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Surgery center boom cuts into hospitals

The Crozer Medical Plaza at Brinton Lake in Glen Mills, Penn., houses a surgery center.

TEXT OF STORY

Kai Ryssdal: There's a whole infrastructure that comes along with health care in this country. Not just the billing and the bureaucracy, but the actual places you go to get care. For decades, conventional wisdom has been that if you needed an operation, you had to go to the hospital. Even for one-day procedures.

Outpatient surgery centers have changed that. They can be easier for patients, less expensive for insurers, and big money makers for the doctors who often own them. But the boom in those surgery centers has hospitals feeling a whole lot of pain. Kerry Grens reports from WHYY in Philadelphia.


ADAM HAUSER: This is our pre-op combined and recovery area. Or PACU, as we call it. It has 17 beds.

Adam Hauser is an anesthesiologist. He wears blue scrubs and one of those little blue scrub caps as he shows off his surgery center.

Hauser: My anesthesia machine. Love my machine here. My anesthesia cart. Here's an operating room bed.

Hauser works a few days a week at a large suburban hospital. Most days he's here running the Surgery Center at Brinton Lake, which does pretty much everything.

Hauser: Orthopedics. Ear, nose, and throat. Opthalmology. Pain management services. Urology...

And a lot of procedures, like knee surgeries, that are popular among baby boomers -- a huge, well-insured market.

Hauser started the center four years ago, after realizing that many patients could be treated less expensively outside the hospital. Attracting surgeons was easy, he says, because outpatient centers offer simpler scheduling and faster turn-around times.

Hauser says Brinton Lake doubled its business in the last two years.

Hauser: We haven't actually done the whole budget for next year yet, but we're probably going to anticipate 15-20 percent margin next year.

Profits like that are typical, and have been behind a small explosion of these ambulatory surgery centers, or ASCs as they're called. With hundreds of new centers opening each year, some states have begun regulating their growth.

ROBERT Field: These ambulatory centers tend to be very profitable because they can do high volume with low overhead on well-insured patients.

Robert Field is a health care regulation expert at Drexel University Law School. He says those surgeries are also very important to hospitals. The profits subsidize their most expensive departments, such as burn units, ICUs, and emergency rooms. And that's creating stiff competition for surgical outpatients.

Field: This is the ultimate cherry picking. And the cherries are the patients who are most profitable.

With every new surgery center that pops up, hospitals lose out.

Richard Keenan is the chief financial officer of Valley Hospital in Ridgewood, N.J. He says surgery cases earn the majority of the hospital's revenue.

RICHARD Keenan: For the first time in the history of Valley Hospital, we did fewer surgical cases in 2009 than we did in 2008, than we did in 2007. So we have seen the erosion.

And he means that literally.

Keenan: That's an ambulatory surgery center right there.

Grens: So, right within view of your office?

Keenan: Right.

And there are five more centers in adjacent towns.

Surgery centers might be the thorn in hospitals' sides, but they save money for the health care system -- a primary goal of health reform.

Kathy Bryant is the president of the Ambulatory Surgery Center Association.

KATHY Bryant: Right now Medicare pays ASCs about 59 percent of what they pay hospitals for performing the same procedure. So there's a great deal of savings that Medicare can achieve.

Even Richard Keenan at Valley Hospital agrees.

Keenan: It's hard to argue that it's a bad thing.

Hospitals are taking notice. More and more of them are teaming up with doctors to open their own outpatient centers.

In fact, the Brinton Lake Surgery Center run by Dr. Hauser, is partially owned by the hospital he works for.

In Philadelphia, I'm Kerry Grens for Marketplace.

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