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The Power Shift After CON Reform
40 Plays6 hours ago
Dr. Leo Spector, MD, MBA, is the CEO of OrthoCarolina, where he leads strategy across a growing network of ASCs while continuing to practice as a spine surgeon. With decades of experience navigating joint ventures and certificate-of-need restrictions, Dr. Spector brings a physician-leader perspective on what it takes to successfully own and operate ASCs today. In this episode, he shares OrthoCarolina’s journey from hospital joint ventures to wholly owned surgery centers, how CON reform is reshaping growth opportunities, and what independent groups should consider as they evaluate their ownership options.
In our news recap, we’ll cover five ways CMS is continuing to impact the ASC industry, two HCA medical centers that sold, cybersecurity concerns around generative AI, and how Amazon's same-day delivery can help your ASC with patient outcomes.
One other note: our other host, Alex Larralde, unfortunately, needed to step away from HST so she could help with personal family needs full-time. That means this will be the last episode she’s included in. I’m sure she’d appreciate a kind message from you if you’re up to it.
Resources Mentioned:
- 5 CMS moves shaping the ASC industry
- Montecito Buys Two HCA Medical Centers
- How the generative AI boom changes healthcare cybersecurity
- Amazon Pharmacy to expand same-day delivery to 4,500 cities
Brought to you by HST Pathways.
Recommended
Transcript
Intro & Podcast Overview
00:00:00
Speaker
Welcome to this week in surgery centers. If you're in the ASC industry, then you're in the right place. Every week, we'll start the episode off by sharing an interesting conversation we had with our featured guest, and then we'll close the episode by recapping the latest news impacting surgery centers.
00:00:16
Speaker
We're excited to share with you what we have. So let's get started and see what the industry's been up to.
Dr. Spector on ASC Management & Experience
00:00:24
Speaker
Hey everyone, here's what you can expect on today's episode. Dr. Leo Spector is the CEO of OrthoCarolina, one of the nation's largest independent physician-owned orthopedic practices, where he leads strategy across a growing network of ASCs while continuing to practice as a spinal surgeon.
00:00:45
Speaker
He has decades of experience navigating joint ventures and certificate of need or CON restrictions. So he brings an interesting perspective on what it takes to successfully own and operate ASCs today.
00:00:58
Speaker
And in today's episode, he shares OrthoCarolina's journey from hospital joint ventures to wholly owned surgery centers.
00:01:09
Speaker
Also how the CON reforms are reshaping growth opportunities and what independent centers should consider as they evaluate their ownership options. In the news recap, we'll cover five ways CMS is continuing to impact the ASC industry, couple HCA medical centers that sold, cybersecurity concerns around generative AI, and how Amazon's same-day delivery can help your ASC with patient outcomes.
Host Transition Announcement
00:01:42
Speaker
One other note, our other host, Alex Lerald, unfortunately needed to step away from HST so that she can help with personal family needs full-time. That means this will be the last episode she's included in I'm sure she'd appreciate a kind message from you if if you're up for it.
00:02:01
Speaker
Okay, all that said, I hope everyone enjoys the episode today and here's what's going on this week in surgery centers.
OrthoCarolina's Transition to Wholly Owned Surgery Centers
00:02:16
Speaker
Hi everyone, and welcome back to This Week in Surgery Centers. I'm super excited today to be joined by Dr. Leo Spector, and we're going to chat about all things ASC ownership at OrthoCarolina today.
00:02:27
Speaker
Dr. Spector, thanks for joining me. If you could just introduce yourself, that would be great. Great. Well, thanks so much for having me today. Really appreciate it. my name Leo Spector. I am the CEO of OrthoCarolina.
00:02:39
Speaker
We are a independent physician-owned and physician-governed, operated organization ah based out of the central area of the Carolinas with our headquarters in Charlotte. but But we have offices stretching up to Hickory and Winston-Salem and down into the Fort Mill Rock Hill area of South Carolina. So that's what they call the Central Piedmont of the Carolinas. Practicing a spine surgeon by a background in training.
