states have limited CON laws.

More Office Surgical Suites
While some physicians built ASCs, others began doing elective procedures in their offices. Because elective procedures are private pay, physicians have been able to preserve the more lucrative fee-for-service model in this setting. Today, there are at least 15,000 medical practices with in-office surgery suites in the US, and physicians perform a full 9 million procedures (26 percent of all outpatient surgeries) in this setting.

Experts believe elective procedures will remain a hot growth area for at least the next five years. Currently, nearly one-third of the 9 million surgeries performed in the office suite are refractive or cosmetic procedures, and many of the remainder are small procedures. LASIK leads the pack, and of the cosmetic procedures, liposuction is the most popular, with more than 385,000 performed in 2001, according to the American Society for Aesthetic Plastic Surgery. It is also possible that many "medically necessary" procedures now done in the ASC will move to the office surgery suite, as Medicare has started offering reimbursement incentives for performing certain outpatient GI and pain management procedures in the office surgical suite. These "site-of-service differentials," which pay the physician more for performing the service in the office yet cost Medicare less because there is no separate facility fee for office procedures, now apply to approximately 12 endoscopic procedures, including colonoscopy and upper endoscopy. "Some physicians are trying to find ways to do it in the office because the differential is so great," notes Damian Augustyn, MD, Chief of Gastroenterology and Hepatology with the California Pacific Medical Center in San Francisco and member of the American Gastroenterological Society's Board of Governors. "But we're concerned there will be more complications and side effects as a result." According to Dr. Augustyn, Medicare's physician fee for an upper endoscopy is $152 in the outpatient facility and $257 in the office suite.

The ultimate consequence of cost containment may be the surgical hospital. Because they do not limit lengths of stay, surgical hospitals are effectively removing the last barrier that kept some of the more complex (albeit relatively low-risk) cases, such as total knee replacements in otherwise healthy patients, in the traditional hospital setting. Mr. Lipomi of the Stanislaus Surgical Hospital estimates that there are about 40 surgical hospitals in existence today, with 40 more in various stages of development.

3. Demand for accountability grows
The American public has grown increasingly wary of politicians, lawyers, the media, and now with the Enron scandal, accountants and "Big Business". In this environment of distrust, it may come as no surprise that many Americans are also suspicious of our healthcare system. A survey of more than 2,000 Americans by the Kaiser Family Foundation and the Agency for Healthcare Research and Quality shows that people are more concerned about mistakes happening when they are in the hands of the healthcare system than when they are flying on an airplane.

Although the reasons may be many, two trends have likely fueled this distrust. For one, reports about serious complications or deaths of patients who were entered into questionable clinical research trials, underwent cosmetic surgery in the office suite, received infected donor knee tissue, or were victims of possible cross-contamination have been headlining the news for several years. For another, the managed care stronghold has restricted patients' ability to choose their own doctors and influenced physician practices, and Americans have responded critically. According to a Center for Studying Health System Change survey, 44 percent of insured Americans feel their doctor is "strongly influenced" by health insurance company rules when making decisions about their medical care.

This pervasive distrust-along with the explosive growth and decentralization of surgery as well as a more informed patient population-has caused patients, politicians, and insurers to step up their demand for provider and institutional accountability. "Years ago, people used to go to their family doctor for everything. There was no concept of the ?second opinion'," says Mr. Lipomi. "Today, patients have a greater knowledge of healthcare, and they make informed decisions." Unfortunately, even when providers agree with the goals of the many regulations imposed on them, the investment can be onerous. Here are a few of the most significant accountability issues that will affect outpatient facilities in the years to come:

More Regulation of Office Surgery
In Florida, five people died and 15 were injured after undergoing office surgeries there during a six-month period in 2000. That, reported CNN, is as many deaths as took place in all of 1999 in the state's ASCs, even though ASC surgeons outnumber office surgeons there by 17 to 1. In addition, Fort Lauderdale's Sun-Sentinel reported that at least 34 patients have died following cosmetic surgery in Florida since 1986, and the newspaper since confirmed nine more deaths involving office-based cosmetic surgery. The problem is not confined to Florida; similar deaths have occurred in New York, Pennsylvania, and California.

As a result of these and other deaths and injuries, more states have passed or are considering legislation to require licensure, Medicare certification, or accreditation. Some, like Florida, have instituted additional requirements, like regulation of anesthesia, procedure length, and amount of fat that can be removed during liposuction. Currently, California, Florida, New Jersey, Rhode Island, and Texas regulate office surgery, and 15 additional states are contemplating similar measures. Last year, the American Society of Plastic Surgeons finalized a bylaw requiring members to seek accreditation for office surgery suites, and the American Society of Anesthesiologists adopted its own guidelines for office-based surgery.

More Comprehensive Accreditation/Certification
In addition to office surgery suites, ASCs are likely to face more stringent accreditation and licensing standards. In its new report entitled "Quality Oversight of Ambulatory Surgical Centers: A System in Neglect," the Office of Inspector General points out that not only have ASC procedures exploded in volume, but their scope and complexity are also increasing. The Centers for Medicaid