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CUTTING THE CORD
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FINANCIAL
SQUEEZE PROMPTS PHYSICIANS TO OPEN SURGERY CENTERS.
By William Poe
Dr. John Hirsch is unapologetic about it; Dr. Herb Haupt raves about
it; Bob Schwendinger says there is no doubt about it—more and more
physicians are getting into the outpatient surgery business and
doing fewer surgeries in hospitals.
“We’re just trying to make a living,” says Hirsch, a general surgeon
and president of Suburban Surgical Associates Inc., which is developing
a new surgery center in west St. Louis County.
“Patients are absolutely enthusiastic,” says Haupt, an orthopedic
surgeon and president of Orthopedic Associates, LLC. “For those
who find going to the hospital to be a demeaning experience, coming
to our place is a whole new world.”
“Physicians are increasingly getting into the free-standing surgery
center business, because reimbursement rates from Medicaid and managed
care companies are down while expenses have shot through the roof,”
says Bob Schwendinger, chairman of the health care practice group
for the Armstrong Teasdale law firm.
One way for physicians to ease that squeeze, Schwendinger says,
is for them to generate new revenue by performing surgeries, imaging,
and other procedures and tests in non-hospital clinical centers
owned by the physicians. By doing so, the physicians can charge
insurers and other third parties fees, not only for their treatment
time, but also for their facility and equipment costs.
"HEALTH CARE HAS CHANGED,
AND THE PUBLIC NEEDS TO UNDERSTAND IT IS A BUSINESS
NOW. WITH DECLINING REVENUE AND INCREASING EXPENSES
ESPECIALLY FOR MALPRACTICE INSURANCE PREMIUMS, WE
HAD TO LOOK AT ALTERNATIVE SITES OF REVENUE ENHANCEMENT
WHILE PROVIDING HIGH-QUALITY SERVICES. THIS IS A WAY
TO DO THAT."
Dr. John
Hirsch
general surgeon and president,
Suburban Surgical Associates Inc.
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“Just like hospitals, any free standing imaging center, surgery
center, gastroenterology center, nuclear medicine facility, maternity
hospital, and others can charge for the technical component of providing
the medical care,” Schwendinger says. “It’s a trend driven by the
physicians’ desires to generate additional revenue and not being
able to do that with the number of procedures multiplied by the
reimbursement rate. Growth can come from owning equipment, whether
that equipment is in their own office or in a surgery center.”
Haupt heads a group of 11 orthopedic surgeons who see patients,
treat them and perform most surgeries at their two-year-old 56,000-square-foot
building in Des Peres. The surgery center, Haupt says, was a response
to falling payment rates to doctors and hospitals.
"HOSPITAL OPERATING
ROOMS ARE NOT RUN THE WAY DOCTORS WOULD RUN THEM AND
HOSPITALS HAVE TO MAINTAIN A HUGE INVENTORY OF SURGICAL
EQUIPMENT FOR VARIOUS SURGEONS. DOCTORS THINK THEY
CAN RUN LEAN AND MEAN."
Bob Schwendinger
chairman of the health care
practice group,
Armstrong Teasdale
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“For us, the impetus was to gain control over the quality of care
we were offering patients,” Haupt explains. “In today’s era of declining
reimbursement, hospitals are feeling the pinch, too, and cutting
back on personnel and equipment.”
Haupt acknowledges that physician-operated, free-standing health
centers are competing with hospitals.
“We have all of the services of a hospital in one convenient location,”
says Haupt, a former chief of staff at Missouri Baptist Hospital.
“We have physician offices with 27 exam rooms, a surgery center,
rooms for overnight post-surgery stays, MRI scanner, physical therapy,
and even a retail store for orthopedic appliances.”
Haupt adds that 98 percent of all orthopedic surgeries performed
by his group are performed at their Des Peres center, rather than
in hospital operating rooms.
Hirsch, who heads a 13-physician general surgery group with principal
offices at Missouri Baptist, plans to open early next year a 35,000-
to 40,000-square-foot surgical facility close to the hospital. He
says that he knows of “at least five other groups of doctors in
west county who are at least in our stage of development, if not
further along.” Not all physicians from Suburban Surgical Associates
are joining the effort, he notes.
The new facility, Hirsch says, will feature four to eight operating
rooms for general surgery as well as for cosmetic, urology, and
ear, nose and throat procedures; suites for overnight patient stays,
and perhaps sophisticated diagnostic equipment.
Facilities such as his, Hirsch stresses, offer physician partners
an opportunity to “bill not only for professional fees, but also
for technical fees for use of the facility.” He explains that revenues
from facility usage often exceeds those of professional fees. And
Hirsch says doctors need that revenue.
“Health care has changed, and the public needs to understand it
is a business now,” Hirsch says. “With declining revenue and increasing
expenses especially for malpractice insurance premiums, we had to
look at alternative sites of revenue enhancement while providing
high-quality services. This is a way to do that.”
Attorney Schwendinger says physicians also believe they can better
control costs by operating their own surgical facilities.
“Hospital operating rooms are not run the way doctors would run
them,” Schwendinger says. “And hospitals have to maintain a huge
inventory of surgical equipment for various surgeons. Doctors think
they can run lean and mean.”
But Schwendinger says it is too early to tell whether physician-run
surgery centers are more efficient and profitable than their hospital-based
competition.
"PATIENTS ARE ABSOLUTELY
ENTHUSIASTIC. FOR THOSE WHO FIND GOING TO THE HOSPITAL
TO BE A DEMEANING EXPERIENCE, COMING TO OUR PLACE
IS A WHOLE NEW WORLD."
Dr. Herb
Haupt
orthopedic surgeon & president,
Orthopedic Associates, LLC
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“It takes a lot of capital to run them,” Schwendinger says, “and
you don’t always reap a profit.”
Schwendinger also notes that free-standing medical and surgical
centers should not entirely replace hospitals.
“Free-standing centers don’t have any obligation to their community;
only to their shareholders,” Schwendinger says. “Relocating resources
to free-standing centers runs afoul of community based not-for-profit
institutions that exist to meet the healthcare needs of the entire
community—not just high reimbursement patients but also those at
the bottom including Medicaid patients.”
William V. Poe is principal of Poe Communications, a St. Louis
advertising and marketing communications firm. |
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