00:03:03
Speaker
I still see patients once a week. I still operate once a week. And I was over at our surgery center last week doing two or three cases in the morning. So still participating in our ASCs as well. That's fantastic. So you have a busy schedule. Keeps me busy. Yep.
00:03:17
Speaker
I love it. Well, thank you for that. Could you tell me a little bit about how OrthoCarolina got into the ASC business? What did that journey look like? How did you kind of first start thinking about ASC ownership? And then tell me about what that footprint looks like today.
CON Reforms & ASC Expansion Plans
00:03:32
Speaker
Yeah, so it started it started well over a decade ago, maybe close to two decades ago. And it it actually started with a joint venture between ourselves, one of the healthcare care systems, and one of the large national management companies.
00:03:47
Speaker
And at that time, or North Carolina was still, as well as South Carolina, were both certificate of need states. And so, as your listeners probably know, or sure you do, in a certificate of need state, in order to be able to open up whatever that asset may be, you need to go to the state, get that certificate of need. And that was a highly regulated and essentially controlled and monopolized by the hospital system. So at that time, in order to do ambulatory surgery center as an independent physician organization, you have to do that as a joint venture with the hospitals.
00:04:22
Speaker
So we have a number of joint venture ASCs with a number of hospitals today, which are all part of that legacy CON. Now, interestingly enough, about 10 years ago, state of North Carolina started a pilot program where they were starting to look at CON reform.
00:04:41
Speaker
And of course, there's always pros and cons to it and different people on different sides. And so what the state did was they said, well, let's do a pilot. Let's go ahead and award three two-room centers throughout the state of North Carolina.
00:04:56
Speaker
And the stipulation was that there could not be hospital ownership or partnership in that venture. And I think it also, if I remember, had to be single specialty. And so we applied for and were granted one of those three pilots.
00:05:10
Speaker
And so we were able to open up our own wholly owned, not joint venture with anybody, ambulatory surgery center about 10 years ago.
Impact of CON Reform & Future Plans
00:05:20
Speaker
And so we have been owner-operators of our own center for about 10 years.
00:05:25
Speaker
We've grown that center a little bit by adding procedural rooms, but given that North Carolina is a CON state, or was, I should say, because that just changed about two weeks ago. We can talk about that later.
00:05:35
Speaker
we were it We kept it as a two-room ASC with a procedure room. Now, more recently, about two or three years ago, we actually had the opportunity to buy out one of our hospital joint venture partners, which was a pretty unique company. circumstance. Typically, it's the other way around.
00:05:51
Speaker
But we had a joint venture and ambulatory surgery center with one of the large hospital systems here in the Charlotte area, and for a lot of reasons we could discuss was not going as well as anybody wanted to, both on our side and the hospital side.
00:06:05
Speaker
And so we got to a point where I told them, I said, this isn't working. i don't want to call it a bad marriage, but maybe it was a bad marriage and it's time for us to make an amicable divorce. And so we went out and got a fair market valuation. And as you'd expect, it was a fair market.
00:06:20
Speaker
It was a price where I would have been happy to sell them my half or I would happy to buy their half. I think with the fact that CON legislation had been passed and we knew was going to come into effect, I think with them knowing that, I think a lot of the traditional leverage, perhaps, that a hospital system had, they knew that was starting to go away.
00:06:43
Speaker
And so I think that probably is a part of what brought them to the decision to either buy or sell this asset with us. And also, I think we both recognized it was an unnecessary thorn in the side of our relationship together. And there's more that we could be doing that's positive.
00:06:59
Speaker
And so about a year and a half ago now, we completed that transaction and we purchased the 50, we put bought them out of their 50%. now we have two wholly owned ambulatory surgery centers. Again, two-room ASC. Now that we are post-CON reform, we're really excited about what the future looks like as we expand those centers and hopefully build some others.
