
Loading summary
A
Welcome to Healthcare Upside Down, a podcast by Becker's healthcare and ECG Management consultants, in which we'll explore the upsides and downsides of healthcare and the industry's most current trends. I'm Chris Sosin and today I'm thrilled to be joined by two guests. We have Kayla Schnee, Weiss Keane, ASC Administrator at Man Eye Institute. And we also have Kevin Dowdy, who's an associate principal at ECG Management Consultants. Kayla and Kevin, welcome to the podcast. Thank you so much for joining us.
B
Thank you, thank you, thank you.
A
All righty. So, Kayla, Kevin, just to start us off, let's give our audience a bit about your background and the work you're leading in healthcare today.
C
So I started off as a nurse, staff nurse, and then worked my way up to ASC administrator. I've been with Mannai for over 16 years. We have three surgery centers in the Houston area in an office based surgery suite in the Austin area. We just built a, our third surgery center within the past two years and at the same time we built our office based surgery suite. So I think I have a good sense of our podcaster today.
B
And Kevin, you Chris, thank you. So again, as you mentioned, Kevin Dowdy Social Principal, ECG My background has been predominantly in the managed care contracting space for ASC management companies for professionals, provider groups, you name it, I've negotiated for it. And so that in addition to having worked at one of the national health plans, I'm not going to necessarily name who that is to keep them innocent, but it provided some great perspective not only into how providers get reimbursed, but also the pressures that the payer community is seeing. The division I work in is called payer strategy and contracting. And so one of the key elements in the division that I work in at ECG is consulting on behalf of payers or health plans. So we really do get to see a lot of different angles. And so I think the topic of today's conversation will be a good one.
A
Perfect. Kayla, I do want to ask you, so with all the building that Man I is doing, what makes now the right time to jump into those extra provider spaces?
C
That's a great question. I do think we built a little too fast, however, from the search surgery center standpoint, we built that one just because our, our, one of our surgeons wanted to, wanted to build it.
A
Okay.
C
And so he was allowing Man I to help manage it. And so we, we were able to build that. And we, I mean, we're, we're open, we're always open for Growth obviously and we're heading towards that direction. For the Austin's office based surgery suite that was a more strategic one. So our owner wanted to build an ASC up in North Austin and Round Rock. But when we did our pro forma it didn't look very good. And so we were talking about an office based surgery suite. So we did a performer for the office based surgery suite and it was looking better. And we can, we can get into the, the details of this a little later because I had like the great statistics for that of the cost difference of the space difference square footage. But it, that was the difference because our surgeons in, in North Austin when they were getting booted out of their asc pretty much most of our busiest time, October, November, December. That's huge for cataracts. Ye they were needing that space. And so we were we when we did our proforma, whether or not to build an ASC or an obs, the OBS made more sense to build that one makes sense.
A
Thank you for sharing that, Kayla and Kevin. So you mentioned some of the pressures that are affecting the industry in general. Are there some that you're thinking about in the next 60 to 90 days that you're like, you know, we have to work on these as far as our clients are concerned?
B
Well, I mean the is relative to case migration from ASC to the office space suite.
A
Yes, exactly.
B
I don't know if there's anything in that short term to be mindful of. But I think industry wide there's this push, you know, we, the ASC industry have touted low cost alternative to the hospital and I think the health plan community has heard that loud and clear in their mind. Their follow up question is okay, well if the ASC is cheaper than the hospital, what's cheaper than the asc? And so I think understanding what is evolving not necessarily in the 60 to 90 days which Chris, I appreciate that mindset and kind of the short term view and we do know that Medicare changes are coming and there's going to migrate cases out of hospitals and ASCs, assuming you know, everything goes through on January 1st. But I think the long term view is the one that I'm most concerned about with pressure from the health plan community or the payer community to push cases out of ASCs into the Office Space Suite or the OBL, whatever terminology you want to use.
