The CFA Perspective

Wake Up Call:  UnityPoint Sues to Stop ASC from Adding Two Cardiac Cath Labs

Posted by John W. Meyer, LFACHE, and Charles W. Franc

9/14/21 6:00 AM

Medical active staff in hospital

This is an incredibly timely and probably inevitable situation. West Des Moines, Iowa-based UnityPoint Health sued to block a large physician group, the Iowa Clinic, from opening two cardiac cath labs in its ambulatory surgery center (ASC). (See: UnityPoint sues to stop ASC from adding 2 cardiac cath labs, Becker’s ASC Review, Thursday, August 12th, 2021.) The Iowa Department of Health had previously granted the project a certificate of need (CON) for low-risk cases. The Iowa Clinic cardiologists have privileges and currently perform procedures at UnityPoint hospitals. If approved, the physicians would transfer a significant number of patient procedures to the ASC. UnityPoint made the argument that the area was over-saturated with cath labs, that this would cause a decrease in its volume and revenue. UnityPoint Health also put forth the issue of patient safety in the ASC cath lab environment. So far, the State is not buying their arguments, noting that CMS, private insurers, and the American College of Cardiology believe ASC-based cardiac cath labs are safe for selected patients.

Inevitability of the Threat

Other than the few states that require cardiac cath labs to be in the acute care setting, this situation is not unique to Iowa, whether or not other states have CON regulations. ASCs are increasing in number and popularity, adding services as regulations and reimbursement permit, including cardiac cath labs for interventional cardiology and vascular procedures. Physicians and physician groups will continue to look for investment opportunities, including ASC’s, despite the pushback from hospitals. Is this trend inevitable? Unless (or until) hospitals directly employ their market-based cardiologists and vascular physicians (thus controlling referrals), they face the prospect of competing organizations (primarily ASCs and office-based labs [OBL]) siphoning off select patients that can be served within the ASC/OBL environment. This leaves the hospital with sicker patients, less volume and revenue. Additionally, these types of competitive situations will inevitably lead to a potentially contentious political environment. Yes, the number of physicians employed by hospitals and health systems (particularly cardiologists) is high and increasing, but this factor does not preclude the trend towards physician-owned ASCs, it only mitigates the issue to a degree.

Considering Alternative Strategies

CFA proposes that hospitals need to carefully consider a series of issues relating to both their overall ASC strategy and, specifically their long-term CV strategy. As the environment continues to support the growth of a bifurcated CV patient population – sicker, more complex patients needing services most appropriate for the hospital environment, and increasing proportions of outpatient-based procedures that do not necessarily require hospital-level infrastructure – there will be both opportunities and challenges. Here are some thoughts one should consider going forward.

What is the Local Competitive Environment? – Most, but certainly not all, hospitals will have an outpatient strategy in place that may include an ASC. Understanding what your competitors are doing and inventorying their competitive activities is an important first step. What is the local, state-level regulatory environment? Who is providing ASC-services? Who owns them (hospital, individual physician or physician group, joint venture, etc.)? What services are provided? How have existing services impacted hospital business and influenced managed care contracting practices? Is anyone providing CV services in an ASC or OBL? Could they? Even if the state restricts cardiac cath services, can ASC or OBL outpatient peripheral vascular procedures be done in your area? The answer to these questions will inform decision making going forward.

What is Our ASC Strategy? – Each hospital needs to develop its own unique ASC strategy in light of the overall regulatory and competitive environment, physician alignment strategy, and managed care and reimbursement environment. In general, lower acuity procedures should be (and will be where they can) performed in the matching environment that both facilitates optimal patient care, produces the greatest patient satisfaction, at the lowest possible cost. This situation additionally facilitates the hospital’s ability to be price competitive in an increasingly price sensitive world. At worst, it might be thought of as cannibalizing services for the sake of reimbursement/payment pressures, but it is not. It is instead a legitimate, and frankly, necessary strategy to remain as competitive as possible.

How does our ASC Strategy Mesh with our Physician Alignment Strategy? – The hospital’s ASC strategy may or may not be directly related to its physician alignment strategy. If, for example, the hospital employs its CV-specific physicians, it is not in danger of direct competition from them. They will not start their own ASC or join a competitor ASC and establish cardiac catheterization or vascular lab services there. But non-employed, free-market physicians might. Just like in West Des Moines. Many hospitals may have a mix of employed/non-employed physicians that complicates the scenario. The hospital will need to balance the potential threat of loss of patient procedural volume with its own physician alignment situation, its need for ASC access with the need for physician convenience and income opportunities.

If we Own or Joint Venture participation in an ASC, does it Make Sense to Offer CV Services There? – This is the larger question, but must fit into the questions previously posed. Assuming you could offer invasive and interventional CV services in an ASC, should you do it? As with any significant economic investment, hospitals and physicians will need to study this question in detail to produce an appropriate answer. Economic feasibility is vitally important. Establish revenue – who will be referring (source of patients) the number/type of applicable patients, their payment type/amount, etc. Establish expenses – cost of providing services, facilities, staffing, etc. There may be offsetting costs. For example, channeling appropriate patients to an ASC may free up needed space or volume access in existing hospital cath or vascular labs or obviate the need to replace older labs and equipment or build new labs in expensive hospital-based space. Remember, feasibility also encompasses political, operational and strategic considerations as well. Political considerations include physician attitudes/desires and support for such a project, as their utilization will be key to financial performance.

In Conclusion

The ASC trend has been with us for some time and will continue to expand. Adding CV capabilities to ASC facilities is relatively new, but is expanding rapidly. Hospitals and physician groups will need to stay abreast of this overall trend and react proactively to opportunities that changes in regulation or marketplace competition open up. Offensively or defensively, a CV-specific ASC strategy will be needed by virtually every hospital CV program in the coming years.

If you are interested in learning more about cardiovascular-specific ASC strategy, rationalizing and consolidating cardiac service lines or other areas of cardiac services strategic development, service expansion and/or other programmatic needs for cardiovascular or other services, please contact CFA at (949) 443-4005 or by e-mail at cfa@charlesfrancassociates.com.