Anesthesia Supply & Strategic Planning
00:07:21
Speaker
Yeah, that's really exciting. The CON environment certainly has had a big impact on growth and those types of strategic decisions, not just for you, but I'm imagining all over the Carolinas. Now that that is shifting, what do you see on the horizon, not just for yourself, but for the industry writ large within the Carolinas? And do you have any specific moves planned in the immediate future to take advantage of the opportunity opening up to expand?
00:07:48
Speaker
Yeah, i think I think it's going to be a very interesting landscape, right? When you have any commodity, if you will, that's monopolized and you remove that me monopoly, you start to let market forces start to come into play. You start to see a lot of change. That's what capitalism is all about, which is hugely important.
00:08:05
Speaker
Obviously, there's this fear that that private equity and others will come into the state and build a zillion surgery centers. And what I have explained to my colleagues and hospital folks and others is,
00:08:18
Speaker
Well, that could happen, but you can build 100 ASCs, but you need the surgeons, the patients to fill them. And so if you try to do that, if private equity or others or whoever may be tries to do that without a partnership with a physician surgery group,
00:08:34
Speaker
They're not going to be very successful. So I really don't see there that there's going to be this massive influx or explosion. I do think you'll have folks coming into the market and wanting to partner with the surgical practices that belong in an ambulatory surgery center. The ENT folks, urology, orthopedics, obviously, is a huge one.
00:08:55
Speaker
The spine component for the neurosurgeons, our GI colleagues. So... plenty of opportunities. What I think you'll see is that it really does change the conversation now between the physician groups and either the hospital systems and or the management companies that you used to need to be able to do these. And so the question then becomes,
00:09:19
Speaker
In the past, the main thing the hospital would bring to the table would be the certificate of need, right? And then we as the surgeons would bring the surgeries. Now that we don't need the hospitals to bring that certificate of need, the question then becomes, okay, what can you bring to the table, right? And there's still plenty of value that hospitals can bring to the table.
00:09:37
Speaker
Same conversation for the management companies, right? What value are you going to bring? So I think just becomes a conversation of what's the value proposition. For us immediately, you know, immediate plans would be to expand our existing centers.
00:09:50
Speaker
Both of those centers have the capacity to expand
Advantages of Physician-Owned ASCs
00:09:54
Speaker
upwards, probably to four rooms each, although we're taking a hard look. And you want to get the number right, right? Based upon geography, beth based upon staffing, based upon working with our anesthesia partners. And so our immediate plans are to expand both of those centers.
00:10:10
Speaker
and to look to break ground on a de novo center, at least one, if not two, in 2026. That is super exciting. You mentioned anesthesia, which is a hot topic issue. It comes up all the time in almost every conversation I have because it really is probably one of the biggest limiting factors, I think, to growth in the ASC space nationally, just because of the supply and demand issues that we keep encountering. But let me ask you, from your perspective, how are you thinking about anesthesia as you're looking at your growth plans and what
00:10:41
Speaker
What role is that kind of playing in your strategic planning and what kind of solutions are you brainstorming or thinking up to to help with that? Yeah, no, I think you're right. Anesthesia is a big issue, and especially nationally.
00:10:55
Speaker
We are somewhat fortunate in the Carolinas to have a number of good anesthesia groups and a lot of good anesthesiologists, but I think it's important we don't take that for granted.
00:11:06
Speaker
I think the way I look at it is we really have to look to see how we can partner with our anesthesia partners because we both need each other, right? that If their surgery is not being done, then they don't have business. If we don't have anesthesiologists to care for our patients, then we can't do it we want to do. So we have to look at it as a business. I just think it starts from a place of mutual respect and understanding where each are coming from.
00:11:26
Speaker
but You're right. There are areas of the country where I hear about tremendous shortages. There's conversations about who should employ the CRNA. Should it be the anesthesia group? Should it be the center? Then there's even conversations about centers employing their own anesthesiologists out of necessity.
00:11:41
Speaker
My hope is that we continue to be able to have good working relationships with the different anesthesia providers within our community and to be able to continue partnering with them.
