Do Single Specialty Ambulatory Surgery Centers Reap the Cost Advantages Presumed to Accompany Specialization?
Two types of ASCs exist in today’s healthcare market place. One model focuses on a single product line such as gastroenterology. These facilities, labeled as single specialty ASCs, adhere to the focused factory model of specialization. Single specialty ASCs possess the three primary characteristics of a focused factory: one physician specialty, operation in a local market, and concentration on a distinct product line. This type of ASC is analogous to the single specialty hospital model that emerged during the 2000s. The other type of ASC is the multispecialty (multiproduct) model. The typical multispecialty ASC is akin to a hospital outpatient surgery department in that it offers the gamut of services performed by different physician specialists.
Empirical evidence documenting the potential cost advantages of single specialty ASCs over their multispecialty counterparts is sparse because these facilities are not required to submit either cost or procedure count data to CMS. Notably, MedPAC has recommended several times that Congress give CMS the authority to collect cost data from ASCs (MedPAC, 2014). Given the absence of such data, it is impossible to evaluate the relationship between specialization and costs.
Published research indicates that physician-owned single specialty hospitals do not incur lower costs per case and are not more efficient than competing general hospitals. Although ASCs are far more numerous and exist throughout the US, similar questions have not been investigated for single specialty versus multispecialty ASCs. Rather, published research to date assumed that all ASCs are alike. This assumption ignores the potential advantages that accompany specialization. Moreover, other than our own forthcoming article (Mitchell and Carey, Medical Care 2016), empirical studies documenting the costs of performing outpatient surgical and/or diagnostic procedures in an ASC do not exist.
To address this gap in knowledge, we estimated multiple output cost functions for single specialty and multispecialty ASCs in order to compare economies of scale across organizational types and to determine whether economies of scope are attained in multispecialty ASCs. Our analysis employs panel data from freestanding ASCs located in Pennsylvania over the time period 2004-2013. Pennsylvania has many ASCs (281 in 2012) and the state has collected financial and procedure data from ASCs since 1996. We estimate that at the median level of output, multispecialty ASCs achieve 50% greater economies of scale than ASCs specializing in GI procedures. We also find economies of scope in multispecialty ASCs, which could attain a proportionate saving of up to 23% over GI ASCs. Our findings provide evidence that single specialty ASCs may not reap the cost advantages that are presumed to accompany specialization.
Key Words: ambulatory surgery centers, specialization, production costs
Funding source: Agency for Healthcare Research and Policy