Fig. 1 The gap between ASC and HOPD payments has significantly widened.Ambulatory Surgery Center Association


Published 8/1/2018
John C. Steinmann, DO; Alexander Sah, MD; Angela Carlson, MHA; Michael Bergerson; Basil Besh, MD

Recovery Care Centers Expand the Benefits of Ambulatory Surgery Centers

Prior to 1970, all surgeries were performed in hospitals and were associated with long lengths of stay and high costs. Improved surgical techniques, along with the desire to reduce the costs of simple surgeries in hospitals, have led to the development of ambulatory surgery centers (ASCs).

Several surgical cases that were once considered to be inpatient only have migrated to ASCs, with well-documented high rates of patient satisfaction, good outcomes, and cost savings. From 2012 to 2015, elective total joint replacement surgeries in the outpatient setting increased by nearly 50 percent. Moreover, outpatient total knee replacements and total hip replacements are expected to increase by 457 percent and 633 percent, respectively, in the next decade. Healthcare analytics firm Sg2 predicts that only 3 percent of the next decade’s growth in total joint replacement surgery will take place in inpatient settings.

Medicare payments to ASCs are currently only 53 percent of what is paid for the same procedures in hospital outpatient departments (HOPDs) (Fig. 1). The result is an annual cost savings to Medicare and its beneficiaries of $2.6 billion. In addition, a review of commercial claims found that ASCs reduce U.S. healthcare costs by $38 billion each year.

The average inpatient length of stay (ALOS) for total joint arthroplasties and spine procedures has decreased to only one to two days in nearly half of patients. Unpublished data from the Spine and Joint Institute at Redlands Community Hospital in Redlands, Calif., and the Institute for Joint Restoration and Research in Fremont, Calif., demonstrate a combined ALOS of 1.5 days for more than 2,500 annual total joint cases. Redlands also has an ALOS of 1.4 days for its more than 450 moderate to complex spine cases.

For these reasons, patients, employers, and insurers are very interested in finding ways to safely migrate procedures to ASCs. One solution is to responsibly extend pain management and monitoring beyond the ASCs’ 24 hours. Interested orthopaedic practices may want to explore the following models.

  • postsurgical recovery care center or convalescent care center (RCC/CCC)
  • medical hospitality suite (MHS)
  • ASC-licensed pain management and recovery care center (PM/RCC)

Postsurgical recovery care center or convalescent care center

Extended monitoring and pain management in an RCC have been considered by ASCs for more than two decades. Yet, despite the growing national interest in such facilities, only Arizona, Connecticut, Colorado, and Illinois have clearly established RCC licensing standards. Colorado licenses RCCs as convalescent centers; Arizona and Colorado regulations do not address length of stay; Connecticut provides a maximum stay of 21 days; and Illinois and Oregon allow a maximum stay of 72 hours. Oregon recently passed legislation allowing a 48-hour stay, with licensing standards to be finalized within one year.

The Colorado CCC license was largely dormant from 1960 until 1990, when it was reassigned and adapted to licensed ASCs. Orthopaedic and Spine Center of the Rockies (OCR) opened its current ASC/CCC in 1990 and expanded it in 1998. It now has three operating rooms and 10 CCC beds. OCR performed nearly 7,500 cases in 2017, including more than 1,000 hip and knee replacements and 300 spine procedures, with 1,400 CCC admissions. Average length of stay in the CCC was 1.05 days. Patient satisfaction has been extremely high (95 percent to 98 percent), and cost savings have been as much as 70 percent off hospital reimbursement rates.

Colorado payers are highly supportive of the ASC/CCC model, and OCR has no issues contracting with commercial payers. OCR is currently in the process of building a second 67,000-square-foot, eight-operating-room ASC and 21-bed CCC in Loveland, Colo.

Orthopaedic groups interested in pursuing RCC/CCC licensure in their states may want to replicate the Colorado ASC and CCC regulations, which are built on 30 years of clinical and regulatory experience.