C
Well, not, not only that you're thinking about that, but you're also thinking about it complements each other. Right. So I mean think about when the ASCs first came out, the hospitals were not happy about that. Right. Because it was taking volume from the hospitals. But I think now if you look at it from a collaborative standpoint, if the ASCs and hospitals work together, they complement each other because it allows the hospitals take on those more acuity cases. And then the same thing now with the, the obs, if you're doing it right, you're not going to take volum volume away from your asc, but you're going to complement it more. Just gives it more space to bring in more cases in the asc. And it gives so they can do more higher acuity cases. Because if you look at it, technology is getting better. That's one of the reasons why we're getting more services in the ASCs, because the technology is getting better and safer. So I think we're just moving in that direction. It's just going to complement each other.
A
Got it. I think that's a great place to go with this question that I have for both of you. Next. So, as we know, site of service optimization is not anywhere new, especially in a ascs. But why do you guys think this remains timely, important. Why are we talking about this still today?
C
I would say the same answer. It just complements each other. And part of our other question is who's advocating for this?
A
Right, Right.
C
And to me, it's. Physicians are advocating for this is because whether or not, whether or not they have the need for more surgeries to be done. So if maybe they own their ASC and they just don't, they ran out of space and they're deciding whether or not to build an extra or, or maybe build an obs from, if you look at it from a cost standpoint, that's no brainer. You want to do an obs, but you also want to, you don't want to take that volume away from your surgery center. So if you're at capacity in your asc, the OBS makes sense. But if you're not at capacity, then you may want to look at different options.
A
Got it. So, Kevin, I want to ask you though, is there a misconception about site of service that you think healthcare and leadership really let go of anything along those lines? Really?
B
Sure. So actually, let me, if I, if I can, can I back up to the.
A
Oh, by all means, please. Sorry.
B
You know, I think there's. I mentioned previously that I work for one of the national health plans, and I, my role there was to develop alternative payment models. And so at the most senior levels within that organization, their motivation was to how, how do we incentivize the optimal side of service for the services being rendered? You know, if it's a high acuity case, do it in the hospital. If it's a lower acuity case, please get it to the ASC as quickly as possible. For the benefits of the patient, control of the physician, resulting in better outcomes, but more importantly for the payer community, cost savings. And so I think from the ASC community we have capitalized on that and we're well positioned for all of those opportunities. And the real cachet in total joints, if you hear any conversation about total joints or spine, that was. And now the new, was the hot topic and now the new frontier is cardiology. You know, how do you get those cases into the ASE setting? And so it's just this, this hyper specialization and optimization perspective. And I think that's what's leading and driving this. And then to your second question with respect to the misconceptions is I think there's, I think we just to be mindful of, we the ASC community need to be mindful of, there's pressure being pushed down on us which could lead to again moving cases out of the ASC and into the office space, which to Kao's point puts more control within the physician patient relationship. And yeah, there's other factors benefiting from it, but it really does shift that, you know, that control back to the physician's hand. So that patient centered focus that most physician practices and physician owned ASCs want to have, they're going to be able to control more of that.
A
Got it. And thank you for backing up. I didn't mean to step on your toes or anything like that, but. No, I'm glad you're able to address all that as well. I do want to ask you something though. You mentioned that, yes, spine migrated was one of the first specialties to migrate into this space. Now we have cardiology. Have you been able to see into the future a little bit and understand what specialty might be next to head in this direction?
B
Meaning from the hospital to the asc.
A
Correct.
C
I've got a list.
B
I was going to say nurse, can you help on that one?
A
Kayla, please.
C
You would want to look up the specific list for the cases, but from a service type, you've got ortho moving over there, some hand surgeries, Ophthalmology of course is your, your big one. You got gastro, gynecology, urology, otolaryng, laryngology, cardio, plastics and pain. And now if you look at that though every one of those, if you're looking at from a class standpoint, which class of obs do you want to build? All of those are class B obs because you're going to do IV sedation, except for ophthalmology. Ophthalmology on there. You want, you can build a class A on that one because you don't need IV sedation for that. You can do PO Valium or po versa or mko, Milt, Kevin, Kayla.
A
So as more procedures that migrate from ASCs to OBSs, and what forces are driving this trend and what are the stakeholders that are shaping it most?
C
So I'm seeing the physician stakeholders are driving the trend. I'm not, I'm not seeing the payers, even though that's what you mentioned, Kevin. And eventually I think that they'll, they'll jump on board with that. But what we're seeing right now is there, we're in our obs, we're seeing a few payers back out of paying for the office based surgery suite. And so it's back and forth, back and forth. I think they're waiting to get more data, quite honestly. So I think it's more the physicians that are driving it.
