Industry Responds to Study Said to Demonstrate Link Between Physician Surgicenter Ownership and Volume of Surgeries

April 18, 2010 by · Leave a Comment
Filed under: Hospitals 
[Ed. note: We received the following response via email from the Ambulatory Surgery Center Advocacy Committee to Kate Greenwood's post, "Study Demonstrates Link Between Physician Surgicenter Ownership and Volume of Surgeries."  In the interest of fairness, it appears below without  comment.]

The Ambulatory Surgery Center Advocacy Committee Responds to Study Published

in Health Affairs

Industry Raises Concerns with Conclusions Drawn in New Study

asc_logo_finalWashington, D.C., April 7, 2010 – The Ambulatory Surgery Center Advocacy Committee (ASCAC), a group of leading ASC operators, state associations and the ASC Association, is compelled to respond to the incorrect assumptions made about the ASC industry put forth in a new study published in the April issue of Health Affairs. The ASCAC reinforces the important role that ASCs play in providing patients with access to convenient, high-quality care at a low cost to the health care system.

The study authors make inaccurate statements about the relationship between physician ownership of ASCs and higher surgical volume, inferring that physician owners are driven to refer patients to their facility by financial incentives. While the study authors recognize limitations with their methodology, the ASCAC is particularly concerned with their sole reliance on surgical volume as a proxy for ASC ownership. Volume is not a valid method for identifying which physicians have ownership interests in ASCs. In fact, many non-owners practice at ASCs.

Research identifies a number of positive factors that have increased the volume of surgical procedures in an ASC, including the migration of procedures and services from outpatient facilities to the less-costly ASC setting as well as patient preference and cost savings.

In 2009, KNG Health Consulting produced a report, which found that 70 percent of ASC volume growth between 2000 and 2007 was due to migration from hospitals to ASCs. It noted that for established specialties of ophthalmology and gastrointestinal (focused on in the study), the volume growth due to migration was 94 percent and 78 percent, respectively. Additionally, a larger and aging population as well as increased patient demand and medical innovation that allows for less-invasive procedures are also contributing factors for higher surgical volume in ASCs.

Patients often prefer the ASC setting for their convenient locations, ease of scheduling, shorter waiting times and faster recovery times. Patients report a 92 percent satisfaction rate after having a procedure in an ASC. Additionally, ASCs have fulfilled an important role in providing patients with access to vital preventive services, such as cancer screenings. For example, ASCs perform 40 percent of Medicare colonoscopies and the U.S. Healthy People 2010 objective to increase cancer screenings would not have been met without this expanded capacity for colon cancer screenings.

The study authors failed to recognize the significantly lower cost to patients and payors when identical procedures are performed in an ASC as opposed to the hospital outpatient department (HOPD). Research shows that Medicare patients save more than a 50 percent on out-of-pocket costs, and overall, ASCs save Medicare approximately 40 percent annually. By shifting just half of all eligible outpatient surgeries to the ASC setting, Medicare could save an additional $2.3 billion annually.

ASCs are staffed by a team of experienced medical professionals, including physicians, nurses, physician assistants and other health care experts. Data indicate that their focused expertise leads to efficient care and better patient outcomes when procedures are performed in an ASC, including low rates of medical error, infections and/or complications leading to readmission.

“With a staff of highly trained and certified medical professionals, physicians in ASCs can perform more surgeries with superior patient outcomes and low rates of medical error in our facilities,” said Brent W. Lambert, MD, FACS, Board Member of the Ambulatory Surgery Center Advocacy Committee and Founding Partner of the Ambulatory Surgical Centers of America, a physician-owned ASC development and management company. “ASCs are important providers of quality, patient-centered care and play an integral role in our country’s health care system.”

Many ASCs are privately owned by physicians, often in partnership with community hospitals or management companies. This structure enables proficient use of the facility, better control of scheduling and an environment conducive to the patient’s needs, as well as adaptable and innovative strategies for governance, leadership, efficiency and improved clinical care.

