Ambulatory Surgery Centers: Rapid Growth and Lack of Oversight in California

Ambulatory Surgery Centers: Rapid Growth and Lack of Oversight in California

By John Stahl, Esq.
Concern regarding the relatively little public information about heavily utilized ambulatory surgery centers (ASCs) in California prompted the California HealthCare Foundation (Foundation) to research ownership statistics and other data regarding these facilities that service rapidly increasing numbers of workers’ compensation claimants, Medicare and Medicaid recipients, and general healthcare patients. The Foundation published its findings regarding these primarily out-patient centers in a California Health Care Almanac report titled “Ambulatory Surgery Centers: Big Business, Little Data.” Laurence Baker, Ph.D., of Stanford, CA, authored the report.
The qualifications for ASC status in California are:
  • Certified participation in Medicare;
  • “Licensed under the [California] Department of Public Health or its successor; or”
  • “Accredited by an accreditation agency approved by the Medical Board of California.”
The agencies that the Medical Board of California approved to accredit ASCs are:
  • Accreditation Association for Ambulatory Health Care
  • American Association for Accreditation of Ambulatory Surgery Facilities
  • Institute for Medical Quality
  • The Joint Commission
The reported statistics show that there are “754 freestanding surgery centers” in California, that those facilities have 1,603 operating rooms, and that “most of these facilities are for-profit centers entities, with a significant number owned by physicians.” Los Angeles County had the highest number of operating rooms in freestanding ASCs, while Sacramento County had the lowest number of operation rooms in freestanding ASCs. Orange County had the highest number operating rooms per population.
The Foundation further determined that “among reporting [ASC] facilities, operating margins were healthy in every year from 2003 to 2010.” The specific 2010 statistics indicated that the average ASC in California had $6.96 million in revenue and $5.01 million in operating expenses.
Research regarding sources of ASCs’ income revealed that “private insurers pay for almost half of encounters at ASCs, and Medicare covers close to one-third.”
More detailed data revealed that, at roughly 50-percent in both 2007 and 2010, private insurers were “the dominant payer for ASC care in California. … The percentages have not changed significantly despite the reporting decline,” which the following section in this article addressed. The reported share of these expenses that the California workers’ compensation system paid remained constant at 6-percent in both 2007 and 2010.
Diminished Oversight
The combination of ASCs operating on a large scale and the lack of oversight of their surgical and business operations raised the red flags that prompted the Foundation to initiate the investigation. The court of appeal ruling in Capen v. Shewry, 155 Cal. App. 4th 378 (, 155 Cal. App. 4th 378 (Lexis Advance) (Cal. Ct. App. 2007), which established both that the California Department of Public Health no longer regulated physician-owned ASCs and that those facilities were required to report data to the Office of Statewide Health Planning and Development (OSHPD), dramatically affected the rate at which ASCs reported surgeries to California regulators. These facilities reported far more surgeries in 2007 than the 120,155 surgeries that were reported for 2010.
The report attributed the above statistics to shifting oversight of ASCs to the California medical board, which did “not track the number of surgeries performed in doctor-owned ASCs.” A related finding was that the federal government, which did not require that ASCs provide detailed data, indicated in 2010 that only 52 of the 754 known ASCs in California reported data to the OSHPD; this contrasted with 451 ASCs reporting to the OSHPD in 2007.
Operating Room Statistics
The fact that the total number of operating rooms in California ASCs increased from 1,180 in 2003 to 1,603 in 2010 provided further perspective. This 36-percent growth in that period significantly increased the capacity for workers’ compensation, Medicare and Medicaid, and general healthcare procedures in these facilities in which state oversight was waning.
The national perspective regarding these statistics for 2010 were that “California had slightly fewer ASC operating rooms per 100,000 population compared to the US average, and falls in the middle of all states.” The U.S. average was 4.62 Medicare-approved operating rooms in freestanding ASCs per 100,000 population and that that figure in California was 4.29 such operating facilities. At 11.63 such operating rooms per the relevant population, Maryland was at the top of the list, whereas Vermont was the lowest on the list with 0.32 operating rooms.

States at the top of the list: 6.01 to 12 operating rooms in freestanding ASCs per 100,000 population: AZ, DE, FL, ID, IN, MD, MS, NV, TN, WA, WY.
States at the bottom of the list: 0 to 3 operating rooms in freestanding ASCs per 100,000 population: DC, HI, KY, MA, ME, MI, NM, NY, VA, VT, WV.
All other states were in the middle range of 3.01 to 6 operating rooms in freestanding ASCs per 100,000 population.

With respect to reported surgeries in the ASC facilities, the report further revealed that “the number of reported ASC surgeries in California increased by over 30% from 2003 to 2007, growing much faster than the population. In the years after 2007, when reporting requirements changed, the available data may not” accurately reflect “what was happening in the state” regarding these procedures.
The remarks regarding post-2007 statistics related to the aforementioned conclusion that the Capen decision influenced the reporting by ASCs of having conducted only 120,155 surgeries in 2010. That figured reflected a surgery rate of 3.22 ASC operations per 100,000 population in California.

The top five procedures reported at ASCs in 2010 were:
  • Colonoscopy – 16.4%
  • Minor Procedures – Musculoskeletal – 16%
  • Eye Procedures – 9.6%
  • Arthroscopy – 7.8%
  • Upper GI Endoscopy – 6.8%
  • All Other (including carpal tunnel surgery, removal of lesions, and other types of ambulatory procedures) – 43%

Other Relevant Statistics
Ownership demographics regarding ASCs in California reflected the national norm in the same manner as the statistics regarding the number of operating rooms in those centers. The ownership in that state broke down as following in 2010:
  • Investor-owned ASCs 97.7 percent
  • Non-profit owned ASCs 1.9 percent
  • Government-owned ASCs .4 percent
The national statistics for 2010 were:
  • Investor-owned ASCs 96.8 percent
  • Non-profit owned ASCs 3.1 percent
  • Government-owned ASCs .2 percent
The report stated that regulatory response to the diminished oversight of ASCs has included the Centers for Medicare and Medicaid Services (CMS) implementing “a pay-for reporting quality program that requires ASCs to report data on standardized measures in order to receive the full annual update to their ASC payment rate, beginning with 2015 payment rates.”
These measures related to mishaps that included “patients experiencing any burns (including electrosurgical, electrical, chemical, thermal) prior to discharge” from an ASC, and “patients requiring hospital transfer or admission upon discharge from ASC.” The new standards additionally required using a “safe surgery checklist” throughout an operation.
It is likely that the pace of regulatory reform will increase in proportion to public awareness of how ASCs operate in their surgical and executive suites. Providing patients with a theoretically less-expensive and more convenient alternative to a traditional hospital stay has tremendous merit. The primary challenges are ensuring that those facilities are held to the same regulatory standards as hospitals and that profit motives do not influence treatment decisions.
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