DOING BUSINESS
Capitated Care A new model of risk sharing could be the key to success for the ASC industry. BY JOAN DENTLER
To remain financially vi- able, ASCs have histori- cally relied on case vol- ume. One of the first steps when even considering
whether to build an ASC was to proj- ect case volumes and payer mix. Once the ASC was up and running, adding case volume was a fairly surefire way to grow the surgery center. While it was critical for surgery cen-
ters to focus on cost and quality as well, long-term survival and profitability were often tied to the revenues generated by an ASC’s case volume. There may be a new reason, however, for developing a surgery center—one where volume is not the driv- er and revenue has no importance. In this era of preventive medicine and population management, ASCs are now being developed under a new model that does not establish ASCs as revenue generators. It is a capitated care model where physicians or hospitals in- corporate the use of an ASC to achieve financial success, not by increasing case volumes and negotiating strong net rev- enues per case, but through risk sharing and serving as a high-quality alterna- tive to higher-cost settings. It is a model likely to become more prevalent in the ASC industry, and one that provides valuable lessons for ASCs looking to put themselves in a strong position for possible involvement in accountable care organizations (ACOs).
Understanding Capitated Care Capitation is a payment model origi- nally developed in the 1990s in which providers are paid a flat fee—usually monthly—by a payer to manage and coordinate the care for a group of lives. The fee is a percentage of these patients’ premiums. The provider is then respon- sible for delivering care to these mem-
28 ASC FOCUS JULY 2013
bers but not for billing the payer for the specific services as they are provided. The fee is intended to cover the costs
of services, with whatever amount left over serving as the provider’s revenue. So if the provider can deliver high qual- ity care that keeps patients from requir- ing more services while
effectively
controlling the costs needed to provide these services, more of the provider’s monthly fee is kept by the provider. On the flip side, if providers deliver lower quality care that results in patients re- quiring more services and, if providers fail to effectively contain costs, more of the monthly fee is spent on delivering care resulting in little or no profit mar- gin for the providers. Capitation can be an effective model to control overall health care costs and al- low providers to deliver care in a manner that focuses on improving quality while maximizing cost effectiveness. Does this description sound familiar? It should: ASCs have historically touted themselves as the higher-quality, lower-cost surgery service alternative to hospitals.
ASCs in a Capitation Model To participate in a capitation model the payer would not contract directly with the ASC but rather with the physician group or hospital that owns and oper- ates the surgery center. Let’s look at one
example where an ASC would come under this model: A payer approaches a large, “every- specialty” physician group and suggests a capitation payment model. The physi- cians in the group currently lack an ASC, and instead, perform their surgeries in a local hospital or other ASCs. In these settings, however, the physicians cannot exert the control over the facility, staff and supplies needed to ensure high-qual- ity, low-cost care. The group realizes it needs to build
its own ASC so it can control the cost of those surgeries, thus allowing for the fi- nancial difference between what the hos- pitals or other ASCs charged and what it costs the group’s ASC to perform the case to go to the group. By investing in developing the ASC—an expenditure that might not have previously made sense—the physicians will see immedi- ate returns on their investment because of the significant savings the ASC pro- vides to them. In another example, the physician
group might already own the ASC but pursue capitation for reasons that might include shrinking reimbursement or bill- ing and collections challenges. In this example, the ASC will no longer serve as a revenue generator and becomes strictly the safest, lowest-cost setting for surgery and procedures instead. Physicians and their ASCs thrive under this payment model because it re- quires an ASC to do many of the things ASCs should do regardless of their payment model. Those things include benchmarking and tracking costs per case and quality; careful planning for any new development in areas includ- ing staffing, equipment and the overall design and construction of the facility; and carefully weighing any investment in outsourced services.
The advice and opinions expressed in this article are those of the author and do not represent official Ambulatory Surgery Center Association policy or opinion.
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