Rae Woods (00:14):
From Advisory Board, we are bringing you a Radio Advisory, your weekly download on how to untangle healthcare's most pressing challenges. My name is Rachel Woods. You can call me Rae. Look, we've been talking about site-of-care shifts for years on Radio Advisory, and if you've listened to any of those conversations before, you've probably got the broad strokes. More care is moving out of the hospital and into lower cost settings. But that's no longer the most interesting part of the story.

(00:43):
Ambulatory surgery centers aren't just getting bigger. They're changing. They're becoming more strategically important to healthcare organizations across the industry. And that depends on the service line. It depends on the ownership model, even the market. What I'm saying is two organizations that both call themselves ASCs can actually look completely different from one another. That means that payers, providers, and even life sciences leaders are now facing a new challenge.

(01:11):
It's not enough to simply know that care is shifting. You need to understand why one ASC can look and behave very different from another and what that means for your organization. So today we're bringing together three advisory board researchers who've each been studying different pieces of that evolution. Nick, Gaby, Rachel, welcome to Radio Advisory.

Nick Hula (01:34):
Hello, thanks for having us.

Rachel Peroutky (01:35):
Happy to be here, Rae.

Gaby Marmolejos (01:36):
Yes, happy to join everyone.

Rae Woods (01:39):
We've got a big crew because we've got a big topic, right? Everybody in the market is talking about outpatient shift, moving away from inpatient care. What does ambulatory care look like? What is the future of the ambulatory surgery center? And that's exactly why I have brought you here to Radio Advisory. And let's be honest, we've been talking about this migration of care out of the hospital for a very, very, very long time.

(02:05):
Nick, you have specifically been on Radio Advisory talking about this many times before. And ASCs, Ambulatory Surgery Centers, are often at the center of that conversation. So forgive me for being a little bit blunt from the jump here, but why should we be revisiting that conversation now? What's actually meaningfully different about the ASC conversation in 2026 that would warrant all three of you being on this conversation?

Nick Hula (02:33):
ASCs have been a hot topic for a really long time, and of course there's always going to be the continued shift in given markets towards ASC at given different paces, at different breadth. And there's always going to be the policy pieces that are pushing site-of-care shifts. If any of you listen to the Policy Focus podcast that I was in back in, I think February timeframe, you would've heard me talk about things like the inpatient only list, central payments, certificate of need laws, stuff like that. All things that are pushing site-of-care shifts forwards. But I think right now we're at a moment where ASCs in particular are becoming even more strategically relevant to health systems. They're no longer a fringe investment for most. They're really starting to be a staple of a lot of health systems.

Rachel Peroutky (03:16):
One of the reasons that ASCs are more strategically important is because cardiovascular service line leaders are kind of entering the game. The policy shifts that Nick just mentioned was a real boost for them. They've stayed out of it for a while and PE was really backing the growth in cardiovascular ASCs, but we know that cardiovascular care is the top priority investment area for health systems. So having them in the game, so to speak, is pushing the whole conversation forward.

Rae Woods (03:49):
It's fairly obvious to me why ASC shifts would matter to providers, right? Nick, that's why you've been on this podcast before saying go on the offense, capture more of those lucrative commercial volumes, compete on access, compete on a better experience, maybe on a lower cost. But it's honestly less clear to me why other stakeholders in the industry should care. So talk to me about the health plans. Talk to me about the life sciences companies. Why is it important for them to understand the ASC market in 2026?

Nick Hula (04:20):
Well, Rae, you mentioned life sciences market and that's a sweet spot in my heart. Always give... I've done a lot of supply chain, purchasing strategy research, and advisory board. And for all you listeners, when we say life sciences, we're referring to pharma and medical device, equipment, suppliers, that side, too. So anything you can pick up and put down. And for those organizations, ASCs is just a big opportunity for them. And to put it plainly, that's another opportunity for sales. If they're trying to quite frankly sell more or grow partnerships with an organization, hey, this is another spot where they can put their equipment in an operating room or another place where they can sell their stents or anesthesia or whatever that might be. It is also a threat if they don't adjust their sales strategy and their commercial strategy to the way that ASCs purchase in particular. But if they look at that right, it's a promising avenue for sales.