Data from the Centers for Disease Control and Prevention’s National Survey of Ambulatory Surgery show that ASCs are much more efficient than hospitals. Hospitals have also recognized that ASCs are effective partners in providing high-quality, patient-centered care, with approximately 20 percent of ASCs owned in part or exclusively by hospitals.

Higher volume in the ASC setting can also result from patient-referrals, another scenario the study did not consider.

“A significant number of new patients who ultimately need a surgical intervention are referred to our facilities from current or former patients satisfied with the care they received,” added Dr. Lambert.

The ASCAC and its partners are dedicated to working with physicians, hospitals, policymakers and other health care stakeholders to ensure that ASCs continue their commitment to excellence in quality and outcomes so that patients have the access they need to vital medical services procedures.

About the Ambulatory Surgery Center Advocacy Committee

Ambulatory Surgery Centers are health care facilitates that specialize in providing important surgical and preventive services in an outpatient setting. With approximately 5,200 Medicare-certified facilities throughout the country, ASCs perform more than 22 million surgeries per year. The Ambulatory Surgery Center Advocacy Committee is working on behalf of the industry to raise awareness of the important role that ASCs play in the health care system and the high-quality, cost-effective care that ASCs provide. The ASCAC includes the national and state ASC associations as well as representatives of all types of ASC operators and physicians. For more information about ASCs, visit


Grassley and Baucus Seek to Further Define the Difference Between Charity Care and Bad Debt for Nonprofit Hospitals. As a Matter of Collections Timing?

May 23, 2009 by · 3 Comments
Filed under: Hospitals 

According to Inside ARM, an accounts receivable management online magazine, the Senate Finance Committee is presently contemplating imposing strictures upon nonprofit hospitals regarding when those hospitals may outsource the collection of unpaid bills and, presumably, the definition of “bad debt” as it relates to “community benefit.” Inside ARM states that “The proposal is meant to provide more free care and make not-for-profit hospitals more accountable for their tax-exempt status.”

Details of the initiative are said to be scant at this point, but according to Inside ARM, “Committee Chairman Max Baucus of Montana and Chuck Grassley of Iowa, the committee’s top ranking Republican, propose requiring not-for-profit hospitals to follow certain procedures before initiating collection actions against patients.” Sen. Grassley has sought to require nonprofit hospitals to justify their tax exemptions since 2005, the year in which he sent what pretty much amounts to interrogatories to the nation’s leading nonprofit hospitals regarding billing practices and questionable characterizations of “community benefit.”

Although without detail, the new timing distinction for collections seems to be based upon the amount owed being designated as “bad debt,” or that which is essentially deemed “uncollectable.” The prospective prohibition would seem to  require the amount owed to be deemed “uncollectable” or “bad debt” before it can be placed with a collection agency. A prospect the nation’s collectors, who generally work on commission, do not relish. But one hopes this provision is but one small piece of further defining “community benefit” in terms of actual charitable care.

Many nonprofit hospitals have characterized their uncollected receivables as a fulfillment of the ill-defined requirement that they offer a “community benefit” in exchange for the tax exemption they receive under 501(c)(3). Senator Grassley has said that “Neither the IRS nor Congress has done a very good job when it comes to establishing the criteria for enjoying this tax status since the IRS scrapped charity care for its community benefit standard in 1969″ (New York Times, 2/13/09).”

He has a point. But unless the prospective timing provision for outsourcing only “bad debt” is coupled with a prohibition upon characterizing mere “uncollected receivables” and  payor “shortfalls” as “community benefit,” it is hard to see what effect this bad debt collections distinction will have–besides the expansion of in house hospital collection  departments. One hopes that the pointed questions Senator Grassley asked of the nation’s leading nonprofit hospitals in ’05 will play a substantial role in the Senate effort to reform and redefine the obligations of tax exempt nonprofit hospitals now. I believe Mr. Grassley would well agree that a mere shift in the locus of collection activities will not constitute reform worth the name.