00:11:52
Speaker
But obviously, i'm not naive to think that may potentially change and we'll have to have alternative options to that. That makes sense. So going back to wholly owned versus joint venture ASCs, I'm really curious from the physician perspective as a practicing surgeon, what are you able to do at a physician owned center? What feels different? What kind of what are the advantages of having a wholly owned center versus a JV?
00:12:17
Speaker
Yeah, I think at the end of the day, a lot of it really boils down to incentives, reward systems tend to drive behavior, right? If I've got two kids, they're getting older, but when they were little, depending on how we were rewarded them for certain behaviors, that definitely informed how they behaved, right? And so I think if you look at least in the Carolinas, traditionally, when it was CON and you had joint venture ambulatory surgery centers, the hospitals, not by any fault of their own, just but because the circumstances, they were highly conflicted.
00:12:46
Speaker
in the sense that every outpatient case we moved from the hospital to the joint venture, that was a net loss that. Because if that case stayed in the main OR, r in the hospital outpatient department, they were going to make a larger facility fee than if it moves to the ambulatory surgery center, where we know the facility fee is lower, and they were having to split that with a group.
00:13:10
Speaker
So the incentive structure, the reward system, was not set up for the hospitals to necessarily want or to be good stewards of ASCs. And so I don't fault them for that. That's just the structure that was there.
00:13:24
Speaker
When the center is fully owned by the surgeons, the alignment between them, us, and our patients, number one, and the payers who's footing the bill is fully aligned, right? We're 100% aligned to deliver the highest quality at the lowest cost because For us, that lower total cost of care is a net benefit to us and to our patients, right? So it's one of those circumstances where we can be benefiting our our patients, benefiting our payers, and also benefiting ourselves at the same time.
00:13:55
Speaker
That's great alignment of incentive structure. Quality is obvious, right? As a surgeon, I'm not gonna operate anywhere it doesn't have good quality because the most important thing is take care of my patient.
00:14:06
Speaker
And if I'm not taking my patient to a place that is safe and gonna provide good outcomes, I'm not gonna be in business law as a surgeon, right? I'm gonna be dealing with all kinds of upset patients and complications. I don't want that.
00:14:17
Speaker
And so when the surgeon owns that, The only person I have to answer about changing the quality there or the processes to improve it is myself and my partners. I don't have to answer to either an outside management company or an outside hospital that may or may not have differing incentive structures.
00:14:35
Speaker
And so I think when you have a wholly owned surgeon wholly owned and operated center. I think the alignment is there to really align those that are providing the care, the surgeons, to those that are receiving the care, the patients, and those that are paying for it, which often is corporate America your or the federal state government, depending on whether it's Medicare or Medicaid.
00:14:54
Speaker
Yeah, that makes absolute sense.
OrthoCarolina's Patient-Centered ASC Strategy
00:14:56
Speaker
I want to take it back to OrthoCarolina and your philosophy. As one of the founders and the CEO, you have described in our previous conversation as OrthoCarolina as being physician-led and patient-centered.
00:15:06
Speaker
How does the ASC strategy extend that? And what does that look like in that environment day to day? Yeah, at the end of the day, we are a group predominantly of orthopedic surgeons. I do have some physiatry colleagues and partners.
00:15:19
Speaker
And candidly, our physiatrist led the way of this. right Back in the day, I remember my physiatry colleagues and partners doing procedures in the hospital and then in the ASC. And now pretty much everything they do is in our our procedure rooms in our offices, office space.
00:15:35
Speaker
So now some of that obviously was driven by insurers and payers, right? But they really led the way in lowering the total cost of care for our patients. But I look at it as the thing that we do as orthopedic surgeons, as physiatrists, when we treat patients, because we're treating the whole patient, is the number one thing we can do is decide, do they need do they even need a procedure or a surgery, right? And so we can help to improve outcomes and lower the cost of care by avoiding unnecessary procedures and surgeries, first and foremost.
00:16:05
Speaker
Once we have decided that it is in the patient's best interest to improve their quality of life, to either do a procedure or surgery, the next lever, if you will, that we can pull to help lower the total cost of care, improve outcomes, is the site of service. Where are we delivering?