Rae Woods (05:12):
So it sounds like life sciences is actually seeing this in a similar way as providers are seeing it. It is a growth opportunity, commercial revenue in the case of health systems. It could also be a threat if they ignore it, if they don't actually grow into this space.

Nick Hula (05:25):
Right.

Rae Woods (05:26):
How about the health plan?

Gaby Marmolejos (05:28):
I would say for the health plan, the strategic focus is for cost savings, especially in the orthopedic space. We're seeing a lot of health plans trying to lower the cost curve for musculoskeletal care in particular. And so they're trying to drive more orthopedic surgeries into lower cost settings when applicable. And so that is just an area of focus, especially in orthopedics, but I imagine for cardiovascular care as well.

Rachel Peroutky (05:51):
Health plans also care about quality and value-based care angle to ASCs. There's always been a lot of question in the past on ASC quality because you don't have the safety net of a hospital readily available to them. So I think a lot of health plans like the idea of the lower cost option, but are still looking at the quality of care provided to their members when it comes to ASCs.

Nick Hula (06:16):
Yeah, that's a great point, Rachel and Gaby, that kind of quality, that safety aspect. ASCs are not this silver bullet for everything, solving all problems in healthcare. There's a lot of stuff that we're just never going to do in ASCs or even safe to do in ASCs. We're not going to do open heart surgeries in ASCs, or at least I really hope not. So there is this safety, efficacy, quality aspect that payers are going to be paying a lot of attention to as they're approving cases for the ASC.

Rae Woods (06:42):
So there might not be the open heart surgery, but there are a lot more cardiac procedures now being done in ambulatory settings that 10 years ago, I don't think any of us necessarily would've predicted or at least would've been willing to put money on, which is why all three of you are saying there is opportunity in ambulatory care. But opportunity isn't quite the same thing in my mind as strategic relevance, which Nick is where you started. What makes ASCs more strategically relevant in 2026, aside from capturing more volumes, more of that growth opportunity?

Rachel Peroutky (07:18):
From a cardiovascular service line perspective, the permissions that CMS have given on the policy front to move some procedures in an ASC is coming at the same time as inpatient capacity is overflowing. So CV leaders are not only trying to capture growth, but they're trying to capture the patients they already have by opening more rooms in their hospital or in that outpatient center for those more higher acuity patients and getting the patients who don't need that hospital care into the ASC setting. So for them, it's just about treating who they already have and treating them on time.

Rae Woods (07:59):
And at the right cost setting.

Rachel Peroutky (08:01):
That too, yes.

Gaby Marmolejos (08:03):
And I would say very similar to CV, I think the CMS policies, Centers for Medicare and Medicaid Services, for the record, when I say CMS, their policies have had an impact in orthopedics in that they are proposing reduced payments for several orthopedic procedures like total hip and knee replacement in the most recent 2027 physician fee schedule proposal. And the main reason why they're reducing the reimbursement for these procedures is they're saying they can be delivered at a lower cost in the ASC setting. And so they're seeing a greater push to lower reimbursement and so more organizations are looking to improve volumes and efficiency in the ASC setting to offset declining reimbursement.

Nick Hula (08:42):
I think at a macro level, you can see there's a lot of divergence in what specifically makes ASC strategically relevant for organization, be that a capacity play, be that a cost savings play, be that a market share play for health systems. Different organizations are going to deploy ASCs in a different way based off what they think will position their business for success.

Rae Woods (09:03):
You're all here clearly representing different voices within the healthcare sector, even among providers. Rachel is here to represent the cardiovascular service line, whereas Gaby is representing orthopedics. But actually what I heard from you is quite a bit of similarity where each stakeholder that you're representing has kind of a similar goal, but my bet is that in 2026, ASCs are not a monolith, not like we perhaps used to think about them in 2016. So what is really the difference, the nuance that we're seeing in ASCs?