B
Yeah, no, I, I'm actually excited to hear that because unfortunately, maybe it's because I have a cynical perspective because I talk to the health plans every day.
C
Right.
B
That I end up getting this perspective that they don't really care. Their direction they're headed as a commoditization of the ASC space. And so they, they don't care about quality, they don't care about, you know, patient outcomes or patient experience. They just what is cheaper for me? And I say that because, you know, recently at ECG I had a payer client that came to me as the quote, unquote ASC expert and said what can we institute on a benefit design level to move cases out of hospitals and ASCs? So, so there are levers that the health plans can pull on with respect to patient benefit design, things of that nature. And so I suspect, and we can look back at history, you know, UnitedHealthcare is a perfect example. They made all these prior authorization requirements to move cases from hospitals to ASCs. They could easily snap their fingers into the exact same thing and migrate those cases. So hopefully they're not listening to this and getting ideas. But my point being is that it could very easily through just a policy change. Yeah, it doesn't even have to be a, you know, a universal change, but just a policy change kind of put pressure to move those cases over.
C
Yeah.
B
So I, I don't know. I think there's, I'm excited to hear that that's the case is what you're seeing. But again, I'm, I'm nervous based on again, the commoditization and it, you know, I say commoditization. What I mean by that is the health plans are offering rates and say take it or leave it. We've got enough surgery centers in our network, we don't need another one.
A
Right.
C
Well, that's one of the things that you want to take a look at whenever you're deciding to either build an ASC or an office based surgery suite is what, what is the cost to your patients and the payer and if you can proof to your payer that it's going to save them cost, which we, we have done, they are more willing to, to give you reimbursement for it. So like, let's just say one thing you want to consider is, is whether or not you're, you want to put an obs in the same building as your asc. And we talked about this last year, your payers are probably going to be less likely to give you a good discount or a good reimbursement because you're in the same building. But if you're in a different city, for example, and you're, you don't have an ASC in that city, you, then they may be more likely to give you a better rebate on that. Not reimbursement.
B
Yeah, no, it makes, that makes perfect, perfect sense. I think. Chris, a minute ago we talked about cardiology.
A
And so yes, you know, in the.
B
Cardiology space right now, the OBL office based lab is where a large percentage of stent procedures and other cardiology, pacemaker insertion, things of that nature. And essentially what that is is that's the office. It's just by a different naming convention. And so reimbursement from the health plan perspective, they're just reimbursing off of, off of a physician fee schedule and not offering a separate rate for the facility like they would in the hospital setting or the ASC setting. And so to that end, you know, I think there's a model in place and so it's from the cardiology world that would work. And to your point, point Kayla though, if, if there's an opportunity to strategically locate the office space suite and certainly geographically favorable, but also it could be a, you know, a positive competitive alternative to even a competing hospital. So you know, if there's a lower barrier to entry, which I'm going to defer to you on that one. With respect to building an office space suite versus an asc, then maybe that's an upside to why are you smiling.
C
At oh, I love this. I want to.
B
Should I ask the right question? Wrong question.
C
Because this is, this is right down the alley of, of the, it's such a huge cost difference. Right. And so when you're like, again, when we want, when you're wanting to decide when you're deciding to build an OBS versus an asc, of course you want to look at, say, patient safety, patient satisfaction, and, and our patients in our North Austin facility actually love staying in the same office to do their surgery. Instead of having to go to a surgery center, you're going to look at surgeon efficiency. If your surgeon's not eff, it may not be the best option for you. Right. Do you need more space in your asc? I mentioned that before. What anesthesia model do you want? If you want anesthesia to be in your center, you might want a class B or the ASC class C space where if you don't need anesthesia, then you can go with the class A obs so that there's a difference in what you want in your centers. And then you want to look at also your staff competencies because. So we were actually very lucky in our obs. So half the staff worked with our surgeon in the ASC that they were going to at the time, and they were helping run the femto for him, and they were also jumping in instruments and helping out in instruments. So they were kind of, they had a feel for the ASC space, sort of. So when they came over to the obs, even though they were still new and, and because they're tied to us as a surgery center in Houston, I was able to go and, and do those trainings for them. But we also had a, a consultant. I don't know if I can mention their name or not, but we had consultant that we had. They came in and they helped us build out the obs and train our staff, which was phenomenal. I, I, I would do that 100 times again, just to have them train the staff, pretty much because they were so good at doing that. But when you're looking at the difference between office space and asc, obviously you want to look at it if your state needs a coin, right, Your building cost. We built our ASC in Sugar Land the same time we built our OBS in North Austin. Some of building costs From a construction cost standpoint, plus architectural fees, our OBs cost 400 over $460,000. Our ASC cost over 4.8 million. So that's a, It's a huge difference.
