Business Perspectives on Vitreoretinal Services in the ASC

Calculating how to turn your investment into a healthy, thriving surgery center.

By Steve Sheppard, CPA, COE

We’ve come a long way since 2007, when reimbursement rates prohibited cost-effective implementation of vitreoretinal surgeries in the ASC. Back then, facility fees for common procedures averaged $750 to $800. Older instrumentation meant longer case times and higher costs associated with items such as sutures. Market penetration prior to the Medicare reimbursement restructuring that commenced in 2008, included only common procedures – peels, puckers, holes and more straightforward detachment repairs – revenues from which usually only supported the sponsoring practice.

In addition to a major improvement in Medicare rates since 2008, we’ve also seen commercial payers across the country paying slightly more than Medicare. Higher revenues on both fronts, along with increased case volume, have given us the opportunity to carve out a more beneficial negotiation of higher-cost supplies such as silicone oil and Perfluoron (Alcon). All in all, ASCs are performing vitreoretinal services today with profitable results. I consider four factors critical to their success: reimbursement rates, payer mix, equipment and supplies, and labor and other business costs.

Reimbursement Rates and Payer Mix

The 2013 national average Medicare rate for the common codes like vitrectomies, peels, puckers, holes and detachments will be about $1635. (Medicare adjusts the rates geographically, so your rates may be slightly different than the national averages.) In my experience, ASC-friendly retina surgeons can typically bring about 80% of their cases to the ASC environment. Very sick eyes often still get referred to the hospital. Most ASCs try to restrict their patient population to patients with an ASA classification of III or less, but in some rare cases, an ASC will take on an ASA IV if the anesthesia provider and the surgeon agree that it’s safe for the patient.

I don’t anticipate substantial fluctuations in reimbursements in the near future. I think we can look forward to ASC reimbursement rates remaining stable for the foreseeable future. Across the country, I’ve seen commercial payers reimbursing ASCs at rates that average about 20%, more than Medicare, although I’ve seen rates as low as 15% higher in some areas.

Finally, it’s important to note that retina has a favorable demographic cohort. Compared to cataract patients, retina patients are typically younger. In my experience, I’d say about 40% to 50% of retina patients are Medicare primary, and 50% to 60% have commercial coverage. That payer mix increases reimbursements. It also makes your anesthesia providers happy because they receive higher payments from commercial payors than they would from Medicare. That’s a nice added benefit as well.

Equipment and Supplies

When determining the specific cost of integrating vitreoretinal surgery into the ASC, consider these benchmarks that I’ve been seeing in the marketplace for the last 2 or 3 years. Equipment costs total about $220,000 to $300,000 or more based on the following requirements:

The cost of the vitrectory system with an integrated laser is about the same as the cost of buying two separate devices ($100,000 to $120,000). You’ll pay about $70,000 to $90,000 for a new microscope, but you may be able to upgrade an existing microscope in your center. You’ll need to add an inversion system, and retina surgeons typically want a stereo-observer system as well. You may already have the image-capture equipment you need, which will save you $10,000 to $30,000 (ranging from a three-chip camera and a digital recorder to pricier high-definition equipment). Finally, the instrument sets will be substantial elements, based very much on surgeon preference.

Additional supply costs for retina surgery in the ASC include surgical packs, the costs of which are $325 to $600 per case, depending on the content, the gauge of instrumentation and other features. Silicone oil or Perfluoron costs an additional $350 to $600 per case. This cost is bundled into the reimbursement code for Medicare patients, so you can’t bill the cost of these supplies separately, but you can charge some of the commercial payors if you’ve negotiated “carve outs” in your contracts.

Labor Costs

Labor is another significant cost component of vitreoretinal services in the ASC, but I think the impact of labor is overestimated. The cost-benefit decision you’ll need to make in an existing center with an existing staff is this: When you perform retina procedures added incrementally at the end of the day or on days when the ASC normally is dark, who would you send home?

You probably have a clinical director on salary, some billing and collections people who work their 40 hours a week, and someone at the front desk. If you’re operating one OR for your posterior segment cases, you might have a circulator, a surgical tech, a pre-op and recovery RN and maybe a front desk person on hand. So, say you have five people who average a fully burdened cost (hourly wage plus benefits) of $40 an hour. This makes your marginal labor cost roughly $200 an hour.

This number enables you to estimate all the marginal costs involved in surgery, but don’t let it limit your options in terms of new surgeons. You want surgeons who work efficiently, but not necessarily the speediest surgeons. If two surgeons produce the same patient care, one completing cases in 45 minutes while the other takes an hour, then that 15-minute difference isn’t going to make or break the profitability of the vitreoretinal surgeon, so it shouldn’t make or break your decision whether to bring the right person onboard.

In the end, vitreoretinal surgery can actually exceed a single cataract on profit per case. The clear difference is that you see fewer retina cases per hour, so the revenue per hour you’re generating in the operating room is less. Performing 30- or 45-minute vitreoretinal cases versus a surgeon performing 20-minute cataract cases, then the cataract surgeon will generate more revenue per OR hour.

Other Business Factors

There are a few final considerations for adding vitreoretinal surgery to an ASC. You need trained staff, particularly a circulator and a surgical technician who are in the trenches with the surgeon. Obviously, retina will impact the pre-op and recovery nurses as well. Optimally, you’ll find someone already on staff or hire someone who has retina experience.

Be sure that your physical plant is set up for general anesthesia. If you don’t have a medical gases delivery system, you’ll need to acquire an anesthesia machine and appropriate monitoring equipment, both for the OR and probably for the recovery room. Even if you’re not planning to use general anesthesia, but you bring in an anesthesiologist and the medications for it, you’ll have to set up a malignant hyperthermia cart and train everyone to use it. That’s not a huge expense, but expect to spend $6,000 to $8,000.

Also in your physical plant, the slower case times and longer recovery periods required for retina surgery mean you need adequate recovery space. Even if you’re performing a relatively small number of general anesthesia cases, you must ensure that you have enough recovery bays to handle patient flow. If you’re planning to build a new facility, consider enclosing a patient bay for recovery to deal with any potential issues of postoperative nausea.

Finally, surgeon-dependent factors impact costs. Average case times can vary from 30 to 90 minutes, making efficiency and scheduling major considerations. Surgeons’ attitudes and adaptability to the ASC environment are very important as well. If you and your colleagues approach your work with similar attitudes and philosophies, then all of the number-crunching and decision-making will be part of a much smoother endeavor.■