Ambulatory Surgery Centers

1. Ambulatory Surgery Centers Econ 737.01 3/16/11

2. Outline • I. What are they? • II. Potential benefits • III. Potential drawbacks • IV. Evidence

3. I. What are they? • Free-standing facilities that provide relatively uncomplicated outpatient medical procedures • Typically small and specialized, most often in ophthalmology, gastroenterology, or orthopedics • Typically privately-owned, either entirely or party by the physicians who practice there • The number of Medicare-certified ASCs in US has risen from 400 in 1983 to 4,700 in 2006. • ASCs provided 43% of all outpatient surgeries in US in 2006

4. Source: Chukmaitov et al., 2008

5. II. Potential benefits • Lower cost of care • Greater convenience • More flexibility in scheduling • Potentially nicer settings • Allows for more efficient sorting of patients (most risky to HOPD, less risky to ASC) • Better quality of care? (specialization) • Competitive effects on hospitals: lower prices, better quality?

6. III. Potential drawbacks • The elephant in the room is physician ownership (“self referral”) • Not unique to ASCs – there are also physician-owned specialty hospitals and imaging centers • Wasteful services? • Cream skimming/cherry picking • Physicians may sendprofitable (better insurance or procedure with higher margin) to ASCs, less profitable to HOPDs • Might hurt hospital profitability (through either lower volume or lower margins) and limit their ability to cross-subsidize unprofitable procedures like charity care • Worse quality of care? (not as well equipped to deal with complications)

7. IV. Evidence • Greater convenience • Weber (2008) • Structural model; strong spatial component to demand for patients • More efficient sorting of patients • Wynn et al. (2004) • Patients treated at HOPDs had more risk factors than those treated at ASCs • Plotzke and Courtemanche (2010) • More diagnosis codes and general anesthesia associated with lower probability of treatment at ASCs

8. IV. Evidence • Quality • Chukmaitov et al. (2008) • Tested for risk-adjusted differences in 7- and 30-day mortality and hospitalizations for patients obtaining outpatient surgery at ASCs versus HOPDs • ASCs seem to do better for upper GI endoscopies and cataracts, HOPDs seem to do better for some other procedures that ASCs don’t perform as frequently

9. IV. Evidence • Wasteful services • Hollingsworth et al. (2010) • In physician fixed effects models, found positive association between ASC ownership and surgical volume • Courtemanche and Plotzke (2010) • Reduction in hospital volume when an ASC enters is way less than the volume of the average ASC • Are the new services welfare-enhancing or wasteful?

10. IV. Evidence • Cream skimming/cherry picking • Gabel et al. (2008) • Physicians who were leading referrers to physician-owned ASCs were more likely to refer Medicaid patients to HOPDs than leading referrers to non-physician-owned ASCs • Plotzke and Courtemanche (2010) • National sample of Medicare patients from the National Survey of Ambulatory Surgery • 10% increase in procedure profit margin was associated with a1.2-1.4 percentage point increase in the probability the procedure was performed in an ASC instead of a hospital.

11. IV. Evidence • Hospital volume • Lynk and Longley (2002) • Two case studies where rural hospitals slashed their provision of outpatient surgery after ASCs entered • Bian and Morrisey (2007) • MSA-level panel analysis • An additional ASC per 100,000 residents reduced hospital outpatient surgery volume by 4.3% while not affecting inpatient volume • Courtemanche and Plotzke (2010) • Hospital-level panel analysis • ASCs only affect a hospital’s volume if they’re within a few miles of each other. • Even then, the average ASC reduces the average hospital’s volume by only 2-4%. • The effects of large ASCs and early entrants are more substantial.