B
Less than 10%.
A
Right?
C
It's. It's huge difference. From a square footage standpoint, our OBS was 1971 square feet and our ASC was 7417 square feet. So I mean, it's a huge difference. And in our obs, we, we actually made it a little bigger. Our OR is a little bigger. We just had the space to do so. So. So you can actually make it smaller than that if you need to. But from the, from the cost and space standpoint, if you don't need an asc, like I said, if you, if you just need the extra space, you, you're, you're maxed out in your, your ASC, your ORs, the office based surgery suite may make sense for you just so you can give those, send those healthy patients over there. That leaves more room for your ASC to bring in cases. But it's a, it's a huge difference you mentioned.
B
Chris, if I may, Kaylie, you mentioned con. And I know Texas does not have a. Is not a co n state, so it's really a non issue or I live in Tennessee and so for a state like Tennessee that does have a certificate of need, do you think this is an end around of building an office space suite?
A
I love that question.
B
Positive thing. Good thing.
C
Well, that's actually a good question, Kevin, because I don't know what. For an office based surgery suite, are you required to check your con like I know you have to for hospital, you have to for an asc, but for an office based surgery suite, I don't know.
B
Can we play in the hypothetical world for two seconds?
A
Let's do it.
B
Well, I would assume, and obviously I'm not an attorney, so, you know, don't treat this as legal guidance.
A
No, we will not.
B
But, but it's one of those things where I guess if there isn't a con requirement for an office based suite and the barrier to entry is lower in a particular state, it could be an e. A good opportunity to, you know, especially if it's a solo practice or a small practice, versus having to build a 10,000, 7,000 to 10,000 square foot ASC.
A
Yeah, yeah.
C
Well, also, if you think about if you own your asc, right? You're a surgeon, you own your asc, you really wouldn't want to build an OBS that takes away your volume from your asc because then your distributions go down. Right. So you want to make sure that that need is before you do that. Now if you have like a lot of outside surgeons and those outside surgeons start building an obs. Yeah, you're going to see the volume go down from your asc. So you want to play that very carefully.
B
Sure, that makes, it makes sense. I mean, you just, you don't want to cannibalize your, either your, your existing center or definitely, you know, disrupt referral patterns either. You know, they'll be in key piece there because you know, there's, I guess if you look at a multi specialty asc, there's physicians that do referrals across based on patient need. You know that an ENT would refer to the orthopedist or vice versa or however that works out. So you don't want to alter that to, or disrupt that too much.
C
Yeah. And that's where the performa comes in is whether or not you need it. So we actually looked this in our Houston area before we built a third surgery center. We just had the two. We were looking at building an office based surgery suite instead of a surgery center. And we decided not to build an office based surgery suite because we didn't want to take our volume from our ASCs. Now that was only because we still, we still had room to grow and then we, we still had room to grow when we bought. Obviously we're still needing having lots of room to grow right now since we have three surgery centers. So that's, that's definitely things you must take into consideration because you don't want, if you, if you're on your asc, you don't want to shoot yourself in the foot.
