Market Determinants, Ambulatory Surgery Centers, and

1
Market Determinants, Ambulatory Surgery Centers,
and Hospital Outpatient Surgery Volume

• June 28, 2005
• John Bian, Ph.D. Michael Morrisey, Ph.D.
• Division of Preventive Medicine Department of
  Heath Care
• DSCE-REAP of BVAMC Organization Policy
• UAB UAB

2
Purpose

• To examine
• The effects of market forces on the growth of
  free-standing ambulatory surgery centers (ASCs)
• The effect of the growth of ASCs on the provision
  of outpatient surgeries in community hospitals.

3
Ambulatory Surgery Centers

• ASCs provide relatively uncomplicated surgical
  procedures. Typically, an ASC
• Specializing in 1 or 2 procedures (e.g., GI,
  orthopedics)
• Mostly physician-owned (entirely or partially)
• Exempt from the Stark law.
• Located in urban areas
• For-profit
• Less stringently regulated than hospitals
• Our focus on nonhospital-based ASCs.

4
What Factors Drive Growth of ASCs

• Advances in technology
• e.g., laparoscopic/laser surgeries
• Changes in consumer tastes and quality of care
• Changes in Medicare payment systems
• Changes in Market dynamics
• Managed care/hospital competition
• Growth in population

5
ASCs Have Grown Dramatically
Facilities

• Surgical volume in ASCs grew from 3 million
  procedures in 1980 to 27 million in 1995
• ASCs are distinct from the 100 to 120 specialty
  hospitals that typically focus on cardiac,
  orthopedic and general surgery

Koazk et al. (1999)
Winter (2003)
6
Existence of ASCs Has Been Controversial

• Improve efficiency by specializing on only a few
  procedures focused factories (Herzlinger,
  2004)
• Draw profitable procedures away from hospitals
  making it more difficult for hospitals to provide
  uncompensated care.
• Conflict of interest when physicians have
  ownership in ASCs (Casalino et al. 2002 Lynk
  Longley 2002)
• ASC vs. hospital law suits have emerged, alleging
  exclusive contracts, foreclosure of markets, and
  denial of medical staff privileges

7
Little Empirical Evidence on ASCs

• Lynk and Longley (2002) examined hospital surgery
  volume as a result of new entries of ASCs in two
  communities, and concluded
• hospital outpatient surgery volume declined
• Doctors with an ownership position reduced
  hospital outpatient surgery volume
• Winter (2003) found Medicare patients in ASCs
  healthier than their counterparts in hospital
  outpatient departments.
• Growth of ASCs likely correlated with market
  characteristics (MedPAC 2004)

8
Conceptualization

• Market effects on ASCs
• Higher penetration of managed care
• Is characterized by selective contracting/utilizat
  ion management
• Attracts efficient providers (e.g., ASCs cost
  advantages to hospitals)
• Thus, leads to faster growth of ASCs
• Greater hospital competition
• Forces hospitals compete more aggressively for
  ambulatory surgeries
• Reduces profitability of ASCs
• Thus, leads to slower growth of ASCs.
• ASC effect on hospital outpatient surgery volume
• Large presence of ASCs
• Forces hospital outpatient departments to compete
  with ASCs (should have little impact on hospital
  inpatient surgeries)
• Thus, leads to a decrease in hospital outpatient
  surgery volume.

9
Hypotheses

• ASCs will have a larger presence in markets with
• higher managed care penetration, and
• less hospital competition.
• Hospital outpatient surgery volume will be lower
  in markets with
• a larger presence of ASCs

10
Data Sources

• 2002 Medicare Online Survey Certification and
  Reporting System (OSCAR) (Thank Kathleen Dalton
  for the data)
• No information on ASC mergers/closures
• No information on ASC volume
• No information on ASC specialties
• American Hospital Association (AHA) annual survey
  files (1992-2002)
• HMO penetration file (Thank Laurence Baker for
  the data)
• Area Resource Files (ARF)

11
Design

• Health care market MSA
• Unit of analysis MSA-year
• Analysis sample
• 1992-2001 MSA-level panel dataset from OSCAR
• 317 MSAs 10 years
• Merged with additional time-varying information
  from
• AHA ( outpatient/inpatient surgeries,
  admissions of community hospitals)
• HMO penetration file
• ARF (i.e., economic/demographic indicators,
  supply of physicians)

12
Variables

• Log-transformed community hospital outpatient
  surgery volume
• Per capita ASCs
• of ASCs normalized by MSA population
• HMO penetration
• all age combined
• Hospital concentration
• Herfindahl-Hirschman Index (HHI) using hospital
  admissions
• Economic/demographic characteristics

13
Statistical Analysis

• Main estimation strategy MSA and year fixed
  effects to deal with unobserved market and time
  heterogeneity
• ASCs
• f (HMO, HHI, MDs, socioeconomics,
• MSA year fixed effects)
• ln (hospital outpatient surgery volume)
• f (ASCs, HMO, HHI, MDs,
  socioeconomics,
• MSA year fixed effects)

14
(No Transcript)
15
(No Transcript)
16
(No Transcript)
17
(No Transcript)
18
Results Market Effects on ASC Growth
Model includes MSA year fixed effects. 1.
19
Results ASC Effects on Hospital Surgeries
Model includes MSA year fixed effects. 10,
1.
20
Summary

• Greater HMO penetration or greater hospital
  competition are associated with lower ASC growth.
• But the effects are small in magnitude.
• More ASCs in the market are associated with a
  fewer hospital outpatient surgeries with no
  effect on inpatient surgeries.
• ? 1 ASC per 100,000 pop associated with a 4.2 ?
  in hospital outpatient surgeries (p lt .01).

21
Limitations

• Unknown ASC specialties
• Unknown mergers/closures of ASCs

22
Conclusions

• Fast growth of ASCs in part driven by market
  dynamics.
• ASCs appear to compete directly for ambulatory
  surgeries with hospital outpatient departments.
• More research needed on quality of care,
  outcomes, and efficiency of ASCs.