By Nap Gary, COO 1. More scrutiny of clinical quality. Surgery centers are coming under increasing scrutiny by regulators and the media, due to a few problems discovered at a few low-quality centers. “CMS surveys seem to taken on a more aggressive approach,” Mr. Gary says. “In the most egregious cases, the threat of a loss of certification has become more pronounced.” Extra funds from federal stimulus spending were earmarked for stepped-up CMS inspections. “Our vulnerability in this area is as high as it’s ever been,” Mr. Gary says. He reports that some centers that passed inspections by accreditors have “gotten blasted” by CMS inspectors. “Obviously it’s just a fundamental obligation to make sure the quality we provide is equal to or better than that available in the hospital,” he says. “We now have to be very careful about crossing all our t’s and dotting all our i’s.” 2. Out-of-network strategy slips away. “A significant out-of-network strategy is getting difficult to maintain,” Mr. Gary says. “Some of the major payors are reducing out-of-network benefits to members to the point where there is no incentive any more.” The loss of this option, which varies by region, reduces a center’s options in negotiating with payors, giving them less leverage against payors. 3. Some leverage moves to payors. Payors’ negotiating power has been enhanced, especially in markets where the number of ASCs has reached the saturation point. “When there is a surgery center on every street corner, just comparing yourself with the hospital is no longer good enough,” Mr. Gary says. “You now are competing with other centers. With so many centers around, one of them might be willing to take a lower rate than you offer.” In some markets, payors have further enhanced their negotiating power through consolidations. 4. Fewer Medicare dollars to go around. Ongoing efforts in Washington to cut the federal deficit are likely to slow Medicare spending, affecting ASC reimbursements in the coming years. However, this new cost-consciousness could also present a great opportunity for surgery centers, Mr. Gary says. Hospitals, which have had a lot of political clout in Washington, will have more difficulty justifying higher reimbursement rates than ASCs. “The ASC industry has to get its message out, and I think we are doing an increasingly more effective job in Washington,” he says. “Now we will go back there with our sleeves rolled up, and we’ll see where we come out.” 5. Fewer new physician-investors. At a time when many physician-investors are nearing retirement, there may not be enough physicians to take their place. Mr. Gary notes that many –– but not all –– young physicians are seeking employment at hospitals, taking themselves out of the pool of eligible investors. “The prediction that all young physicians or all women physicians seek employment is too simplistic,” he says, “but it is safe to say that in the short term, at least, more physicians are trying to align with hospitals.” In the long term, however, this trend may derail. “Long-term employment is incompatible with the mindset of the successful surgeons I’ve worked with,” Mr. Gary says.