Perhaps some background is in order. As we posted here a little while back in “The IRS, Nonprofit Hospitals, and the Meaning of “Community Benefit,” the IRS recently published the results of a two year study of nonprofit hospitals functioning under 501(c)(3), a portion of the Internal Revenue Code which garners tax exemptions for those entities it harbors. For those of you who have not yet read our post on the topic, I’ve excerpted it here below (if you have already read the piece, you can scroll down to the paragraph before Grassley’s numbered questions for the concusion to this post). The excerpted post describes how uncompensated care, bad debt and “shortfalls” in payments from Medicare and even Private Insurers can, and often are, characterized as somehow providing a “community benefit” which justifies a tax exemption for nonprofit hospitals:

Under the strictures of 501(c)(3) nonprofits are confined to paying executives “reasonable compensation” and supplying “community benefit.” Unfortunately, neither of these terms are particularly well defined. In the study’s executive summary, the IRS puts it so:

The community benefit standard is the legal standard for determining whether a nonprofit hospital is exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code.

“Observations. Both the community benefit and reasonable compensation standards have proved difficult for the IRS to administer. Both involve application of imprecise legal standards to complex, varied and evolving fact patterns.”

These limitations may be seen in the characterizations of “community benefit” available to the hospitals in the study. Bad debt and Medicare payment shortfalls may be construed as  “community benefit.” As the debt, the credit injury, and the collection calls all inure to the community member who received treatment but could not pay, one might question if the “community benefit” involved in a failure of collection practices might be distinguishable from the “community benefit” involved in intentional charitable care. In addition, there simply is no set criteria to determine the appropriate amounts to be charged as “community benefit.” The IRS study poses the following under the heading of

Limitations: …although the IRS designated the general categories of activities that could be reported as community benefit for purposes of the study, determining what was treated as community benefit (for example, bad debt or Medicare shortfalls) and how to measure it (cost versus charges) was largely within the respondents’ discretion.

Which is to say that those being monitored (nonprofit hospitals) to gauge the amount of money spent– to justify their tax exempt  status– were free to characterize their contributions in the manner they thought best.

Medicare shortfalls: So… if a non-profit hospital has a fee schedule rate of $100 for a procedure, and Medicare has a reimburse rate of $80 for that procedure, if a “charge” rate of measurement is used then there has been a $20 “community benefit” if the federally designated tax exempt nonprofit hospital accepts as payment the federally designated and predetermined Medicare reimbursement amount. Significantly, 19% of the hospitals also claimed “shortfalls” in payment from private insurers as uncompensated care/community benefit (See Chart: “Figure 82,” p. 105, full report).

Cost vs. Charge: So… if a procedure has a cost to the hospital of $80 and a fee schedule [or "chargemaster"] rate of $100, and the recipient of the procedure does not pay and the hospital categorizes the non-payment as “bad debt,” it has the ability to count as “community benefit” not only the cost of its unintended largesse, but also the amount it had expected as profit.

Perhaps even more telling than this latitude in characterization are the amounts actually submitted to the IRS as community benefit. Here are a few of the findings:

  • The average and median percentages of total revenues reported as spent on community benefit expenditures were 9% and 6%, respectively.
  • Uncompensated care accounted for 56% of aggregate community benefit expenditures reported by the hospitals in the study. Read more

Medical Expense for a Family of Four Rises

May 21, 2009 by · 1 Comment
Filed under: Uncategorized 

Yesterday we took a look at Health Insurance CEO pay, and noted that Mr. Ronald Williams of Aetna made $467,309.85 per week in 2008, while Ms. Braly of Wellpoint was left to make ends meet on $189,311.76 per week, and Mr. Hemsley of United Health was forced to manage on  $62,327.73 per week (though one might hope that Mr. Hemsley had the presence of mind to put a little something away the year prior when he had made $253,164.02 per week).

Today we take a brief look at how the other half lives. HealthCare Finance News reports that according to the Milliman Medical Index (MMI) the average medical bill for a typical family of four covered by an employer-sponsored preferred provider organization (PPO) program rose 7.4 percent from 2008 to 2009. In actual dollars:

The total 2009 medical bill for a typical American family of four is $16,771, compared with the 2008 figure of $15,609. The $1,162 increase is the highest measured by the MMI since the 2006 increase of $1,168, when cost trends were at 9.6 percent.

