ASC merger expected to shut down AAASC

The merger of the two largest ambulatory surgery center organizations in the U.S.—the FASA and American Association of Ambulatory Surgery Centers—will probably lead to the AAASC shutting down operations and handing over its assets to the larger group.

The two groups on Oct. 5 announced their plans to combine on Jan. 1, 2008, to form the Ambulatory Surgery Center Association. Together, the combined groups will represent 45% to 50% of the industry, although the long-term goal is to grow to at least 4,000 facilities, or 80% of the industry, says Craig Jeffries, executive director of the AAASC.

In a joint statement, the groups said they wanted to combine their knowledge and resources, “to effectively influence Medicare policy and national legislative initiatives.” The enterprise, however, involves blending two separate headquarters in Tennessee and Virginia, and not everyone involved is ready to talk about the logistics. FASA, whose leadership seems to be taking the helm of the new group, declined an interview, and it appears that Jeffries will be out of a job by the end of 2007.

Industry officials said there are no hidden controversies behind the merger. On the AAASC’s end, “This wasn’t a question of ‘throw us a life raft, we’re sinking.’ It was about finding the best way for the industry to restructure itself” and find commonality in addressing issues of interest, says Mark Mayo, executive director of the Illinois Freestanding Surgery Center Association, who serves on the AAASC’s board of directors. Mayo also serves on the Board of Ambulatory Surgery Certification, a FASA-related not-for-profit, according to FASA’s Internal Revenue Service Form 990 filing.

The new group will be based in Alexandria, Va., FASA’s current headquarters, with Kathy Bryant, FASA’s current president, serving as chief executive officer.

Bryant declined to comment.

Jeffries says his expectation is that the AAASC’s headquarters in Johnson City, Tenn., will be closed, although “that will not preclude some of the staff from being a remote resource to the organization,” he says. All of the AAASC’s records and physical assets of the organization will be blended with FASA to establish the membership base of the new organization, he says.

He won't speculate on what the annual operating revenue of the new organization would be. The AAASC had revenue of $1.21 million in the 12 months ended June 30, 2006, according to its latest IRS Form 990. FASA declined to provide updated information on its financials. It had revenue of $4.49 million in calendar year 2005, according to its Form 990.

Jeffries says he won't speak for FASA, but says that it is probably remaining mum because some of the transition issues as they relate to staff and resources are still being worked out. As the incoming CEO, Bryant is “being appropriately respectful of that transition.” As for his own career, Jeffries said he hopes to stay in the ASC industry. “I plan on supporting the new association as a cheerleader, not as a staff member.”

Settling in FASA’s area is a logical step, as the organization is the larger group of the two, with 2,600 members compared with the AAASC’s 675, and it is located near Capitol Hill, where the new group wants to make its mark as a strong lobbying force in Washington.

The motivation for the merger had been growing over the past six years and more intensively over the past year, as the industry faces new changes to its payment system under Medicare, Jeffries says. In combining their efforts, the two organizations want to coordinate a voice in Washington in response to the new payment system, and in addition, “focus on state advocacy by eliminating some of the redundancies in our efforts,” he says.

Medicare in 2008 will start phasing in a new payment rate for ASCs. The transition will take place over four years, and by 2011, the program will be paying ASCs at 65% of what hospital outpatient departments are paid, a measure that may lead to steep cuts for some single-specialty ASCs. Mayo said cooperation between the two organizations was test-driven when they both participated in a coalition to address the recent Medicare payment changes, and lobbied for federal legislation that would set the ASC payment rate at a more generous level of 75% of the outpatient rate.

Hospitals, which compete directly with ASCs for patients, contend that the new Medicare rules level the playing field between the two industries. On the merger itself, however, the American Hospital Association declined to comment.

The focus of the new group won’t just be on lobbying concerns, Mayo says. “There’s been fragmentation in the ASC community on things like education opportunities and vendor resources.” Mayo says the merger makes things easier for corporate ASC partners who in the past have allocated staff to both associations, and have been conflicted over which group had the better annual meeting or benefits, he says.