A pair of Warwick podiatrists appear headed for state approval to open the first new ambulatory surgical center in Rhode Island since 1992.
The proposed Foot and Ankle Institute of New England Inc., which would reside in space formerly occupied by Harvard Pilgrim Health Care on Bald Hill Road in Warwick, also would become the first surgical center in the state specializing in podiatric procedures.
The Health Services Council, a 22-member advisory board under the Department of Health that determines whether proposals for major new health services are necessary, approved the proposal last week. Health Director Dr. Patricia Nolan has the final say on the project, and had been expected to make a decision late last week.
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The project would fill a growing need for more podiatric surgeries, health regulators concluded. The number of podiatry procedures grew five percent annually since 1999 to more than 4,106 last year, according to a report by independent consultant Harvey Zimmerman of Warwick-based Spectrum Research Services. The Foot and Ankle Institute expects to perform nearly 500 procedures during its first full year of operation.
But the report also concludes that – for the first time in at least 10 years – Rhode Island also could be in need of more operating rooms.
Over the past decade, hospitals and physician groups have floated at least a half-dozen proposals to create for-profit ambulatory surgical services – only to be rejected by the Department of Health based on a lack of need. Under state law, the health department must determine the need and affordability of major new medical services or technologies before it grants approval.
With each application submitted since 1993, Zimmerman’s research found that the state had surplus operating rooms. But in the report done last month for the podiatrists’ application, Zimmerman concluded that Rhode Island could be in need of nearly 10 percent greater ambulatory surgery capacity by 2006 – the equivalent of 14 additional operating rooms.
The reason: Utilization is way up, thanks partly to Rhode Island’s aging population and a drop in the state’s uninsured population, the report says. There was a 10 percent surge in outpatient surgeries in the state last year alone – an increase of more than 10,000 operations. The largest increases were seen at Memorial, Women & Infants Hospital and Westerly hospitals.
The vast majority of the state’s 154 staffed operating rooms are spread across Rhode Island’s 11 acute-care hospitals, ranging from Rhode Island Hospital’s 29 operating rooms to Newport Hospital’s five rooms.
The remaining 16 operating rooms are housed at five freestanding surgical facilities: Blackstone Valley Surgicare, Wayland Square Surgicare, Bayside Endoscopy, Ocean State Endoscopy and Koch Eye Surgicenter.
In the past, such for-profit surgical centers have been viewed by the hospital industry as competitive threats. For instance, when the same two physicians from the Foot & Ankle Institute submitted a more ambitious version of their plan two years ago, nearby Kent County Memorial Hospital objected to it, saying it was not needed because there was sufficient capacity for podiatric surgery at Kent.
Kent also opposed at least three other proposals for new ambulatory surgery centers for the Warwick area in recent years. And Our Lady of Fatima Hospital voiced its staunch opposition to a proposal for a for-profit surgical center in Johnston in the early 1990s.
The prospect of losing higher-margin outpatient operations to for-profit surgical centers is more bad news for an industry already losing in excess of $30 million a year. It is difficult for hospitals to compete with free-standing ambulatory surgical centers, which have far lower overhead costs and are less beholden to regulations.
"The costs will be much, much less overall to insurance companies and patients," said Dr. Bruce Werber, one of the podiatrists planning to open the Foot & Ankle Center.
The center’s application to the Health Department says procedures performed at free-standing surgical centers in the state are 47 percent less expensive than those done in the hospital setting.
"It’s hard for hospital-based ambulatory surgery centers to compete with free-standing centers on a cost basis, because (freestanding facilities) are not subject to the same regulations as hospital-based ambulatory surgical centers," said Dr. Michael Migliori, an ophthalmologist who performs surgeries at Rhode Island and St. Joseph Hospital, as well as Wayland Square Surgicare.
Another competitive advantage for surgical centers: Many patients find them more convenient.
"A lot of patients, especially for ambulatory surgery, don’t want to go to the hospital," said Migliori, a former president of the Rhode Island Medical Society. "They like the thought of having a more private facility with less hassle."
And patient turnover generally is higher at freestanding surgical centers, Migliori said, partly because hospitals tend to perform more time-consuming ambulatory operations, and procedures performed by residents at teaching hospitals can take longer. Also, some larger for-profit ambulatory surgery chains pay their surgical centers per procedure, providing an incentive to turnover patients quickly.
The hospital industry says the difference in regulatory requirements and other discrepancies between hospitals and freestanding surgical centers creates an uneven playing field.
"Competition is a noble premise, but within health care there needs to be a broader understanding that the rules need to be equal," said Edward J. Quinlan, president of the Hospital Association of Rhode Island.
One example is the amount of uncompensated, or "free care," provided by the hospitals to uninsured patients. While the Foot & Ankle Institute estimates that free care will equal about 1 percent of revenues, for instance, hospitals in the state provide free care equal to about 6 percent of revenues on average, according to the hospital association.
It’s yet to be seen what players will move to fill the projected void in operating-room capacity: hospitals or for-profit, physician-led ambulatory surgery centers.
Migliori said a drive to rein in escalating health-care costs could point toward more proposals for free-standing surgical centers, despite the "incredible hurdles you have to jump through" to get state approval for the facilities, he said.
Or, he said hospitals might follow the lead of facilities in other states, which have placed ambulatory surgery facilities off-campus to circumvent the regulatory hang-ups that on-campus surgical centers face.
Another possibility: Some hospitals might staff out-of-use operating rooms, which were purposely omitted from Zimmerman’s inventory count, if they see enough demand.
"I think providers will look at the data and make decisions based on their own volumes of business," said John X. Donahue, chief of the health department’s Office of Health Systems Development.
Still, Zimmerman’s projected shortfall in operating-room capacity might be overstated, his report says. "The need for additional operating rooms is probably less than" the projected 14, the report reads. That is partly because out-of-use operating rooms were omitted, and because physicians increasingly are performing surgeries at their offices, a trend that is expected to continue, the report says.
While a pronounced increase in surgical operations is happening nationwide, statistics show that Rhode Island’s utilization is growing at more than twice the national average.
From 1997 to 2000, the number of surgical operations in all U.S. community hospitals grew by 8 percent, but procedures in New England hospitals jumped 12 percent, and hospitals in Rhode Island saw a 16.7 percent surge, from 111,000 to nearly 130,000.
Statistics from the American Hospital Association show that in 1999, Rhode Island had a whopping 22 percent more surgical operations than the national average. The state’s older population accounted for a small portion of that difference, but even after adjusting the numbers for age, Rhode Island has a 17.3 percent higher surgical rate.