00:16:22
Speaker
And so by moving that from high cost centers to lower cost centers when it's appropriate, that's the second way that we can lower the total cost of care. So as a physician-owned and patient-centered organization, we can do that. We can focus on what's best for the patients.
00:16:38
Speaker
And at the end of the day, in in our opinion, what's best is improving the outcome quality, and lowering the total cost of care. And the way that we can do that most effectively is by offering the right procedure or surgery to the right patient at the right time in the right location.
Independent Practices & Patient Experiences
00:16:58
Speaker
And so the ASCs fit into that last bucket right up to the right location. And be had being able to have access so that our patients have access to those high-quality, low-cost centers is a huge part of that strategy.
00:17:10
Speaker
Absolutely. and makes total sense. Okay, so next question for groups like yours, independent physicians or practices that want more control, kind of more ownership to create those patient-centered experiences. What first steps or conversations do you recommend they start having as they're looking toward kind of changing up their strategy?
00:17:33
Speaker
Yeah, I think first and foremost, they have to have the internal conversation first, right? You have to meet with your partners and make sure you have alignment as to what is your why, right? Our why is our patients, right? Patient-centered care.
00:17:47
Speaker
You've got to to first and foremost determine as an as an independent practice or any kind of practice, what's your why? Because not everybody's why is the same. And make sure you have a line, general alignment. We've got 110 partners. To sit here and tell you that 110 surgeons agree on everything 100% of the time, everybody would know that I'm lying, right? But you have to have general alignments as to this is our why, our mission, our vision, our value. So I think you start there.
00:18:13
Speaker
Once you have that alignment, you then have to look and make sure that you've got the structure and the processes in place to be able to deliver on that, right? Because it's all it's great to have a strategy. Everybody, you need to have strategy, right? A well thought out strategy.
00:18:26
Speaker
But without execution, strategy goes nowhere. And so once you have that, then you've got to work on executing. And that's both on the physician side, but then it's also on the administrative side. Make sure you've got the right resources.
00:18:40
Speaker
And I think when it comes to that, really think it's important that you step back, take a deep breath, and really have some humility as to what you are and are not capable of. Currently, we're capable of owning and operating two two-room centers.
00:18:55
Speaker
We feel confident that we can own and operate those centers at a little bit of a larger scale. We're not sure if we can go to three or four or five rooms. We may need to bring in a management partner.
00:19:06
Speaker
Or we may need to dedicate more resources to grow it internally.
Negotiating ASC Ownership & Partnerships
00:19:10
Speaker
Those are the kinds of conversations you have to have. And I think you have to realize that you could have a really good plan, but you have to also be prepared to pivot.
00:19:19
Speaker
Say it was Mike Tyson, the one who famously said, everybody's got a plan until I hit him in the head or fix or something like that. And the real world hits you in the head pretty hard sometimes. And so, especially as surgeons, it can be a little hardheaded at times.
00:19:31
Speaker
So I think we have to have that willingness to make changes and to pivot based upon how things are going. For sure. And I'm also curious, you mentioned when you were looking to restructure the hospital joint venture that we were discussing earlier that you went out to do evaluation.
00:19:48
Speaker
What did that process look like getting started there for potentially physicians or ASCs that are a similar situation that might be looking at, hey, we want to bring somebody in or, hey, we actually want to run this thing on our own.
00:20:00
Speaker
Yeah. These are tough conversations, right? They're not easy conversations to have with your hospital partners, because at the end of the day, we are still partners caring for the community, caring for patients. They can't exist without us and we can't exist without them.
00:20:12
Speaker
So there has to be that that that recognition. I think you have to have an understanding of what you as a group are willing to do to understand what kind of, hate to use the word leverage when we're talking about caring for patients, but the business side of things, you have to understand what kind of leverage do you have, right? So if you have a surgery center and you feel like it's it's not working well and you want to restructure it,
00:20:37
Speaker
What are you willing to do? Are your doctors willing to walk away from an investment? If they are, then you've got tremendous leverage because if you walk away from that, then you're leaving the hospital with 100% of nothing, right? In which case, hopefully they'll come to the table and you guys will figure something out.
