North Carolina plans to eliminate certificate-of-need laws across the state by the end of 2025, presenting several new opportunities for ASCs.
This change will have several major benefits for ASCs, allowing them to restructure their existing ownership structures, expand more freely and save even more money for patients and payers.
Leo Spector, MD, CEO of Charlotte, N.C.-based OrthoCarolina, spoke with Becker’s about how new CON changes will shake up its existing ASC ownership structures for the better.
Question: How will the removal of CON laws benefit your state?
Dr. Leo Spector: There’s no doubt that the cost of care in the Carolinas is high. I think that’s why legislation both in North Carolina and South Carolina voted for CON reform. What it’s going to do is help lower costs because essentially MRIs and ASCs are a commodity, but they are ones that have been protected by CON. As a result, prices on them have stayed higher than they would in an open market. So with the removal of CON and the ability to have surgeons open up those ASCs, we know that it’s going to lower costs at those ASCs because they will no longer be controlled in the way they were previously. As orthopedic surgeons, I think the greatest thing that we can do to help lower the cost of care really is site of service. There are other things we can do right, we know that certain surgeries may be avoidable. Obviously being good stewards of our patient’s care, that’s why we believe in bundled payments because we think those really align the incentives of the payer, the patient, and the practitioner. But even within that, the biggest lever we can pull to help lower the cost of care is moving appropriate cases out of the hospital and HOPDs into the ASCs.
Q: What is OrthoCarolina’s practice strategy this year?
LS: ASCs are unique in the Carolinas because while certificate-of-need reforms may have a negative impact on the MRI business, it has a very positive impact for surgery centers because now that South Carolina has fully repealed CON and North Carolina is about to at the end of this year, it creates the opportunity for us as a private practice to own our own ASCs. We estimate that 70% of our surgeries here in the musculoskeletal space can be done in the ASC. We feel that really aligns with our core mission and our values, which is, we are here to make lives better. We want to improve the cost of care for our patients throughout the Carolinas. If we can move patients appropriately from inpatient to outpatient and move from HOPDs to ASCs, we can lower the cost of care by our estimates; if we were to move the full 70% of cases, we would need far more capacity than we currently have. The opportunity for us to invest both the financial and human resources into growing the ASCs was really a decision we made. We look back at therapy and MRI as being service lines that are not as core to what we do. So to have the opportunity to invest and to grow outpatient care will be a win to not only our patients but our practitioners.
Q: Do you believe the future of orthopedic care rests in ASCs?
LS: We have always been bullish on ASCs. We have seen a huge uptick in use of ASCs post-COVID. There was a lot of hesitancy from some of the practitioners and some of the patients. We are all creatures of habit, and it’s comfortable to go to a hospital and continue doing what we are doing. But getting patients and practitioners to adopt ASCs post-COVID really opened that up. When hospitals were having to take care of all of those sick patients and could not do elective surgeries, ASCs were open and able to continue doing those. As much as orthopedics is elective, when you are hurting, you still want that taken care of. It created a lot of options for both practitioners and patients. So coming out of COVID we have seen a nice uptick in the utilization of our ASCs. Our current ASC ownership structure is a result of the CON laws that existed in North Carolina.
We have multiple ASCs, but the ownership structure is different for each one. They are partnerships with different hospital systems, sometimes different management companies, and it’s typically done with the individual shareholders. So there is not a cohesive OrthoCarolina strategy and that is because of the nature of what we had to deal with in the past. We had to set up each ASC based upon wherever we could create a partnership with the hospital system and or management company. Post-certificate of need, that changes. We can really take control of ASCs and move them 100% into OrthoCarolina ownership. It does not mean we may not want to continue partnering with hospital systems, and or management companies, if it makes sense, but it allows us to take a patchwork of ASCs and create a comprehensive OrthoCarolina ASC strategy under OC ownership. We think that will be a better way to bring uniformity to what we are doing.
Part of that vision is also to concentrate services. Some of the stuff that you do in an ASC, especially hips and spine, sometimes take 23-hour observation capability, whereas stuff that hand, foot, ankle and sports does doesn’t require that. So we may have one center that’s focused on hip and spine and make that a larger center that can really specialize, which will provide a better experience for patients and practitioners.
We know it will take a lot of work to get from here to there. A lot of things will have to be done in regards to our legacy ASCs, and so again we look at the PT and MRI and we only have so much bandwidth. Our team needs to be able to focus on certain things. We really felt this was a deep opportunity to divest of our two ancillaries that were not a part of our core and really double down on our core business.
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