HealthAffairs: Physician-owned surgicenters lead to higher volume, profits

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Investing in ambulatory surgery centers provides physicians better profits and incentives, but is also linked with a high level of surgical volume, according to a study published in the April issue of HealthAffairs.

“Our findings serve to inform the policy debate surrounding current provisions in the federal law permitting physicians to invest in surgicenters and their close relative, specialty hospitals,” the authors wrote.

James M. Hollingsworth, MD, of the University of Michigan in Ann Arbor, and colleagues compared practice patterns of physician-owned ambulatory surgery centers to non-owners and the trends of five common ambulatory procedures performed at the sites.

According to the authors, from 2000 to 2007, the amount of Medicare-certified surgicenters increased by 50 percent to 5,359—83 percent of physicians had stakes in these facilities and 43 percent fully-owned them.

The researchers attributed the surge in physician interest to invest in these surgicenters to an ability to gain more control of a practice, deliver better care and economic pressures including declining reimbursements and high practice costs.

However, the authors said that investing in surgicenters could create a potential conflict of interest due to its generation of more income and nature to create high procedural volumes.

The researchers looked at ambulatory data within the Healthcare Cost and Utilization Project’s state Ambulatory Surgery Database, which uses statistics from Florida surgicenters between 2003 and 2005, to assess trends.

The rates of five procedures were evaluated: carpal tunnel release, cataract excision, colonoscopy, knee arthroscropy and myringotomy with tympanostomy tube placement.

Hollingsworth and colleagues identified 1,482 owners of surgicenters and 1,716 non-owners. Of the identified owners, 1,482 performed carpal tunnel release procedures, 2,000 performed cataract excision, 2,815 performed colonoscopy, 1,534 knee arthroscopy and 727 myringotomy. For non-owners these same rates were: 1,716, 1,058, 3,908, 1,595 and 985 procedures, respectively.

According to the authors, while there were differences between procedural trends of owners and non-owners, these differences were not instrumental. 

However, the researchers did find that the number of surgical procedures performed by owners were twice those performed by non-owners.

Physician-owners of surgicenters who perform the five aforementioned procedures, on average performed 16 more carpal tunnel release procedures, 204 cataract excisions, 366 colonoscopies, 53 knee arthrosocopies or 15 myringotomies procedures, per year.

In addition, the results showed that owners performed twice the amount of procedures compared to non-owners during the pre-ownership period. And while, both non-owners and owners experienced increases in their case load between the pre-ownership and ownership periods, owners’ cases increased more rapidly.

“These data imply that the use of these procedures rose much more rapidly among physicians who acquired ownership compared to those who never did,” the authors wrote.

The researchers also found a significant association between acquisition of ownership status and increases in physician surgery volume. “Investing in a surgicenter serves as an important driver of surgery use,” the authors wrote.

The researchers speculated that the higher volume of procedures at surgicenters may be directly associated with financial incentives, particularly due to the fact that financial gain is often derived from fee-for-service payment rewards.

“The findings reveal a need for further studies that examine how ownership status relates to patients’ outcomes and the cost of care,” Hollingsworth and colleagues wrote. “If our observed trends do reflect physician-induced demand, then possible remedies include revising current federal law to require public disclosure of investment arrangements or barring surgicenter ownership by small groups of physicians, for whom incentives are greatest.”

The authors recommend that legislators look at ways to reduce personal financial incentives for physicians by changing the physician reimbursement system, including reducing payment rewards. This, they said, would “dilute the incentives of ownership” and help put the kibosh on the overuse of fee-for-service payment rewards.