Whether you're still stuck in the grips of the recession or enjoying the early fruits of the recovery, we figured you could use some good economic news with your monthly magazine and your morning coffee.

Would you settle for some pretty good economic news?

The outlook isn't as rosy as you'd like it to be, at least not yet, but we're seeing familiar signs of prosperity return to outpatient ORs across the country, little things that you used to take for granted, like full surgical schedules, 40-hour workweeks and raises for the staff. Happy days aren't quite here again, but it sure feels like they're getting closer.

"There has been a very recent, very slight upswing — we are hopeful of a trend," says Stephanie Diem, RN, BS, clinical director of the Washington Square Endoscopy Center in Philadelphia, Pa. "We will survive."

We're not dispensing groundless optimism here. Our sense from talking and visiting with many of you and your vendors is that the outpatient surgery industry took the recession's best shot and has bounced back stronger than before in large part because many of you rolled up your sleeves a la Rosie the Riveter when the economy turned sour. With steely resolve, you did what you had to do to make it through, be it finding new ways to save or new ways to find surgeons.

Tracy Humphreys, BS, MS, CRCST, of Metro Health Hospital in Wyoming, Mich., formed an alliance with other hospitals to negotiate a better group buying contract. At Holy Family Memorial in Manitowoc, Wis., outpatient surgical volume is 225 cases ahead of budget this year thanks to one specialty: orthopedics. Volume for other surgical specialties has held relatively steady, so why the spike in ortho cases? Rather than sit back and let the recession wash over her, Lisa Sherman, RN, BSN, CNOR, the director of perioperatve services, pounded the pavement, recruiting fellowship-trained orthopedic surgeons in total joints, shoulder, spine, foot and ankle, and hand. The hospital now draws patients from across the region, not just locally. "That's our distinction, our differentiation: orthopedics. That's where our growth is," says Ms. Sherman. "We're a small hospital in a little town, but we dreamt big. Our facility had the foresight to do something that was a little different. We weren't satisfied with the status quo."

Some good, some bad
The results of our survey last month of 64 ASC and hospital facility managers and physicians tells you why we say the news is only pretty good:

• Nearly 1 in 5 (19.4%) said that their caseloads had improved from last year. At Chilton Medical Center in Clanton, Ala., 70 cases a month had been the norm before the economic downturn. Last year, monthly case totals dropped considerably: 31 in January, 45 in February, 35 in March, 32 in April and 37 in May. "It's just now starting to pick up again," says Dayna Jones, RN, the director of surgery. "I think there's a general feeling that the economy is getting better. Hopefully, the recession has taught us to run on a leaner budget so that when our volume returns to normal or better than normal, our profit margin will increase."
• Nearly 1 in 3 (30.6%) survey respondents actually described business as being brisk. Surgical volume is up from 2 years ago at McAlester (Okla.) Regional Health Center, says David Mullins, RN, vice president of patient care services. "Surgery has been carrying the rest of the hospital," he says. Ophthalmologist Steven K. Mishkin, MD, of the Freehold (N.J.) Surgical Center, says cataract surgery volume is up about 20% from last year. His advice: "Look at the things you can control, not at external forces. This is the time when it matters more to look at your bills and expenses and see if you can get better pricing. There's nothing you can do about the economy. Just hunker down and wait it out."
• Exactly half (50%) of our respondents said that their surgical volume was down considerably. That's actually better than last year, when a similar survey we conducted found that surgical volume was down at 58.1% of facilities.
• Nearly 1 in 5 (19%) reported that they've had to lay staff off. Maureen Spangler, RN, director of perioperative services at Lexington Medical Center in Columbia, S.C., says staff have been asked to give up no more than 10% of their hours.
• Nearly 3 in 4 (71%) said that they've postponed or delayed a capital equipment purchase due to the economy. At MedCentral Health System in Mansfield, Ohio, for example, they no longer routinely replace up-in-age OR tables. "If it's still working," says Debbie Hudepohl, RN, MSN, CNOR, the nurse manager of surgical services and sterile reprocessing, "we'll hold on to it for another year." Similarly, Annemarie Enthoven, RN, director of nursing at Summit Surgery Center/Premier Surgery Center in Santa Barbara, Calif., says she's buying refurbished equipment instead of new and recycling more ("free pickup," she says), which has lowered her trash collection bills.