The MMI found that employers are expected to pay $9,9947, or 5.4 percent more than in 2008, while employees are expected to contribute $4,004 toward their health costs, an increase of 14.7 percent, and pay $2,820 in out-of-pocket expenses, an increase of 5.4 percent.

According to Health and Human Services: “The estimated median income for a four-person family living in the United States is $70,354 for FFY 2009″ (slightly more than Mr. Hemsley’s weekly paycheck). According to the MMI, of that $70,000, nearly $7,000 in employee wage goes to healthcare expense. That’s 10 per cent or $583.33 per month. That’s more than enough to make the payment on a brand new Cadillac.

In addition, one should also note that the employers’ contribution is nearly $10,000 per year, or $833.33 per month. Together, the actual total is $16,771 or $1397.59 per month. Which is to say that the average expense for medical for a family of four is $1400.00 per month. According to the Census Bureau, the average price of a house in the U.S. in March of 2009 was $201,400.00.

According to the current average for a 30 year fixed rate mortgage is 5.24% but rates are “all over the map.” We’ll use 7%. The monthly mortgage payment on $201,400 for a 30 year fixed rate at 7% is $1339.92. The average monthly medical expense amounts to $1397.59.

That’s a house. The average monthly medical expense for a family of four amounts to a house, maybe not one that Mr. Williams, Ms. Braly or Mr. Hemsley would live in, but a house nonetheless. Oh, and there’s still $57.67 left over– enough to catch the earlybird special at the Family Buffet.


Mintz Levin: False Claims Act Amendments Gain Traction

May 19, 2009 by · Leave a Comment
Filed under: Proposed Legislation 

I’ve never done this before (except perhaps to introduce Ezra Klein’s new site), but I came across a really good Health Law feed on Twitter from Mintz Levin Health Sciences Practice. Good enough that you can now find it in the “Resources” section of this Blog. I was particularly taken by the report on the progress of the amendments to the Fair Claims Act in Congress. We have written at length about the Fair Claims Act and its use as an enforcement mechanism, but I was impressed by how clearly and cogently Mintz Levin described the current status of the efforts to amend as well as the implications– in a very short space. This link is to their feed, and  this one is to their Health Law Washington Beat: Recent Health Industry News – Issue 9. Click on Issue 9 and scroll down a little until you get to “False Claims Act Amendments Gain Traction in Both the House and Senate.”


HHS OIG Report Finds “High Risk” of Medicare Fraud in South Florida

April 24, 2009 by · 3 Comments
Filed under: Fraud & Abuse, Medicare 

A report released Tuesday by the HHS Office of Inspector General identifies South Florida as “a high risk area for fraudulent billings to Medicare” by suppliers of durable medical equipment. According to the report, South Florida accounts for 17% of Medicare’s total spending on inhalation drugs, but is home to only 2% of the nation’s Medicare beneficiaries.

While warmer climates are known to cause a variety of respiratory problems, that alone does not explain the “aberrant claim patterns” identified in the report.

In 2007, Medicare spent $143 million on claims for costly drugs to treat respiratory ailments in Miami-Dade County.

That’s 20 times more than the amount Medicare spent in the Chicago area, which has twice as many beneficiaries,

reports the Miami Herald.

The Herald explains the root of the alleged abuse is that two-thirds of the patients in South Florida listed on Medicare claims for expensive inhalation drugs did not have office visits with the physician who prescribed the treatment in the previous three years.

Additionally, medical equipment suppliers and pharmacies are alleged to have recycled the offending doctors’ names for ongoing patient billing, and billed far beyond the Medicare guidelines for inhalation drug therapy. As a result, the Herald says,

Medicare has spent five times more per patient on inhalation drugs in South Florida than the rest of the country — $4,400 versus $815 per beneficiary[.]

Read the HHS Office of Inspector General’s full report here (PDF).


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