00:20:53
Speaker
Now, if you're not willing to walk away from it, then you don't have as much leverage. And so before you enter into negotiation, you better know what you're willing to do because you never want to make threats at all during a negotiation. But you don't want to say that you will do X, Y, and Z. And it turns out as the leader, you look behind you and nobody's standing behind you anymore, right? So you need to make sure that whatever you are willing or committing to, that that you're you've got the general buying to do that. So I think you first have to assess...
00:21:22
Speaker
Again, what's your goal? Is your goal to 100% own and operate it Okay, if it is, then what are you willing to sacrifice to do that? And once you know that, then you can have that conversation. We're having have a current conversation with another hospital partner about restructuring a syndication.
00:21:38
Speaker
And those conversations are going very well. And I think both sides have an understanding, their understanding what both want and both are willing to do. And i think that allows you to better get to yes, because that's the goal of any negotiation is get to yes.
00:21:53
Speaker
And also, if you can't get to yes, know that quickly and move on because you don't want, just because you couldn't make something work here, you don't want that to fester and then start souring the relationship in other places.
Future Growth & Value-Based Care
00:22:06
Speaker
For sure. So zooming out and looking at OrthoCarolina as a whole, what does the future look like over the next three to five years for growth of the practice just generally even beyond ASCs?
00:22:18
Speaker
Yeah, we're blessed that Charlotte, this kind of greater Charlotte market, because when i say that, you just think of the city of Charlotte, but I really think of the greater Charlotte market because there's so much within one or two hours of Charlotte.
00:22:29
Speaker
We're blessed to be one of the fastest growing areas in the entire country. The Southeast in general is a very fast growing area. North and South Carolina within that are fast growing, and Charlotte is one of the fastest growing. I think my chief growth officer tells me there's 170 move to this area every day.
00:22:47
Speaker
So that's tremendous growth. And so first and foremost, we need to batch that growth because those folks are going to need access to high quality care. And we also need to realize that those folks moving to the area, they don't know us, right? They're new.
00:23:01
Speaker
And so we've got to make sure that we do a good job making sure that they know that we are are hopefully the choice when it comes to orthopedic care. So for us, it's really a lot of growth within what's affectionately called the central peat box area.
00:23:15
Speaker
We're never opposed to growing into other markets if there's a right opportunity and the right alignment. But really, We're mostly focused on this. This is a really exciting time for us. We've been waiting for CON form for well over a decade.
00:23:28
Speaker
And i don't think it's any secret, right? Healthcare care is getting harder. Margins are getting tighter. The cost of doing business is getting is going up, both on the human side as well as general supplies.
00:23:40
Speaker
And insurance companies are not asking or're not offering to pay us more for what we do. And so with tighter margins, you've got to look at different opportunities. And we really think the ASCs are a huge opportunity for us.
00:23:51
Speaker
that if we grow and execute on that, it can help us to continue to manage, maintain the profitability so that we can grow. think the other part of that really is where the ASCs fit into the whole world of, I hate the term value-based care, they could be a little overused, right? But using that term, I think, how does it fit into the whole value-based care?
00:24:11
Speaker
Specifically with regards to direct-to-employers, right? A lot of employers, they're just seeing their healthcare cost rise every year, every year. And so they're looking for ways to lower that.
00:24:23
Speaker
In the state of North Carolina, the state health plan, which oversees all the state employees, they switched for their musculoskeletal care away from traditional insurance, and they've gone to a direct-to-employer plan.
00:24:34
Speaker
And we're really excited to be one of the three orthopedic practices in the state that are signed up for them. And so for us, that is a huge influx of patients where, again, we can improve quality, we can lower the total cost of care, and ASD it will be a huge part of that. So...
00:24:49
Speaker
that's That's what we're focused on. And I think to be a successful company, you can't try to do everything right. Or you can't you can't try to but yeah you can be everything to everybody. right You really need to know what is your domain of expertise.
