PA Hospitals Call on Super Committee to Examine ASCs

Acute care hospitals in Pennsylvania want Congress to examine ambulatory surgery centers as a target for reimbursement cuts or other revenue measures. The hospitals believe that a review by the "super committee" charged with balancing the budget will show that ASCs are cherry picking lucrative commercially insured patients and shirking care for lower-paying Medicare, Medicaid and indigent care.

"We are asking the super committee to understand that hospitals nationwide have a $155 billion in cuts in the foreseeable future already on the table," as part of the Affordable Care Act,  said Michael P. Strazzella, senior vice president for Federal Relations & Political Development at the Hospital & Healthsystem Association of Pennsylvania.

"Those cuts include $9 billion in Pennsylvania alone. There needs to be some recognition that there are other people who can afford to take those kinds of cuts without impact the care they provide," he said.

A report last month by the Pennsylvania Health Care Cost Containment Council showed that there are 266 ASCs in the state, up from 72 one decade ago. The council reported that ASC total profit margins have exceeded 26% in each of the past three years, while acute care hospitals see margins averaged 5.2%. HAP says that is partly because Medicaid accounted for only 4.5% of ASC revenue in 2010, compared to 11.8% of general acute care outpatient revenue.

"The pressure on acute care hospitals is increasing because there is a larger demand on public and private payers. We are seeing more people lose their private insurance and move to Medicare and Medicaid, even as those payments have decreased," Strazzella told HealthLeaders Media.

In addition, Strazzella says Pennsylvania's acute care hospitals have seen their state Medicaid reimbursements cut by 4% in fiscal year 2011-12.

However, Pam Erdel, president of the Pennsylvania Ambulatory Surgery Association, says HAP is making an apples-to-oranges comparison on operating margins because ASCs and hospitals use different calculations. "For ASCs, the salaries paid to physician-owners are not counted as overhead. In the hospital that is all taken out before they report their operating margins. It would be similar to removing all the staff salaries from the operating costs of a hospital before calculating their margins," she says.

Erdel says two-thirds of ASCs nationwide provide care at reduced rates for patients who are underinsured or not uninsured. "We feel bad for hospitals in that they are having reduced rates, but we already started out with less. We get paid on average 56% of the rate that the hospital gets paid for doing the same procedure, because Medicare set it up that way," she says.

Erdel says it's ironic that HAP would target ASCs for criticism when "the most lucrative ASCs are owned by hospitals," and those hospitals belong to HAP. "I would love to bridge that relationship with the HAP because we have a lot to offer each other," she says.