Medical hospitality suites

MHSs have a long history in plastic surgery. Similar medical hotels for other surgical fields, including orthopaedics, have successfully emerged, providing recovery under supervision of licensed nursing personnel in comfortable, patient-centered environments.

Arrowhead Orthopedics in Redlands, Calif., a state without RCC/CCC licensure, uses the MHS option to provide a safe and comfortable option to an increasing number of patients receiving outpatient spine and joint procedures. One requirement was that the MHS be built in a manner consistent with the safety and regulatory standards of licensed RCCs/CCCs. This may be a suitable model for practices in other states where RCC/CCC licensure is being sought.

Although the cost-effectiveness and flexibility of recovery care in hotel-like rooms are appealing, every effort should be made to ensure that only appropriate patients are selected for this service and that rooms have safety features equal to those found in ASCs or licensed RCCs/CCCs. Such safety features include the following.

  • licensed nursing staff
  • generator back-up power
  • basic diagnostic and resuscitative equipment
  • oxygen and suctioning at bedside
  • disaster-preparedness plan
  • fire-control plan
  • quality-assurance and performance-improvement plan
  • complete, comprehensive patient medical record system
  • appropriate pharmaceutical services
  • sanitary environment
  • infection-control program

Accrediting institutions such as the Accreditation Association for Ambulatory Health Care, the Institute for Medical Quality, and The Joint Commission have standard-setting programs that achieve sufficient federal and state recognition for facilities to successfully meet a broad range of safety standards. The presence of licensed home health nurses to staff an MHS provides an additional level of recognized safety standards within a licensed, regulated scope of practice.

ASC-licensed pain management and recovery care center

A third option is to license a second ASC as a PM/RCC under a state’s State Health and Safety Code, accredited by any one of the recognized accrediting bodies. Such a center could provide pain management and recovery care services with the same level of safety and competence as the original ASC but with an additional 24 hours of skilled postoperative care. A PM/RCC ASC may perform procedures, such as epidural and regional blocks, as well as offer private recovery rooms for orthopaedic ASC patients in a setting with quality standards ensured by a licensed and accredited ASC.


Developing appropriate compensation is vital to ensure viability of an RCC/CCC, MHS, or PM/RCC. Except for the recognized pain management procedures performed within a PM/RCC, these centers are currently ineligible for Medicare reimbursement. Viability of a center will, in large part, depend on successful contracts with payers for services provided.

Payers recognize the potential cost savings associated with RCCs. For example, New Haven Hotel, a licensed recovery center, successfully obtained an RCC contract with HealthNet. “I’d rather have a relative at the recovery center than spend a night in the hospital,” said Thomas G. Miller, vice president of Provider Network Management at HealthNet. “Patients [in the RCC] are not surrounded by people with acute illnesses, and the environment is very conducive to getting well.”


Many healthy patients undergoing hip and knee replacements and spine procedures in inpatient settings could safely migrate to the more cost-effective ASC setting if skilled postoperative pain management and monitoring were extended by 24 to 48 hours or more.

The suitability of a particular model is likely to be dependent on the availability of state licensure and the surgical practices and postoperative care preferences of the surgeons. Table 1 provides a comparison of key components of each model. In many markets, the low-cost provider should prevail. However, there is a large financial stake in the larger, more expensive providers. Efforts to protect them and slow this process may be expected.

Barbara Hardes, chief operating officer of OCR, and Diane Przepiorski, executive director of the California Orthopaedic Association, contributed to this article.

John C. Steinmann, DO, is a founding partner at Arrowhead Orthopedics. Alexander Sah, MD, is medical codirector of the Institute for Joint Restoration and director of the Outpatient Joint Replacement Program at Washington Hospital. Angela Carlson, MHA, is executive vice president of Renovis Advantage. Michael Bergerson is chief executive officer of OCR. Basil Besh, MD, is past-president of the California Orthopaedic Association and a member of the AAOS Board of Directors.


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