In this study, we demonstrate that rates of genitourinary ambulatory surgery are associated with an empirically derived measure of physician ownership of the ASC. Although ASCs were conceived as facilities where all surgeons would perform procedures, non-owners rarely used these facilities. Further, the use of hospitals for ambulatory procedures has remained stable over the study period, while rates of procedures in ASC have increased sharply. This increase was associated with the conversion of non-owners to owners, and a behavioral shift among these new owners to emphasize the performance of procedures with misaligned financial incentives in their procedure mix after establishing ownership.
Overall, our results raise concerns about the ability of the physician-owned ASC to reduce overall health care costs. Medicare reimbursement policies were changed in the early 1990s to favor office based practice as a cost control measure,27
with private insurers soon following.28
An inherent problem with these measures is the inconsistency of the physician response.29
Some physicians respond by decreasing the performance of the procedure with decreasing reimbursement and substituting new procedures.18
Others increased procedural volume to compensate for situations where the reimbursement was reduced in order to maintain a targeted income.30
This demand induction has been a major concern of policy makers when they impose fee reductions.31
While one cannot conclude that the physicians in this study are inducing demand, the phenomenal growth of ASC use for procedures intended to be performed in the office setting is certainly concerning. In fact, for non-owners, these procedures are among the most lucrative procedures available to urologists on an hourly rate basis.9
In this context, ASC use for these procedures could reflect movement of procedures out of the office (for example to meet safe harbor requirements for ownership status), or lowered thresholds for intervention among new owners. In either scenario, our findings would suggest that incentives designed to promote office-based procedures are being overwhelmed by the additional revenue generated as a result of ASC ownership, likely resulting in unnecessary costs to the US health care system. This added cost may represent value to the physician with higher reimbursement, possible value to the patient if the ASC is a better environment for surgery than the office, and decreased value for payers because they pay more for the same services.
Understandably, payers want to encourage the performance of surgery in the least costly and safest setting. In the desire to shift cases out of the hospital, they have set physician payments to encourage office-based practice. However, the incentives established to encourage office-based procedures clash with those fostering ASC promulgation, through the added remuneration of the facility fee by physician owners. These conflicting incentives likely contribute to physician investment in ASCs, and to the consolidation of surgical groups that then invest in single-specialty ASCs.32
When these conflicts have occurred in the past, policy has been changed to discourage physician investment in ancillary services. Research on self referral for radiological procedures,33, 34
and radiation oncology36
led to regulatory action to prevent abuses from ownership interests.23, 37
Such regulatory action continued with the temporary moratorium on specialty hospital creation, which was released in 2005.38
The use of such hospitals has been associated with increased use of coronary revascularization,39
but not increased quality of care.40
Our findings support these previous studies, and lend additional support to the contention that physician incentives need to be carefully considered when implementing reimbursement policy.
Instead of allowing physician ownership of ASCs, state or federal regulations could prohibit such ownership, or prohibit new investments in such physician-owned facilities (as has occurred for specialty hospitals). In this counterfactual situation, current non-owners would not be able to become owners. Thus, this group of surgeons would not be able to respond to the financial incentives associated with facility ownership. They would likely continue a stable practice style, and not demonstrate the changes in the distribution of cases among facilities we observed for the new owners. Alternatively, total reimbursement (physician and facility) for a procedure could be capped at the equivalent of the office-based professional fee. In this case, the misaligned incentives would be removed.
Our findings should be interpreted with several caveats in mind. First, ownership was defined based on the percentage of a surgeon’s case done in a single ASC. This empirically-derived measure was created because no direct listing of physician ownership interest of ASCs is available. Our definition threshold of 30% of cases in a single ASC is consistent with Federal rulings on safe harbors for both anti-kickback statutes and Stark laws. Though this definition may have classified some non-owners as owners, the data support a significant change in physician behavior after they become owners (Figure 3). Thus, it seems unlikely that the significant increase in ASC use we find among the new owners is a result of misclassification of non-owners into the ownership category due to fluctuation around the 30% threshold. Furthermore, our validation study for the ownership definition allays some of the concerns about using an empiric measure, and the results were robust to limiting the data set to physicians who practiced within ASC where ownership could be confirmed. Finally, endogeneity of the ownership definition and the outcome variable could be a concern. To alleviate this concern, the dependent variable in the regression was the count of procedures at the surgeon level, and the definition of ownership based on the percentage of procedures performed in the ASC was independent of the outcome variable. An individual surgeon could have a rising count of procedures without a change in ownership status, or conversely could have a change in ownership status without any change in the number of procedures performed.
Second, while it would have been ideal to observe concurrent changes in office-based procedures, these are not tracked within the SASD dataset. Since the majority of the procedures performed by these new owners come from procedures with misaligned incentives, it is probable that they represent office-based procedures that have been moved into the ASC setting; however, this hypothesis cannot be further tested using the current data. As with similar studies, it is impossible to determine the ‘right’ rates of utilization for these procedures, many of which are preference-sensitive. It is possible that the observed rates may reflect previously unmet demand or patient preference for a particular setting of care.
Third, we chose to examine data from Florida, a state that may not be representative of the country as a whole. Florida has a more elderly population than many other states, more for profit facility ownership, and higher per capita health care use than other states. Despite these issues, Florida provides a valuable substrate for this study because of the lack of certificate of need legislation, the ability to track surgeons in the data, the inclusion of freestanding ASC in the data, and the diverse population in the state. Due to these factors, the results of this study can be generalized to other areas where physicians are able to make new investments in ASCs.
New physician investment in ASCs in the context of the current reimbursement structure is concerning. Procedures performed by the new owners of these facilities are likely those that are performed by non-owners in their office. Since physician-owners of ASCs generate more revenue through the use of these facilities, they have direct financial incentives to increase the delivery of care, and to move procedures from the less costly office setting to the ASC. Such movement will invariably lead to increased costs to the US health care system. Changes to health care policy that properly align financial incentives of physicians with the interests of patients and payers will ultimately limit the negative effects of ASC development while continuing to provide a necessary alternative to the hospital outpatient department.