Knee Replacement Surgery
Ambulatory Surgery Center-
Surgical Facility Cost
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Board-certified Surgeon
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Board Certified Anesthesiologist
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Recovery Room
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Medications
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Implant Cost
Knee Replacement Surgery
Hospital-
Surgical Facility Cost
-
Board-certified Surgeon
-
Board Certified Anesthesiologist
-
Recovery Room
-
Medications
-
Implant Cost
Why is the price so different?
One reason is the overhead and salaries
Hospital CEOs tend to command much higher salaries and compensation than their ASC counterparts. “In the comparison between hospital and ASC you are paying more for the “bigness” of it all, even if you aren’t getting any value from it. That’s pared down in the ASC setting”, explains Dr Maria Todd, SurgeryShopper’s go-to-expert on health administration issues and healthcare price transparency. Todd explains that while some patients truly need the support of a full-service facility, that’s actually the exception in many cases.
Another reason is their supply chain and procurement practices
Hospitals have entrenched relationships with traditional distributors, even when they attempt to save money through Group Purchasing Organization (GPO) memberships. ASC counterparts are more agile and can take advantage of market disruption such as Amazon.com entering the healthcare supply chain and distribute at a lower cost. Amazon can supply things ASCs need same day or next day. The ASC doesn’t require all the warehousing space, may not need the vendor reps in the OR, and may rely on pre-packaged instrumentation customized to the surgeon’s pick list and case set ups. “At one point, I thought that ASCs would need to join the GPOs. I don’t think like that anymore. The disruptors have earned the right to play on the playground with a leaner, better procurement solution.” she explained.
A third reason is contract negotiations
“ASCs tend to spend less in the contracting and revenue management process,” Todd explains. The contracts are less onerous, and require less effort to analyze, negotiate and implement. Todd has been helping both ASCs and hospitals analyze and negotiate their managed care contracts since 1983. She told us that the average hospital contract starts around 48-60 pages in the main document, of which each line and price must be scrutinized. The average ASC contract is usually under 20 pages, total. “My ASC clients pay me about one-third of the amount paid by hospitals because there’s less to evaluate, model and negotiate. And in the case of bundled price contracts that are negotiated directly with employers, the contract may be fewer than 8 pages in length and comes with lower financial risk exposure and faster remittances.”
Government regulatory constraints
Medicare sets the standards on which procedures can be performed in the ASC setting if you want to be paid by the Medicare or Medicaid program. “It updates payment policies at the pace of a sloth.” says Todd. If you schedule a Medicare or Medicare Advantage patient for a joint replacement in a hospital, the hospital gets paid a hefty sum for the implant cost reimbursement. If you schedule the same Medicare or Medicare Advantage patient for the same joint replacement in an ASC, with the same surgeon and anesthesiologist, Medicare won’t pay for the implant at all. The outcomes can be better in the ASC but they won’t get paid according to established policy. Medicare policy is updated at a snail’s pace and it maintains an office of “innovation”. That’s a joke.
