Good or Bad Strategy?

 

Dr. Emrick's Book and Articles

Ambulatory surgery centers (ASCs) have transitioned from the outskirts of hospital operations to the heart of strategic planning, as the economic and clinical rationale for moving cases out of hospital outpatient departments (HOPDs) has become increasingly complex to overlook. Federal policymakers continue to broaden the list of procedures eligible for ASC reimbursement. Private insurers incentivize this shift with reduced facility-fee schedules, and patients with substantial deductibles opt for the lower-cost setting whenever possible. UnitedHealth Group’s national claims review estimates that each transfer from a hospital outpatient department (HOPD) to an ambulatory surgery center (ASC) lowers total spending by nearly 60 percent and decreases the average patient bill by approximately $684. These figures resonate with both employers and public payers, driving a strong movement for “site-neutral” payment reform that would eliminate the hospital premium. The Medicare Payment Advisory Commission reaffirmed this argument in its March 2025 report to Congress. As the payment discussion gains momentum, surgeons have also adopted minimally invasive techniques, regional anesthesia, and enhanced recovery protocols, ensuring that same-day discharge is safe, even for complex orthopedic and cardiovascular cases. A study presented at the 2024 American Academy of Orthopedic Surgeons meeting confirmed that ASCs demonstrate superior cost-effectiveness across a variety of upper-extremity procedures without compromising outcomes. In other words, clinical capability now aligns with financial incentives, creating a perfect harmony of interest among payers, patients, and physicians.

Hospital leaders, eager to safeguard both market share and margins, have embarked on an unprecedented building spree. The Health Management Academy’s Spring 2024 poll of chief strategy officers revealed that 86 percent view ASC expansion as their top capital priority for the current planning cycle—this figure significantly surpasses interest in urgent-care clinics, micro-hospitals, or post-acute ventures. High-profile transactions highlight this commitment. Cleveland Clinic acquired a majority stake in a new joint venture with Regent Surgical to establish branded centers across multiple states. ChristianaCare partnered with Atlas Healthcare Partners to create a Mid-Atlantic network, while MultiCare Health relied on the same operator to speed up growth in Washington. In California, Palomar Health integrated its Poway facility into a partnership with AmSurg, echoing similar arrangements that Parkview Health, Methodist Health System, Bon Secours Mercy Health, OhioHealth, Intermountain Health, Providence, Corewell, and Banner Health announced between mid-2022 and early 2025. The anticipated capstone is Ascension’s negotiation to acquire AmSurg outright for approximately $3.9 billion, a move that would immediately grant the Catholic organization control of more than 250 centers in thirty-four states.

From my perspective, the move toward ASCs is strategically sound, provided that organizations adhere to several key parameters. First, transferring lower-acuity cases from the main campus frees up inpatient beds and full-service operating rooms for trauma, advanced cardiac procedures, and transplant surgeries, all of which continue to yield relatively strong margins under diagnosis-related group payment. Second, surgeons with equity in a joint-venture center have a vested interest in its success; this ownership aligns incentives, stabilizes referral patterns, and discourages leakage to competing systems. Third, placing ASCs in suburban retail areas broadens access for commercially insured households that may find tertiary campuses intimidating and expensive. Finally, the small size and focused governance typically found in an ASC create an ideal testing ground for digital pre-admission tools, just-in-time inventory systems, and protocols for 23-hour stays. Insights gained there often carry back to the flagship hospital, enhancing efficiency across the system.

Nevertheless, the financial mechanics cannot be overlooked. A de novo two-operating-room orthopedic center can be launched for approximately $6 million. However, a multi-specialty hub with six suites, an extended-stay unit, and shell space for future growth can surpass $30 million before accounting for equipment. Many hospitals ease that balance-sheet burden by partnering with management companies or private-equity platforms, taking 51/49 or 60/40 equity splits that leave the operator responsible for arranging construction loans and supply-chain contracts. Simultaneously, the health system provides brand recognition, fosters physician relationships, and mitigates risk through de-risked volume. VMG Health’s “ASCs in 2024” year-in-review noted that same-center revenue grew a median six percent last year, supporting valuations in the 10- to 12-times trailing EBITDA range for multispecialty platforms. That multiple feels rich, but the acquisition premium can still be justified if management keeps per-room case throughput above fifty cases per week and maintains supplies at below eighteen percent of net revenue.

Risks remain. Nineteen states still enforce certificate-of-need statutes that can delay construction for years; some systems buy existing centers to bypass the licensing queue, only to find that staff shortages limit utilization. Operating room nurses, sterile processing technicians, and certified registered nurse anesthetists remain in short supply nationwide. Unless an ASC pays wage premiums or shares a staffing pool with the hospital, it may simply cannibalize the core campus. Information technology poses another hurdle. Even sophisticated operators often run cloud-based clinical systems that don’t integrate smoothly with the Epic or Cerner platforms used by parent hospitals, complicating bundled payment reporting and longitudinal quality measurement. The most significant strategic uncertainty, however, is regulatory. If Congress ultimately enacts a valid site-neutral rule that erases most of today’s payment spread, centers built on a thin volume base will struggle to cover debt service. Given those crosscurrents, I frame the question not as “Should we build or buy ASCs?” but rather “Under what conditions does an ASC network advance the system’s mission and financial sustainability?” The durable strategies I have observed start by mapping case-mix opportunity with surgical and anesthesia leaders at the table. They codify clinical pathways to ensure patient safety when discharged the same day. They establish a joint finance committee—half surgeons, half hospital executives—that monitors block utilization, case length variation, and quarterly debt service coverage, releasing dividends only after the venture exceeds a preset liquidity threshold. They integrate real-time dashboards that track start times, unplanned admissions, and thirty-day readmissions, then feed those metrics into credentialing decisions.

When those pieces fall into place, ASC expansion provides more than just short-term cost relief; it becomes a cornerstone of an integrated outpatient care architecture that positions the hospital for risk-based contracting and consumer loyalty. Conversely, a hurried land grab, driven mainly by the fear of losing orthopedic cases, may burden the organization with underutilized rooms and surgeon dissatisfaction once the initial enthusiasm wanes. My advice is to act swiftly but not recklessly: secure physician partners, negotiate multiyear payer carve-outs, invest in workforce pipelines, and base every decision on transparent data. This discipline turns the ASC “gold rush” into a sustainable engine for value-based care rather than a speculative gamble on payment arbitrage. Therefore, the shift toward ambulatory surgery is not a trend; it reflects lasting structural incentives in American healthcare. The economics of facility fees, the clinical viability of minimally invasive techniques, and the consumer demand for convenience all converge on the same destination. Hospitals that view ASCs as an integrated pillar—aligned with digital engagement, population health strategy, and disciplined capital stewardship—will develop resilience in a marketplace that values quality. Those that pursue volume without strict governance may find themselves repeating history’s lesson: growth without guardrails rarely ends well for margin or mission.