Rachel Peroutky (09:38):
From the CV side, there are differences in the goals as well as the structure, how they operationalize their ASCs. On the goal front, you have some CV service line leaders we've talked to who are chasing volume and growth, and then their neighbors are trying to protect that growth and kind of acting a little bit later and going on the defense to try to recapture some of the referrals that they lost to their neighbors who joined an ASC earlier. You also have some of the rural health systems that are unable to access the CV patients that are six hours away from them. One of the actual big policy shifts that goes under the radar when it comes to this ASC conversation is that CON law reform is looped into the Rural Health Transformation Program eligibility.

(10:30):
So a lot of those health systems that want to be part of that program and get that funding, they're working with their states to make sure CON laws for ASCs are changing because they want to bring these services closer to their patients.

Gaby Marmolejos (10:44):
Yeah, and I would say that in orthopedics we've seen a lot of the same approaches that you're seeing in cardiovascular care. It's just orthopedics is a little bit more mature and further along in that journey.

Rae Woods (10:55):
It's much more mature. I mean, for a long time we could have equated ASC care with orthopedic care, and everybody was talking about hips and knees for the generally healthy population was happening at ambulatory surgery centers. So I guess a question I have for you, Gaby, then, is how mature are we talking about? What does it look like and how do we know that it's actually matured?

Gaby Marmolejos (11:18):
I would say relative to cardiovascular care. The orthopedic ASC market is more mature. In 2018, total knee replacement was moved from the CMS inpatient only list, and in 2020, total hip replacement was removed from the inpatient only list. And since then, today, about one in five, or 20% of outpatient joint replacement procedures are performed at the ASC. So we've seen pretty rapid growth from about 5% five years ago to 20% today, and it's only growing. Some markets have as high as 50% of their outpatient joint replacements are performed at the ASC. It just kind of depends on the market. And so we're seeing... Depending on the market, depending on how many ASC providers are in a market, we're seeing pretty rapid growth in that setting, and we're seeing folks are becoming more skilled in figuring out how to efficiently deliver care in the ASC and deliver sometimes more complex procedures in that setting.

Rae Woods (12:12):
How does that compare then to cardiovascular, Rachel? Do you think that CV is on the same trajectory?

Rachel Peroutky (12:18):
The cardiovascular space is definitely in its infancy compared to ortho, and it's been almost fully private equity driven to this point. So in 2020, there was 18 PE-backed CV clinics. In 2023, that number shot up to 342.

Rae Woods (12:37):
Wow. No wonder CV is getting so much attention then when it comes to the ASC conversation.

Rachel Peroutky (12:42):
Right. And what we're seeing now in 2026 is health systems catching up to what PE has been doing in the CV space for the last five or so years.

Rae Woods (12:54):
And Rachel, can you name some of the services that are actually being delivered? It's perhaps not open heart surgery as Nick shared, but it is cardiac ablation, right? It is stent placement? What are we talking about here?

Rachel Peroutky (13:05):
It's a mix from state to state, and we could talk about CON laws if we want, but that's still controlling a lot of what is being performed across the country. A lot of places do PCIs in the ASC setting. The biggest change having an impact now is EP ablations were added to the approved list last year. So that's something people were advocating for for several years. I remember tracking it every year, being surprised it hadn't been added yet. So that was a big one that's kind of compelling this shift because we do a lot of ablations in the outpatient setting that most people agree don't need to be there.

Nick Hula (13:44):
I think that a lot of people who missed the boat or late to the boat on the orthopedics shifts are not going to make that same mistake again in the cardiovascular shifts. So if they were approached by a physician group, independent physician group say, "Hey, let's open up an ortho ASC," and they said no, and they lost a lot of their outpatient orthopedic market share, I doubt they're going to make the same mistake again when thinking about, okay, who are we going to partner with when it comes to these cardiovascular shifts?