00:25:03
Speaker
At the end of the day, as surgeons, as physiatrists, as people that do surgery and do procedures, that really is our domain of expertise. So we really want to focus on that. And it really works well with the CON reform. We can focus in on those sites where we deliver those services.
00:25:18
Speaker
Absolutely.
Engaging Staff & Patients for Improvement
00:25:19
Speaker
I'll be very excited to watch and see how you grow and and what moves you make in the coming years. But my final question is something we ask our guests every week on the show. And that is what is one thing ASC leaders could do this week to improve their surgery centers?
00:25:34
Speaker
Oh, wow. That's, that is a great question. I think, and hopefully people are already doing this, but I think really talking to the people that use the center on, on a regular basis,
00:25:45
Speaker
and find out what's going well, what could go better, and what they would do differently. And that means talking to the surgeons, obviously, but we get pulled too much attention, talking to the teammates that are there, from the folks checking in to the folks working behind the scenes in SPD, and talking to the patients.
00:26:04
Speaker
And it can't be this once a year patient employee satisfaction or physicians. think talking on a weekly basis to find out what are the barriers that to success? Because oftentimes there are little things as we in management or owners that I seek can break down those little things and make lives better for people.
00:26:24
Speaker
It's going to make it better for our patients and therefore make it a better place for us to serve. Absolutely. Well, thank you so much, Dr. Spector, for joining me today. It's been such a pleasure to have you on and to be able to chat with you.
00:26:36
Speaker
Thanks. i appreciate the time. Great questions.
CMS Rule Changes & ASC Procedures
00:26:47
Speaker
Okay, let's jump into the news this week. First one CMS's final payment rule is top of mind right now. In case you didn't see these updates, these were not just routine changes for 2026. They made big changes that are really reshaping the financial and regulatory foundation for outpatient surgery.
00:27:11
Speaker
Becker has done an article recapping a few things that ASG leaders should know about this. First is that CMS finalized a major expansion of the ASG covered procedures list, adding 573 new codes Again,
00:27:30
Speaker
five hundred and seventy three new codes Many of these fall in spine and cardiovascular care, which is going to open up the door for new service line growth.
00:27:43
Speaker
At the same time, cms is phasing out the Medicare inpatient only list over the next three years. That change removes the long-standing site of service restrictions and is going to give physicians flexibility to choose.
00:27:59
Speaker
Financially, CMS finalized 2.6% payment increase for ASCs and corrected prior cardiac reimbursement calculations, turning what was expected to be a cut into a 3.4 increase for certain cardiac procedures.
00:28:19
Speaker
The oversight is also increasing. CMS launched a new pilot using AI-supported prior authorization in several states. That's going to introduce new review protocols for certain procedures.
00:28:34
Speaker
If you take this together, these moves show that there is an acceleration to the outpatient setting. But then also there's going to be increasing complexity across reimbursement and regulatory compliance.
00:28:49
Speaker
So good thing to keep tabs on.
Investment Interest in ASC Properties
00:28:53
Speaker
Next story is around CBRE, one of the world's largest commercial real estate services and investment firms.
00:29:00
Speaker
And they just facilitated the sale of a two property ASC portfolio anchored by HCA in Katy, Texas and Orem, Utah. Both properties were built in 2025 and are fully leased with the first lease expirations not until 2035, which shows the attractiveness to investors.
00:29:25
Speaker
The Bayer Montecito Medical Real Estate is one of the largest privately held acquirers of medical outpatient real estate in the country with more than $6.5 billion dollars in healthcare assets across Florida States.
00:29:41
Speaker
The Oren facility includes 10 ORs, which means it's in the top 5% of the largest ASCs nationally. Also has four procedure rooms and 32 recovery bays.
00:29:55
Speaker
It's a big one. The Katy location sits in one of the fastest growing healthcare markets in Texas. And if you listened to last week's episode with Jim on preparing for a transaction and valuing your ASC, this is the type of thing strategic buyers are looking for.
