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| Wall Street Reveals Dreary View of ASC Industry
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Shares of publicly traded surgery center companies took a hit last week after Bank of America downgraded the entire sector, citing declining case volumes, a clampdown on out-of-network payment arrangements, renewed risk to worker's compensation fee schedules and Medicare's new ASC payment policy — which the bank anticipates will add less than 1 percent to ASC revenues over the next two to three years.
"We are lowering our investment view of the ASC industry from overweight to underweight," says Bank of America analyst Gary Taylor in a report to investors in which he lowered ratings on all three surgery center pure-plays (AmSurg, Symbion and United Surgical Partners International) to "sell." "We believe revenue and growth will continue to lag consensus expectations over the next two to three years, with a possible 20 percent correction in sector price-to-earnings ratio."
Mr. Taylor said July and August surveys show patient case volumes were up only 2 percent for the quarter and declining sequentially, posing an earnings risk during the third quarter. Why the slowdown? "We hypothesize a combination of material industry capacity expansion (400 to 500 new ASCs annually the last few years) and the same general slowdown in utilization (driven by rising uninsureds and higher out-of-pocket expenses for insureds) that the hospitals have experienced since 2003," says Mr. Taylor. "In addition, to some degree, more defensive hospital behavior may have allowed hospitals to stem market share losses to ASCs."
Bank of America says 58 percent of the ASCs it surveyed said they believe profits will be reduced in the near term because of commercial payers eliminating out-of-network payment arrangements. "This trend is certainly not a new trend in the industry," says Mr. Taylor, "but does appear to be accelerating. We estimate that the publicly traded ASCs derive 15 to 20 percent of their total revenues from out-of-network payments."
The survey also identified nine states potentially facing new or additional risks to worker's compensation fee schedules: California, Florida, Georgia, Nebraska, New Jersey, Ohio, South Carolina, Texas and Utah.
CMS is proposing an increase to the allowable list by 14 procedures for 2007 and by 763 procedures for 2008 (from the current 2,500). Bank of America says the market is overvaluing the Medicare ASC procedure list expansion, citing proprietary analysis that suggests that the 763 new allowable procedures (plus materially higher payment rates for some other currently allowable procedures) will add less than 1 percent annually to ASC revenues over the next two to three years. "We estimate that even if the ASC industry could capture 50 percent of the total market share for these procedures, the opportunity represents an approximate $400 million (2.7 percent) revenue opportunity for the existing $15 billion industry," says Mr. Taylor.
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| Thyroidectomies Shifting to Outpatient Facilities
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Endoscopic thyroid surgery is safe for most patients and can be performed on an outpatient basis, according to David Terris, MD, chair of the Department of Otolaryngology at the Medical College of Georgia in Augusta. Dr. Terris presented his findings last week at the annual meeting of the American Academy of Otolaryngology — Head and Neck Surgery Foundation in Toronto.
"This procedure uses established technology for a new purpose," says Dr. Terris, noting that improved optics and hemostatic instruments allow for rapid wound healing, a local anesthetic and less chance for wound drainage.
Dr. Terris employs a 30-degree laparoscope and the Harmonic Ace ultrasonic blade for cutting and coagulating. "Endoscopes have been around for a long time, particularly the past 15 years, and the Harmonic device has been commonly used for about eight to 10 years," he says. "It is only in the past few years that both of these have been used in tandem for thyroid surgery."
According to Dr. Terris, 36 of 125 thyroidectomies performed at the Medical College of Georgia between February 2005 and March 2006 were minimally invasive procedures. Thirty-five of those cases were outpatient and none reported complications.
The endoscopic procedure calls for two surgical assistants and takes 20 percent to 30 percent longer than open surgeries. But with superior visualization, smaller incisions and less dissection, Dr. Terris says he believes the minimally invasive approach is a viable option that will become widely accepted after additional reports of positive experiences and case outcomes.
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| Panel Reaches PONV Treatment Consensus
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Endoscopic sinus surgery should be used to treat chronic rhinosinusitis that has not responded to medical treatment, regardless of predisposing factors, say researchers who presented their work at last week's American Academy of Otolaryngology — Head and Neck Surgery Foundation annual meeting in Toronto.
Researchers from Sestre Milosrdnice University Hospital in Zagreb, Croatia, studied symptoms of the disease and signs of pathogens in order to diagnose 50 allergic and 50 non-allergic patients before endoscopic sinus surgery as well as 12 months and 24 months afterward. Both sets of patients reported post-operative improvement in both severity and frequency of congestion, postnasal secretion, nasal secretion, headache, sneezing, cough, facial swelling and olfaction.
Allergic patients exhibited a worse long-term response to surgery in terms of a cure, but appeared to experience a lower failure rate than non-allergic patients. Researchers say this suggests that, "in non-allergic patients, single or combination of few parameters of inflammation have a greater impact on [a] certain symptom, than all parameters of inflammation on total symptom scores, when put together." They also found that specimens taken during the procedure and scored for pathology correlated to severity of symptoms pre-operatively and their persistence post-op in allergic patients. Researchers recommend consultation with a pathologist to help predict chronic rhinosinusitis symptoms after endoscopic sinus surgery.
Chronic rhinosinusitis, which affects about 31 million Americans annually, comprises a spectrum of inflammatory and infectious diseases concurrently affecting the nose and paranasal sinuses and is marked by considerable morbidity and often unmanageable symptoms.
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| News and Notes |
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FUNCTIONAL RHINOPLASTY BOOSTS AIRWAY FUNCTION in patients with severe nasal obstructions such as septal deviation, valve insufficiency and turbinate hypertrophy, according to a study in the September/October issue of the Archives of Facial Plastic Surgery. Patients completed questionnaires about the severity of their nasal obstructions before and after undergoing the surgery. Researchers assigned them a severity score of zero to 100 based on their answers, with higher scores indicating more severe nasal obstructions. After an average of 227 days, severity scores decreased significantly, from 58.4 to just 15.7.
TWO MEDICAL MANUFACTURING EXECUTIVES have been sentenced to federal prison for fraudulent business practices and the unauthorized sale of a surgical sterilizing device that caused blindness in 18 patients. Ross Caputo, president and CEO of AbTox, Inc., of Mundelein, Ill., received 10 years' imprisonment and Robert Riley, vice president and regulatory officer, received six years. The two were jointly fined $17 million, the amount the now-defunct company earned selling the devices between 1994 and 1998, as restitution to hospitals that bought them. AbTox had been approved by the FDA to market a small gas plasma sterilizer, but it also sold the larger, unapproved Plazlyte Sterilization System, which it promoted with the FDA's earlier clearance letter. About 168 of the $110,000 Plazlyte units were sold nationwide. However, ophthalmic instruments that included brass, copper, zinc or soldered joints reacted to the unit's sterilizing agent, creating copper acetate residue that blinded patients.
MEDI-FLEX, THE MAKER OF CHLORAPREP skin prep solution, is changing its corporate name to Enturia as of January 2007 in conjunction with its international expansion. There has been no change in ownership and there are no plans for such a change, says the company; however, the name Medi-Flex already exists in certain overseas markets and several similar variations exist in the U.S., prompting the company to seek a unique brand name. |
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