Rae Woods (15:35):
So Rachel and Gaby, you have described very different states of play for these two service lines, and I want to try to find some through lines, some lessons that maybe ASCs can take away, even though they are at very different stages in their maturity. Where are you seeing organizations make different strategic bets?

Rachel Peroutky (15:56):
One of the big differences in how CV leaders are approaching this is whether they're going to partner with private equity, who again is what started CV growth in ASCs, or if they're going to go it alone or potentially partner with independent cardiologists. Some see value in the private equity partnership because it brings them automatic scale and usually some access to best practices and administrative support and policy support that's really needed in this space. But there's also some questions around quality with private equity, about branding with private equity that causes some to stay away from that type of partnership.

(16:40):
Those who are thinking to go it alone, some of them see it as a potential opportunity for recruitment. This is an interesting strategy that I don't see a lot of people talking about, but it's really hard to recruit CV specialists right now. There's a really big shortage, and CV specialists have said that they prefer to work in the ambulatory setting. So if you can ask a specialist to come in and say, "Hey, 50% of your time, we need you in the hospital and 50% of your time, we will support you in your own kind of ambulatory setting," that's a strong recruitment tactic.

Gaby Marmolejos (17:16):
And I would say in orthopedics, they're a little further along in that I would say most orthopedic programs, especially large orthopedic programs, already have some sort of ASC strategy, whether through venture partnerships or joint partnerships with venture capital organizations or with independent orthopedic practices. But what I see right now is that anyone who didn't already make that ASC movement in the orthopedic setting, they're starting to do so now.

Rae Woods (17:42):
Do you think they're behind if they're starting to do so now?

Gaby Marmolejos (17:45):
I would say yes. And the reason why some organizations have not made that shift yet is that maybe they were in a market where there was a certificate of need law in place that prevented ASCs from being constructed. And so in their view, they said, "We're not going to see ASC competitors in our market, so why would we make those investments?" And I'll give you an example of where this is changing is in North Carolina where I live, there was a large AMC that they traditionally depended on the traditional HOPD playbook for delivering orthopedic surgeries, and they didn't really have any intention of developing an ASC. Well, North Carolina last year removed certificate of need laws for ASCs in counties with large populations. And so now that same AMC is reaching out saying now they're trying to think through their ASC strategy since they expect there to be more competitors moving forward.

Rae Woods (18:34):
This is an important nuance because that health system may be behind compared to the level of maturity that ortho has reached when it comes to ASCs, but they haven't missed the boat entirely and they needed to wait for the policy environment to create enough of a burning platform and enough of an opportunity for them to actually make the next step. Gaby, what you're naming is that service lines aren't the only things that are shaping how organizations behave and how ASCs mature, right? It's not enough to just think about here's what's happening in CV versus here's what's happening in ortho. You have to understand what's happening in the policy environment. Who are the owners here? How much PE and private equity activity is there? What does your market look like? What's your payer mix? How are the demographics shifting, et cetera? But I'm betting our audience wants to hear more about this ownership angle.

(19:24):
I learned from your research, Nick, that ASC ownership is actually all across the board. I think a little over half of all ASCs are owned by physicians only.

Nick Hula (19:35):
Yeah, that's right.

Rae Woods (19:35):
And after that, the picture gets a lot more complicated. Maybe a quarter are owned through a hospital or a physician joint venture. Some are corporate and physician, some hospital only, some PE only, a whole mix. Have I painted a complicated enough story for all of our listeners? My question for you is, how much does ownership shape the way that an ASC approaches their strategic decision making?

