Assessing the Profitability of Orthopedics, Spine, and Pain Management in ASCs Ambulatory Surgical Centers of America Luke M. Lambert, CEO
Summary Know your profit detail. Variable and fixed costs. Case costing. Reimbursement. Marginal Profit Analysis. Characteristics of success. Opportunities. Pitfalls. Changing world.
Know Your Profit Detail By knowing your profits by CPT Payer Surgeon effective decisions can be made. Simply a function of revenue and costs. Average profit vs. marginal profit.
Variable & Fixed Costs Variable costs are those that increase or decrease with changes in case volume. Fixed costs in the short run are unaffected by volume. Revenue must exceed the sum of both types of costs for financial success.
Staffing Largest Variable Cost 3 OR, 1 PR, 4 days/wk, ortho, pain, and spine:
Variable Costs (Cont.) Supplies. Surgical. Drugs. Implants. Linen. Cleaning.
Fixed Costs Rent - Ortho and spine require more SF than pain. Shell $12 23/SF. Built out $24 35/SF. No point to being in high-rent district. Mortgage. Equipment depreciation. Administrative salaries/benefits, utilities, property taxes, insurance, etc
Fixed Costs Ortho Equipment Video tower $70,000. Mini c-arm $68,000. Spine Pain C-arm $120,000 - $145,000. Microscope (Some want some don t) Back frame - $5,000. Self retaining retractor - $4,000. Kerrison Rongeur - $600 each. Want 4-6. C-arm $120,000 - $145,000. Fluoro table $27,000. RF generator $25,000 - $35,000.
Case Costing Allocate all your costs down to case level. Supply attribution and time allocation of all other costs most practical. Total costs vs. marginal costs. Total costs must be covered to be profitable. Cover marginal costs to increase profits. Case cost every case every month.
Common Ortho Cases Knee arthroscopy procedures (29888, 29881) Medicare pays $1,242 and $901. Shoulder arthroscopy procedures (29826, 29823, 29822). Medicare pays $1,242, 1,242, and 842. Carpal tunnel releases: open (64721) Medicare pays $591 and endoscopic (29848) Medicare pays $1,246.
Common Spine Cases Lumbar Laminotomy/Discectomy - 30-60 min. 1 inch incision. (63030) Lumbar Laminectomy for Spinal Stenosis (63047, 63048) ACDF - Anterior Cervical Discectomy and Fusion can take 90 minutes. $800 for allograft and $3,000 for plate and 4 screws. (63075, 29931, 22845) Posterior Cervical Laminotomy. (63020, 63035)
Common Pain Cases Epidural steroid injections. SI joint injections. Facet joint / nerve. Large joint injections. Less commonly - stimulators and pumps.
Case Costing Knee Case Costing
Rotator Cuff Case Costing
ACL Reconstruction Case Costing
Lumbar Laminotomy/Discectomy Case Costing
Epidural Steroid Injection Case Costing
Reimbursement - Ortho Rates still weak with Medicare, Medicaid, and many HMO payers. Rely on a minority of payers to deliver majority of profits; especially Workers Comp and % of charge payers. Must get implant and secondary procedures paid. WC reform has reduced reimbursement.
Reimbursement - Ortho (Cont.) Groups 3 & 4 are most common. Hand procedures see groups 2 & 9. If you have trouble getting carve-outs try: Reassigning groups. Getting preferred pricing for your most common groups. Showing HOPD rates or current Medicare APC rates. Case location flexibility important chip.
Reimbursement - Spine Medicare and many others don t pay spine in an ASC. All Other categories at fixed rates rather than % of charge can make it uneconomic. Must get paid for implants. Get carve outs or percentage of charges. $3,000-5,000+ typical. Hospitals get 2-4x.
Reimbursement - Pain Medicare still adequate for short cases but becoming less so. Carve-out more complex and implants. Avoid having commercial payers carve out cases into a group zero or office type group. Most cases group 1. Multiple procedure coverage essential.
Reimbursement Payer & Profit Ortho 100% Percentage of Profit 80% 60% 40% 20% Managed Care WC Commercial Medicare 0% 0% 20% 40% 60% 80% 100% Percentage of Ortho Cases
Reimbursement Payer & Profit Ortho (4+ yrs. Ago) 100% 80% Percentage of Profit 60% 40% 20% 0% Medicare Managed Care Commercial WC -20% 20% 40% 60% 80% 100% Percentage of Cases
Reimbursement Payer & Profit Spine Percentage of Profit Commercial WC Managed Care Percentage of Spine Cases
Reimbursement Payer & Profit Pain 100% Commercial Percentage of Profit 80% 60% 40% 20% 0% Medicare Managed Care WC 0% 20% 40% 60% 80% 100% Percentage of Pain Cases
Marginal Profit Analysis For Incremental Decisions Incremental revenue less incremental costs. On average marginal/incremental profits per case must large enough to cover full share of overhead for center to be profitable. When adding a case or surgeon marginal profits are your bottom line.
Ortho Marginal Profit By Payer & CPT
Spine Marginal Profit By Payer & CPT
Pain Marginal Profit By Payer & CPT
Profit Contribution By Surgeon, CPT, & Payer
Ortho Success Factors Payers must recognize costs of ortho with carve outs and implant reimbursement. Fast and cost conscious surgeons. < 3500 SF / OR. Spend less than $650,000 / OR for all the center s equipment. Pain.
Spine Success Factors Fighting hospital inpatient tradition. Surgeons now trained to do spine outpatient whereas 20 years ago they weren t. Anesthesia comfort with shorter recovery. Payer acceptance. Patient expectations - becomes selling point. Capture of pain referrals (expect only 50-100 spine cases / surgeon). Appropriate reimbursement.
Pain Success Factors Specialists dedicated to pain. Part timers tend not to work out well. Committed to using center over office. Low acuity - volume and speed driven. High acuity - implant reimbursement key. Pulse generators, pumps. Strong referral sources.
Opportunities Orthopedics - 60% of knee procedures still in hospitals. High level of commercial payers. Payers accepting higher reimbursement is needed if to move to ASCs. Spine - Reimbursement potentially attractive if approved for spine cases. Pain - Fast cases play to ASC strengths. Reasonable reimbursement for low acuity cases.
Pitfalls Orthopedics - Longer cases. Expensive implants and disposables. Must negotiate for adequate reimbursement. Spine - Acceptance, implants, and lower volumes with spine. Pain - Office competition. Reimbursement cuts. Some cases have expensive implants.
Changing World Ortho a reliable contributor. Getting faster with evolving techniques and technology. Outpatient spine gaining acceptance. Successful contributor to multispecialty ASCs. Payers pushing pain to office with site-ofservice differentials. From today, when convert to final Medicare rates complete, ortho +39% and pain -17%.
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