00:30:16
Speaker
Scale, growth markets, potential cash flow. So much capital is continuing to flow into quality outpatient assets, especially those that have long-term lease stability.
00:30:31
Speaker
Again, if you're interested in selling wholly or partly, seems like a decent time to seriously explore that.
Cybersecurity Risks of AI in Healthcare
00:30:41
Speaker
Next story is around generative ai So this of course is rapidly expanding across the world and in healthcare, care but it's also meaning there are new cybersecurity risks that ASCs should not ignore.
00:30:58
Speaker
In a recent interview, Taylor Lemon from Google Cloud's office of the CISO warned that AI systems may be harder to secure than traditional tools.
00:31:11
Speaker
This isn't necessarily because they're more vulnerable, but because they're more difficult to monitor when something goes wrong. For instance, if an AI model produces inaccurate output, it can be challenging to determine whether it's a harmless error or the result of manipulation by malicious actor.
00:31:30
Speaker
Of course, one instance here and there is different than a repeated pattern too. But the major one of the major concerns is visibility. It's important to be able to understand what model you're using, where it came from, how it was trained, what data it's used, the country that created it, who's going to be accessing it.
00:31:55
Speaker
This all helps to show the importance of strong identity controls and transparency into the types of activities when using these models.
00:32:08
Speaker
At the same time, cyber criminals are using AI to move faster. That means response times must shrink from hours to minutes or frankly even seconds. As ASC leaders, you should think about how yourself or your IT t teams can monitor, detect and recover from these threats.
00:32:31
Speaker
If cybersecurity in general is top of mind for you or your center, HST Pathways has a section on their website under the resources menu where you can find a bundle of resources called enhancing cybersecurity measures.
00:32:51
Speaker
And this has insights and strategies to help protect your ASC from evolving cyber threats. Now, some of these tools also have healthcare specific versions. For instance, ChatGPT, if you contract with them, can have a HIPAA compliant option, which is valuable for healthcare facilities or healthcare IT providers as well.
00:33:18
Speaker
Okay, last story here.
Amazon Pharmacy's Impact on ASC Outcomes
00:33:20
Speaker
Amazon Pharmacy is significantly expanding its same day medication delivery footprint They're adding nearly 2,000 new communities and bringing same-day service to about 4,500 cities nationwide.
00:33:36
Speaker
That's same-day service to thousands of new cities. The new states include Idaho and Massachusetts, building on earlier rollouts in New York and California and others.
00:33:50
Speaker
Amazon's positioning itself as a major competitor to traditional pharmacy players like Walmart, Optum, CVS Caremark, and Express Scripts, among others.
00:34:02
Speaker
While traditional mail-order prescriptions can take time, you know, sometimes five or 10 days, Amazon is really emphasizing its faster fulfillment.
00:34:13
Speaker
And in some markets, really fast pickup through pharmacy kiosks inside their Amazon One medical clinics. The company is also targeting access gaps created by pharmacy closures, staffing shortages, and transportation barriers.
00:34:32
Speaker
They're delivering to remote Alaskan towns across the Navajo Nation and even places like Mackinac Island. I guess they're using ferries and horse-drawn carriages even in some cases.
00:34:46
Speaker
Which if you attended the Michigan ASC conference in the past, you'll know that is an island that is unique.
00:34:57
Speaker
Prime members without insurance can also access steep discounts on generics and brand name medications. For ASC leaders, this could be a huge opportunity to ensure continuity of care. Faster, more reliable medication access can of course directly impact the post-op compliance and recovery ability.
00:35:22
Speaker
And for patients who live alone, who maybe rely on public transportation or have limited resources, programs like this from Amazon can reduce those delays in starting treatments or medication. And of course that can affect their outcomes after surgery as a whole.
Conclusion & Call for Engagement
00:35:43
Speaker
And that officially wraps up this week's podcast. Thanks as always for spending some time with us. Please subscribe, leave a review, Send it to a friend directly.
00:35:55
Speaker
we'd love the support. Hope you have a great day and see you in the future.