Nick Hula (19:59):
It has a huge impact on how organizations think about their strategic direction. Like you said, about half of the market is just owned by independent physician groups and it's becoming more and more and more fragmented as other players get into the game, and they're all going to have different goals for their ASC. We've talked about orthopedics a lot and cardiovascular a lot. So for example, let's go with the GI space. So take an independent gastroenterologist or GI group, they might want to open up an ASC just to maintain more revenue they get from doing endoscopies, GI procedures, as opposed to having to share it with the hospital that they use to practice. For them, their goal is we want autonomy, we want better control of their schedule, we want growing equity for our retirement. That's their goal for that venture. Whereas look at that same thing, them investment through the lens of a hospital or a health system who's investing in a GI ASC, they might be opening that up to shift cases, really simple GI cases out of the hospital so they can perform really high revenue complex stuff in the hospital.

(21:00):
For them, it's more of a, "Hey, how do we ensure stuff does get transferred back?" For them, it's more of a, "What should we fill those open slots within the hospital?" It's shifting capacity to a lower acuity site so they can focus on more high revenue stuff. Same exact investment, but very different purposes and very different aims that those two sites might have. That independent ortho group might be really focused on making a lot of profit because as they hold equity stake in that venture, whereas for the hospital, they might be okay not making any margin on it because the benefit from opening that ASC comes from the high revenue stuff they're able to put back in their hospital ORs.

Rae Woods (21:34):
The complex nature of ownership also means a perhaps more complicated story for partnership. And so I want us to take a moment and speak to each side of the partnership angle. What do ASC leaders need to be looking for as they seek partners, and what would you tell leaders who are actively trying to partner with those ASC owners?

Nick Hula (22:00):
I'll start with the people who are trying to partner with the ASC owners piece, because just as ASC leaders are getting a lot more savvy and understanding, "Hey, what is my specific goal for this ASC?" You all need to be getting more savvy, too, if you want to be working with them. You might have to be changing your value narratives that you are sharing with them. For example, if something like throughput, getting patients in and out is what a lot of ASCs live and die by, well, it needs to be a huge part of what you communicate to those leaders. So it's about finding what are those ASC specific value narratives that are critically important and being able to highlight those.

Rae Woods (22:41):
What I'm hearing you say is that those value narratives might actually look fundamentally different between two different ASCs or between two different service lines.

Nick Hula (22:50):
Yeah, exactly. Between two different service lines or even within a single service line between different sites of care. What you would say to a orthopedic leader in the hospital is probably not the same exact thing you want to be saying to them or highlighting to them for the ASC setting, same exact thing for CV, again, GI, whatever that service line might be.

Rae Woods (23:08):
I hear you on the value narrative side, and this is a message that you have been evangelizing rightly so to our listeners for some time. My follow-up though is, do the products themselves need to change? Not just the narrative around those products, but do you actually need to be delivering different things for ASC leaders to be successful?

Nick Hula (23:27):
You know, Rae, I think that most suppliers will have the right physical things that an ASC is going to need. However, I think that a lot of suppliers can be offering additional services, intelligence, business support. That's new. That's something they should be offering to the ASC that they may not have had to offer to hospitals.

Rae Woods (23:49):
And beyond the product.

Nick Hula (23:50):
Beyond the product. 50% of ASCs are owned by independent physician groups. They might not have the luxury of having a huge team of administrators and strategy teams and supply chain teams to maximize operations. They might not know how best to run an ASC or how best to run a business. They're focusing on providing care. Suppliers, on the other hand, they have been down this road dozens and dozens and dozens of times and can offer the services to say, "Hey, if your operating rooms are going to be this size, you're not going to be able to fit all this equipment in. You need to either expand size or get smaller equipment." Or what I've heard a lot of suppliers doing is offering supply chain optimization support. So that could be as simple as coming in and saying, "Hey, let me reorganize your store rooms. Let me do your inventory management, and hey, buy my products also," type of thing, but being able to offer a lot of business related services to ASCs as well.

Rachel Peroutky (24:47):
This is especially true for the CV space right now. Cardiovascular leaders have really good relationships with their vendor partners for everything that happens even in the operating room. And right now, they're going to a lot of external consultants to try to figure out the ASC space. So it seems to me like they would be open to leveraging those existing partnerships more for the questions they have now.

