At the end of 2020, Tenet Healthcare made a major pivot to enter the ambulatory surgery center business with a $1.1 billion deal to get up to 45 centers.
The deal, which Tenet made in part after selling off its urgent care business, comes after a rough 2020 for hospitals that saw outpatient revenue plummet due to COVID-19.
But Tenet is not alone in trying to snap up surgery centers, which specialize in elective or same-day outpatient surgical procedures. Community Health Systems, for instance, opened up three new ambulatory surgery centers in 2020.
And it's not just hospitals. Medical device company Stryker launched its own ambulatory surgery center business in July 2020, pointing to the potential to help provide more than $55 billion in healthcare savings per year.
The pandemic has accelerated a growing desire among providers and even some medical technology manufacturers to acquire or get into the surgery center business, experts say. One of the biggest drivers of this shift has been eroding patient volumes at hospitals due to fears of contracting COVID-19.
“Patients were more reluctant now than ever to go into a hospital setting when there is an alternative setting that is really focused on just what the patient is looking for,” said Jim Freund, senior partner at ASCs Inc., which represents more than 250 surgery facilities. “It is focused on strictly their surgical procedures and [patients] encounter a much cleaner and simpler process.”
Hospitals also have pushed more procedures to outpatient settings to preserve operating rooms and other space for treating COVID-19 cases and more emergency procedures.
“The priorities were given to emergency procedures where the health condition of the patient is critical,” according to a report from the firm ResearchandMarkets.com released late last month. “Many suitable procedures were referred to be performed in ambulatory surgical centers.”
The pandemic also had the side effect of opening greater opportunities for patients to accept going to a surgery center for care. The report notes the surgery market is projected to grow by 7.5% through 2029.
But COVID-19 isn’t the only driver of this shift. Commercial payers have generally been in favor of moving outpatient procedures to surgery centers because they involve less costs than a hospital setting.
“The payers are very supportive of this trend because the costs of the same procedure in an ambulatory surgery center might be half of what it might cost in a hospital setting,” said Jonathan Kanarek, vice president and senior credit officer for Moody’s Investor Services, in an interview.
Hospitals have a “gigantic infrastructure that accounts for that reimbursement,” he added. “When you think about the convenience and benefits of saving the healthcare system cost and in some cases ownership opportunities for physicians, those are some of the driving factors behind why ASCs are becoming more of an interest for large hospitals.”
The Centers for Medicare & Medicaid Services has also increased the number of procedures that can be performed at ambulatory surgery centers and get Medicare reimbursement. The agency’s latest outpatient payment rule added 267 additional surgical procedures eligible for reimbursement starting this year.
Freund anticipates the trend for ambulatory surgery center acquisitions is likely to continue well past things get back to normal after the pandemic recedes.
“You have got to have a platform that enables us as a country to significantly reduce our healthcare costs,” he said. “The only way of doing that is to create a much more efficient and viable way to address patient care. It is not feasible to pay two or three times for the same procedure in a setting no more conducive to a good outcome.”