B
When I talk to health plans, a lot of the, I think one of the biggest misconceptions that they have is they have the perception that everything's cheaper in the ASC setting. And the reality is, I argue that's not true. Staffing costs, you're competing with the hospital. If you just take, go back to economics 101. You know, if an entity buys more widgets than the widgets, per widget is cheaper. You know, just basic economics. And so surgery centers are buying, you know, less supplies, less implants than the hospital. So on a per unit cost ends up being equal to or in some cases more expensive to perform a surgery in an ASC setting versus a hospital setting. The ASC community has just learned to do more with less from a reimbursement perspective. So my question this Leads to the question is, okay, so if, if you were to extrapolate that out to the office based setting from a cost perspective, are you seeing differences in costs on a per case basis? Obviously lenses are going to be the same, but you're building a smaller footprint, which I think the statistics you quoted were less than 2,000 square feet for the office space suite versus a 7,000 square foot ASE. So like that to me starts to speak to hyper specialization and building only what you need, which is I think a very smart economic sense.
C
Absolutely. So I mean from a cost standpoint, if you're, if you're building the class A obs, you don't need an RN in there. So you can use all your technicians that are in your clinic and you can actually work that where your same technician, you don't have to hire extra technicians for your obs unless you're super, super, super, super busy five days of the week. But our, in our OBS in Austin, they're able to do cases like in, in the morning or maybe till two and then they go, they go back to clinic. All those, all the staff goes back to clinic. So from a labor cost standpoint, our class A obs is roughly $222 per eye labor. Our ASE is 345 and I so and our ASE is pretty much 55% more expensive. Now when you're looking at the build out costs, Our OBS was 234 which, including the architect, but not the shell, but with the shell for the ASC and the architect at 650. So you got to look at your premium, your rent, right. Your depreciation if your build out space obviously because it's higher square footage. So your rent's going to be higher for that. From EMR standpoint, our EMR and our asc is costing $2,000 a month where our EMR and our OBS is 830. So it's a huge cost difference in many, many ways. I love to see the labor cost difference because it's just such a big difference from a contribution margin. Our OBS is $910 where ASC is $1234. But the ASC cost is higher. Right. Especially if you have an idle ASC one or two days of the week. Right. You're still paying rent. You, your higher depreciation and interest on the building costs. Our break even from a volume per month in The OBS is 55 cases. For the ASC it's 161.
B
I don't know about you. I am floored by these numbers.
A
You're not alone there, Kevin, whatsoever. Thank you, Kayla, for rolling with all this. And you all have all these terrific statistics that our audience I think is going to really find helpful as we close things up. So we've covered a ton of ground and I love all the conversation that you guys have brought today. So what else would you like to cover as far as trends in obs are concerned and what are the upsides? What are the downsides?
C
Just to be clear, I'm for ascs. I know I've made a big, big argument that the obs is, I don't say quote, unquote better. It's not better, but it, it provides different options for people who need those options. Right. And so if you're, maybe you're a plastic surgeon and you do have a lot of cosmetic patients, right? Those cosmetic patients, if they're healthy, you can do that in the class, class B obs. And then you, you save money for that patient because then, then they don't have to pay a facility cost at that point. Maybe you can work with anesthesia and anesthesia is going to be a lower cost. I have no idea. But it's possible. Anesthesia anesthes from my understanding, like to work in the office based surgery suites as well as the ASCs.
B
Kevin, that's. Thank you for starting that statement with your still pro asc. I too am pro asc. Have been in the ASC space more years than I care to admit. But the, it's one of those things where I recognize ASCs may not be the silver bullet to fix all, everything that ails the healthcare industry, but it's one of the levers that must be pulled. And so to that end there is, I think both an opportunity but also an awareness that the ASC industry needs to have when it comes to what the future may hold.
C
Well, I was going to just, just hit on that and saying the AC injury is a, is a huge contributor to cost savings. Right? Because if you look at the, let's just go to Medicare rate calculator, right? And you can, you can put in a CPT code for, I don't know, a knee replacement, right. Done in the hospital versus the asc. It's going to be night and day difference. And let's just say, let's just say cataracts. 66984, right. You put that in there and let's just say the patient. I'm just going to throw out random numbers because I don't Remember the numbers off the top of my head, the patient pays, let's just say 1500 in the hospital and a thousand in the ASC. Well, if the ASC does 5000 cases a year, you times that together, it's millions of dollars that you can save the federal government by just doing cases in the asc.