Rae Woods (25:12):
Yeah. If you're going to look externally anyways, why not look externally to the partners that you could or should have or already have?

Rachel Peroutky (25:22):
A lot of times these CV service line leaders, the surgeons themselves are used to having a med tech partner in the operating room with them. So these are robust relationships that they have and there's definitely an opportunity to lean on those.

Rae Woods (25:36):
What I've learned so far in this conversation is that the ASC market is in fact different than it was five or 10 years ago. For listeners who are now realizing that they might need to rethink their ASC strategy, it's no longer a monolith, what's the first thing that you'd encourage them to do differently?

Rachel Peroutky (25:57):
CV service line leaders talk to your ortho partners across the hall. That's a good place to start. Also, make sure you're actively engaging with your CON laws. There are more states looking at those policies right now than states that aren't looking at those policies, and a lot of them also have stipulations around ownership structure. So whether private equity is going to be involved in your market or isn't is up to you and a lot of the advocacy happening right now at the state level.

Gaby Marmolejos (26:26):
I've sort of alluded to this earlier, but being proactive with your ASC strategy, I know a lot of organizations that are not proactive because in their specific market, they don't see ASC competitors right now, but just know that can change, whether it be because of a certificate of need law changing or it may be that you might have other external investments, private equity investments come into your market. So I would say be proactive right now. And if you haven't already, I would assess opportunities to develop ASCs, whether it be for orthopedic procedures or cardiovascular procedures moving forward.

Nick Hula (27:02):
And I would just encourage people to respect ASCs for what they are. They're a location for lower complexity care, some simpler procedures and surgeries. This is not something that organizations are just going to be able to copy and paste from the hospital setting and expect success. For those ASC leaders out there listening to this, that means different operations, different operating models than what may have worked in the hospital outpatient department. For all of you who are looking to partner with those ASCs, again, I'll reiterate, you need to build that ASC specific commercial or partnership model. Can't be just, "Hey, here's what works in the hospital. Let me copy and paste it and tweak around the sides." For both stakeholders, it requires a wholesale new approach to how we're going to operate and work within the setting.

Rachel Peroutky (27:50):
Can I add one more thing?

Rae Woods (27:51):
Go for it.

Rachel Peroutky (27:52):
We're going to be talking a lot more about cardiovascular ASCs through our cardiovascular market trends this fall, especially our November webinar. We'll highlight some of the actions of early movers like Penn Medicine and Corewell Health, and also give you a pretty robust checklist of conversations you need to be having at your strategy sessions this year.

Rae Woods (28:14):
And we will absolutely add a link to sign up to that in our show notes. Rachel, Gaby, Nick, thanks so much as always for coming back on Radio Advisory.

Nick Hula (28:24):
Great talking with you all.

Gaby Marmolejos (28:24):
Thanks for having me.

Rachel Peroutky (28:24):
Thanks, Rae.

Rae Woods (28:31):
Here's what I'm taking away from this conversation. The ASC landscape has grown and evolved remarkably quickly, and that's actually brought in more variation, variation in what an ASC can look like between markets, between service lines, between states, and policy pressures are going to continue to create more variation. That also means the strategic importance of an ASC is going to look different organization by organization, and partner by partner. Understanding that variation is step one. Changing how you partner with different owners, in different markets, in different service lines is step two. And this is where I remind you, as always, we are here to help.

(29:39):
New episodes drop every Tuesday. If you like Radio Advisory, please share it with your networks. Subscribe wherever you get your podcasts and leave a rating and a review. Radio Advisory is a production of Advisory Board. This episode was produced by me, Rae Woods, as well as Chloe Bakst, Atticus Raasch, and Abby Burns. The episode was edited by Katy Anderson with technical support provided by Dan Tayag, Chris Phelps, and Joe Shrum. Additional support was provided by Dominique Del Gaudio. We'll see you next week.