More funerals than baptisms
What about the many ailing centers that may not survive without outside assistance (see "We Need to Find Some Help" on page 23)? Each year from 2002 through 2009, an average of 314 new Medicare-certified facilities entered the market, while an average of 65 closed or merged with other facilities. In 2009, there were nearly as many funerals for ASCs as baptisms: 152 ASCs, about 2.5% of the total, closed their doors, the most in history, and 164 new centers opened, considerably less than in recent years (273 in 2008, 347 in 2007, 332 in 2006, 355 in 2005 and 369 in 2004, according to a June 2010 MedPac report). Who knows how much more mourning there will be by 2010's end.

"This is a watershed year in the ASC industry," says Andrew Hayek, chair of the Washington, D.C.-based Ambulatory Surgery Center Advocacy Committee and president and CEO of Surgical Care Affiliates, a national surgery center management firm headquartered in Birmingham, Ala.

Mr. Hayek says the sluggish economy is only partially to blame for the lull in new construction. "There are now 5,300 Medicare-certified ASCs, with approximately 100,000 ASC-eligible physicians," he says. Since there are about 20 surgeons per ASC, explains Mr. Hayek, nationally, "the market is fairly well-served with the existing base of surgery centers." He says surgical volume could shift back to the hospitals in certain markets, thanks to the growing hospital employment of physicians.

When the economy began to head south, Mr. Hayek expected to see certain specialties suffer more than others. Instead, data has shown that case volumes are down across the board. The ASC industry is shifting from rapid growth to a more mature stage, says Mr. Hayek, in which surgery centers are going to focus more on how to grow distributions in a low, or negative, case volume growth environment. "We are doing less cases but our reimbursement is higher this year than last," says Carolyn Hollowood, BSN, CASC, administrator of City Place Surgery Center in Creve Coeur, Mo.

Mr. Hayek blames declining case volumes on the rising unemployment rate that's reducing the number of insured patients, declines in the stock market that are limiting consumer spending on health care and a rapidly growing patient population that's insured by plans with deductibles of $1,000 or more. "This increase in deductibles is intended expressly to curb healthcare consumption," he explains. "It unfortunately results in people deferring procedures, such as screening colonoscopies, that are critical to their long-term health."

The rising unemployment rate and dearth of consumer spending in the healthcare sector can be tied directly to the stagnant economy, says Mr. Hayek. However, he believes the trend toward patients struggling with higher deductibles is a long-term issue that could impact surgical volume for many years to come. We heard from one facility that it's offering promissory notes to patients that can't afford their co-pays.

ASCs hit harder than hospitals?
If the economic downturn hit hospitals hard — 70% of hospitals reported lower overall patient volumes and 22% said they'd put capital improvements on hold, according to a June 2010 report from the American Hospital Association — it hit for-profit ASCs harder. The recession came along at time when:

• New ASC construction starts were slowing. The building boom hasn't gone bust, but it's slowed considerably, a sign that the freestanding surgery center market is now a mature one. Yes, the number of Medicare-certified ASCs increased by 50% from 2002 to 2009 (3,512 to 5,260), but new ASC starts declined 18% in 2008 and another 23% in 2009.
• Volume and profits at existing centers were already flat. Blame the recession for ASCs going from 8% to 10% growth to negative growth, says Mr. Hayek. He notes that there have been no positive updates to Medicare ASC payment rates from 2004 through 2009. Medicare payments account for about 20% of all ASC revenue, according to industry surveys.

Mitesh Rao, MD, a general surgeon at the Yale School of Medicine who studies healthcare policy, believes the struggling economy hasn't hit the surgical sector nearly as hard as it has impacted other industries. "Truth be told, that's one of the fringe benefits of the medical industry," he explains. "While certain surgical specialties have started to see a cutback in elective procedures, on a whole the country still has the same needs for health care as it did before the economic downturn."

Hope and pay
Mr. Hayek thinks overall surgical volume will improve somewhat in 2011, but volume growth at individual facilities will likely remain flat to negative, although less negative than in 2010. On the Medicare front, Mr. Hayek says rates will remain flat while commercial and out-of-network benefits will come under increased pressure. He says inflation will cause a 3% to 5% uptick in supply costs and an approximate 1.5% increase in labor costs, which will focus surgical administrators' energies on working closely with physicians to achieve cost efficiency in a more challenging environment.