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by: Joe Pleshek, President & CEO

As our nation continues to grapple with the increasing cost of healthcare, the growth of services provided by Ambulatory Surgery Centers (ASCs) offers a great model for transformation in the delivery of healthcare.  ASCs are outpatient facilities that provide same-day surgical care without the need for hospital admission.  In the past, almost all surgery procedures were performed in hospitals and in many cases this led to frustrations for all stakeholders including limited operating room availability, scheduling delays, high readmission rates and staff shortages.   Technology advancement has allowed a growing range of procedures to be performed safely on an outpatient basis.  ASCs offer a convenient, cost effective and high-quality way for these procedures to be administered across the nation.     

The first ASCs were established in the 1970s with the number growing steadily since. Today there are over 6,000 Medicare-certified ASCs nationwide where more than 23 million procedures are performed annually. A broad spectrum of medical procedures including orthopedic, spine and cardiology are transitioning to ASCs at a rate of 5% per year.  Due to the cost effectiveness of ASCs, the Center for Medicare & Medicaid Services is rapidly expanding the approved ASC procedure list to include cardiac catheterization procedures, various neurosurgical procedures, and total knee arthroplasty.  In addition, Medicare copays are increasingly structured to promote patient utilization. Copays can be 30% – 60% lower if a patient has the procedure performed at an ASC versus a hospital. Medicare is paying significantly less for ASC based procedures saving billions per year. Both employers and insurers are steering patients towards ASCs through cost transparency tools and incentives. 

To develop and maintain a cost-effective business model, ASCs focus on efficiency and quality in all aspects of their business. Most of these businesses are physician owned  which allows  them more control over their work environment and the quality of care than they would have at hospitals. This control enables them to streamline their operations focusing exclusively on a small number of processes in a smaller physical setting with significantly lower overhead than the hospital setting. ASCs strip out the bureaucracy associated with large healthcare facilities enabling a closer physician-patient relationship and an overall improved patient experience.   

The rapid expansion of the ASC market is having a major impact on the medical device industry.  For decades, manufacturers have built complex product offerings, consultative sales practices, and supply models to satisfy the diverse and ever-changing needs of the acute care hospital.  While these practices have added tremendous value through technology innovation, enhanced patient safety and inventory availability, they come at a cost, a high cost.  Acute care hospitals and their suppliers must be prepared for all patient care possibilities.  By focusing on high volume surgeries, ASCs prioritize simplicity over “just in case” products and services.   

"Medical device manufacturers need to face this reality in order to compete in this rapidly expanding market."

Medical device manufacturers must provide high quality products and innovative solutions at the lower cost that ASCs require. Servicing these small, geographically dispersed facilities with current sales and operational resources and processes is not sustainable as margins continue to decline. At the same time ASCs want increased supply reliability especially post pandemic.  New business and distribution models are required to lower the cost of sales and logistical operations. Those medical device manufacturers that create these new business models are poised to flourish with expanded market share at ASC customers.  Technology will be a key enabler in achieving the supply chain transformation required to serve the ASC market effectively and profitably.   

Inventory management is of critical importance in this evolving supply chain transformation.  Again, with a focus on cost effectiveness and efficiency, ASCs do not want to own a large amount of inventory, preferring to have products “consigned” by manufacturers having to only pay for what they use when the use it. The management of consignment inventory at large hospitals is difficult enough but adding consignment inventory at thousands of ASC facilities without automation and control takes the challenge to another level.    

To cost effectively enable the management of inventory at ASCs, medical device manufacturers are developing and implementing technology enabled strategies. IOT connected sensors like RAIN RFID, inventory management software, predictive analytics, AI and data integration platforms are all being considered and utilized.  At Terso, we work with many of the leading medical device manufacturers to utilize RAIN RFID technologies to create value added services that they use to manage inventory and ultimately, build better relationships with ASCs. These RFID solutions provide visibility to inventory at the ASC and automatically send consumption events to the manufacturers’ ERP system for efficient invoicing and replenishment.  This automation reduces the amount of inventory required for each ASC leading to lower working capital and a more efficient cost to serve model.   

The ASC market is accelerating at a speed that is unprecedented- lowering the delivery of care cost and enhancing the patient experience. This is far from being a blip on the radar, as we are seeing healthcare transform before our very eyes and there’s no stopping this evolution.  Medical device manufacturers need to face this reality in order to compete in this rapidly expanding market. It’s not a matter of if this will happen, it’s a matter of when? And how will they meet the level of efficiency and flexibility that ASCs require?