Number of outpatient-surgery centers in Pa. up

The number of outpatient-surgery centers rose in Pennsylvania in 2007, and so did their income.

According to a report today from the Pennsylvania Health Care Cost Containment Council, total margins for the facilities, known officially as ambulatory-surgery centers, rose from 20.85 percent in fiscal 2006 to 24.74 percent in fiscal 2007. Their margins have increased an average of 2.2 percentage points per year since fiscal 2001.

In a report released earlier this year, the council said the average total margin for general hospitals rose from 5.39 percent in fiscal 2006 to 6.51 percent in fiscal 2007.

Margins for the centers and hospitals are not comparable because physician owners of centers typically pay income taxes out of their margins.

Hospitals have long argued that independent surgery centers weaken hospitals by siphoning off the most-profitable patients. The centers focus on well-reimbursed procedures, while hospitals must offer a broad array of services, some of which lose money.

In a news release yesterday, the Hospital & Healthsystem Association of Pennsylvania said the "proliferation of ambulatory-surgery centers continues to increase the pressure on acute-care hospitals at the same time that the national economic downturn threatens to further weaken the health-care safety net."

The centers say they are more efficient and convenient. They also typically are paid less than hospitals, said Rick Bloxdorf, an Erie center administrator and president of the Pennsylvania Ambulatory Surgery Association.

There are now 245 ambulatory-surgery centers in Pennsylvania. Seventeen new ones opened between June 2007 and May 2008.

Net patient revenue for the centers - $707.3 million in fiscal 2007 - was equal to 6.2 percent of hospital outpatient revenue that year.

Bloxdorf said about half of the state's centers belonged to his organization. Hospitals have an ownership stake in 13 percent of member centers.

An increasing percentage of the state's outpatient and diagnostic procedures are being done at the centers rather than at hospitals. In fiscal 2007, 30.7 percent of such procedures were performed in the centers, up from 10.2 percent in fiscal 2000.

The report provides some ammunition for the hospitals. They reported that 11.4 percent of their patients were covered by Medicaid, the government insurance program for the poor. Only 3.3 percent of patients at the outpatient centers had Medicaid. Doctors and hospitals say Medicaid generally has lower reimbursement rates than private insurers or Medicare.

Bloxdorf said that many of the centers accepted Medicaid patients, but that such patients often end up at the hospital because they start treatment in the emergency room.

The level of uncompensated or unpaid care was also higher at the hospitals (2.27 percent) than at the surgery centers (0.42 percent).

The report by the cost-containment council also found that the operating margin at psychiatric hospitals grew from 5.28 percent in fiscal 2006 to 5.69 percent in fiscal 2007. The margins have been rising since 2004, largely because of improved reimbursement. Margins were considerably better at for-profit hospitals than at nonprofit ones.

Meanwhile, the average operating margin fell at long-term acute-care hospitals from 3.72 percent in fiscal 2006 to 3.09 percent in fiscal 2007 because of a decline in Medicare patients.