B
I completely agree and I'd even take it one step further with the publicly available payer transparency files. They are jaw dropping as far as what you can see. So I was working with a surgery center also in Texas, and we were looking at a procedure that currently is only being performed at the hospital because they can't move it because the reimbursement isn't high enough to perform it because of implant costs. And the health plan just offered a $5,000 reduction to the surgery center to $20,000. They're paying the hospital where, the hospital where the case is being performed today, $78,000. And so it's not like we're talking a few dollars here. We're, you know, so to your point, Even if that one Inspire case is done 30 times a year or even 10 times a year, you could save $50,000 on one case by moving it to the ASC. You do 10 of those a year. We're talking big numbers that add up quickly for sure on the cost side. Now anything else? Because I've got my pearl of wisdom I want to bestow upon the listeners. I'm saying that completely. If you see.
C
Well, you mentioned the files and data gathering files from an ASC standpoint. I'm not for that. Just because it puts too much burden on extra administrative burden on centers. If you're talking about the ones that the ASCs have to gather and get the data files. You're not talking about.
B
No, I'm not talking about those. Now these. So federal government requirements that all health plans publish all, all of their payer contract rates for every provider on their website. It's just in a format that it's intended to help consumers, but it's published in a format that no consumer on the planet, unless they're, you know, work for IBM or Microsoft can do the math to, to drill down to what it actually means. Yeah, but you know, there are organizations that help, you know, take these large massive files and condense them down to usable size. And you know, I use that in my contract negotiations and I even can share with the health plan just a basic Excel spreadsheet that says you're paying. You've offered the ASC X by CPT code and then for every competing surgery center in its community or if it's being performed at the hospital. And I can list the name of the hospital facility at the top because it's publicly available and I'm sharing with them their information. So it's hard to argue because it's their numbers.
A
Yeah, Kevin, so you teased a pearl of wisdom, so to speak, for the end of this podcast. As a big fan of such things, you know, please, please let us know how do you want to close us out here?
B
Sure, I'm sure, I'm sure oversold it, Chris. But, you know, I think we mentioned briefly that, you know, we're both very pro asc. And I think what I would want to do is I want to make the ASC industry aware that the messaging that they've been providing for the as long as I've worked in the ASC space of low cost alternative is a bit of a slippery slope. And I think we need to pivot off of low cost to high efficiency or I'm not in the marketing space. So there may be a better terminology to use. And the point that I'm getting to is that the health plans have heard, they think of ASCs as Walmart and they're working to commoditize the ASC space. And what does that mean? I mentioned this now multiple times. Downward pressure. That's rate downward pressure. And so the health plans have heard the ASC industry, they're saying, oh, you guys are cheaper, right? So let's just do everything there. Well, they're going to get to the point where like, okay, we've squeezed enough from the ASC space, where can we create savings? And so I just think as an a, as an industry, we should, now that, you know, we're providing the exact same, if not better quality of care in the hospital setting because of the equipment that we have, the higher acuity services, that we shouldn't just walk around saying we're the low cost alternative. Because I think it leads to things like, you know, health plans putting pressure to possibly migrate cases out of the ASC setting and taking that control out of the physician's hands, which, you know, Kayla, is what, you know, you shared earlier is very important for your doctors and I think is still number one and let the patient and the doctor decide where the care should be performed.
C
Yeah, agreed.
A
Perfect. Well, thank you so much, Kayla. Kevin, this has been a fantastic conversation. I only wish it could go on a little bit longer. But that's what other future podcasts are for. We of course want to thank our podcast sponsor, ECG Management Consultants. And of course you can tune into more podcasts from Becker's Healthcare by visiting our podcast page@beckershospitalreview.com thank you so much.
B
Thank you.
Podcast: Becker’s Healthcare Podcast
Episode: Healthcare Upside / Down: From ASC to Office - Opportunities, Pressures and Risks
Date: October 28, 2025
Host: Chris Sosin (A)
Guests:
This episode explores the evolving landscape of outpatient surgical care, focusing on the migration of cases from Ambulatory Surgery Centers (ASCs) to Office-Based Surgery (OBS) suites. The discussion investigates the financial, operational, and regulatory factors driving this trend, considers the impact on providers and payers, and offers strategic insights for stakeholders navigating these changes.
Quote:
Upsides:
Quote:
Kayla Schnee:
Kevin Dowdy: