Quick Hits

Quick Hits

“Site-neutral” reimbursement comes soon to ASCs

Will lucrative hospital buyouts slow up?

By Jerry Helzner, contributing editor

When President Obama signed the Bipartisan Budget Act of 2015 into law, it contained a four-sentence section that, come Jan. 1, will set into motion the necessary steps towards implementing “site-neutral” Medicare reimbursement. Site-neutral payment is a key, long-term goal of the influential Medicare Payment Advisory Commission (MedPac), which advises Congress on Medicare payments and policy issues. MedPac has long advocated equal payment for equal services, no matter the setting in which the service is performed.

As MedPac has noted: “If Medicare pays a higher rate for a service in one setting over another, program spending increases and beneficiaries pay more in cost sharing without a corresponding increase in quality of care.”

Section 603 of the Bipartisan Budget Act of 2015 ends the financial incentives for ASC-to-hospital outpatient department (HOPD) conversions. These conversions have provided significantly higher Medicare reimbursement to many HOPDs after fairly routine transfers of ownership and sign changes on building facades.

When Section 603 takes effect for new conversions, it could slow the popular practice of hospitals acquiring 100% ownership of freestanding, physician-owned ASCs. This is an often-used — and lucrative — strategy that has allowed hospitals to both expand their provider base and take advantage of hospital outpatient-department Medicare reimbursement rates that average 42% higher than ASC reimbursements.1 How lucrative? According to an investor presentation given last year from Tenet Healthcare Corp., independent ASCs make up 63% of the $24 billion ASC market. 2

Section 603 is intended to put a stop to these outsized reimbursement rates on new conversions; but it won’t stop them on HOPD conversions made prior to the 2015 passage — their premium reimbursement rates will stand.

ASCs have been in demand

In recent years, physician-owned ASCs that primarily perform efficient and routine cataract surgery (among other outpatient procedures) have become a highly desirable acquisition target for hospitals, both for the higher reimbursements and for the increased number of cataract surgeries being performed as the baby boomers move into their 60s and 70s. For example, Tenet operated 67 ASCs (performing unknown types of procedures) in 2009; by the fall of 2014, it operated 200.2

One of the biggest transactions of this type involved Hartford Hospital’s $27 million, 2011 purchase of nearby Constitution Eye Center in Connecticut and conversion to HOPD status. Testifying before a Congressional subcommittee in opposition to that acquisition — and conversions overall — Michael Guarino of the Ambulatory Surgery Center Association noted that the Certificate of Need filed by Hartford Hospital estimated that the purchase of the surgery center would account for $7 million in incremental revenue annually.

More specific information on increased revenue from HOPD status comes from a case study prepared by Avanza Healthcare Strategies, a Texas-based company that helps hospitals successfully navigate the ASC-to-HOPD conversion process. The following is Avanza’s assessment of the outcome of one such conversion it shepherded through the regulatory process, achieving a 45% revenue increase within two months.

“The transition … was a great success. … A post-transition CMS survey found no deficiencies in determining provider-based status.

“There was minimal disruption of services during the transition, with few patient complaints. Within 60 days, the HOPD saw a 45% increase in revenue, with no pushback from payers regarding the higher HOPD rates. The transition also minimized duplication of services, delivering instant cost savings.”

AMA approves, hospitals object

The American Medical Association supports the new conversion law, issuing in July a statement that similar payments could lead to a more level economic playing field and help preserve independent practices. The new policy is more equitable for patients, who, CMS notes, often pay more for the same service provided in a hospital’s off-campus department.

But, the powerful American Hospital Association (AHA) has strenuously objected to “site-neutral” reimbursement. In a letter to Congressional leaders following passage of the Bipartisan Budget Act of 2015, the AHA contended that hospitals have the greater financial burden of providing around-the clock services to all-comers.

In addition, the AHA contended in its letter that making it difficult for hospitals to acquire freestanding, off-campus facilities would force them to provide services solely from the main campus, thus making it harder for patients to access satellite facilities that offer shorter travel distances and more convenience.

The AHA also cited deals “under development” at the time the new law was passed and the uncertainty surrounding those yet-to-be completed acquisitions. OM


1. Ambulatory Surgery Center Association presentation advocating passage of the ASC Quality & Access Act of 2013.

2. Kutscher, B. Modern Healthcare. Tenet-USPI deal will spur more ASC consolidation. March 25, 2015. Accessed Nov. 3, 2016.

Report from the eye bank battlefront

A once-contented industry raises its collective eyebrow over new business model.

By Robert Calandra, contributing editor

For the better part of 72 years, eye banks have cooperatively worked together to recover and distribute sight-saving tissue. Its nonprofit status, some in the industry believe, has been vital to the success of its mission.

But eye banking may be about to change.

In October, SightLife, the largest distributor of donor tissue worldwide, announced it launched SightLife Surgical, a wholly owned, for-profit subsidiary with the goal to “drive innovation in the cornea research space.”

“This mission-driven structure maintains the nonprofit status of SightLife as the parent organization and adds a for-profit “engine” to power and accelerate achievement of the mission,” according to the eye bank’s website.


The Seattle-based company, which achieved 25,000 cornea transplants last year, is underwriting its new venture with $10 million from Flying L Partners.

According to a SightLife press release, Flying L Partners is a health-care investment firm founded by William Link, PhD, Richard Lindstrom, MD, and Andy Corley. Its focus is on “raising capital and funding projects of merit primarily in the ophthalmic field.”

SightLife Surgical will “accelerate the SightLife mission to eliminate corneal blindness worldwide” by driving innovation, according to the announcement. In August, the Washington Global Health Alliance awarded SightLife’s director of global surgeon training and patient care its Rising Leader award for the organization’s work in training 20% of the corneal surgeons in India, according to the Puget Sound Business Journal.

Every eye bank charges fees to cover its costs for staffing and other day-to-day business incidentals. But that’s all. SightLife and SightLife Surgical will become the first non-and-for-profit combination eye bank.

And while many consider SightLife’s goal admirable, eye bankers are concerned about the means to that end. A once cooperative industry has suddenly turned competitive. There are reports of SightLife representatives trying to woo doctors who work with local eye banks. Efforts to reach SightLife were unsuccessful.

A shake-up

What has really shaken the industry is SightLife’s decision to make SightLife Surgical a for-profit business. Eye bankers say the industry depends on public trust to do their job. Knowing that a company is earning a profit from a loved one’s tissue may offend people and make them less inclined to donate.

“There is definitely concern about what this does to our potential donor pool once [donors] learn that there is a model organization that is formally commercializing donated tissue,” says Phil Waitzman, chief operating officer of Vision Share, a 13-member consortium of eye banks.

While Mr. Waitzman agrees that there is nothing intrinsically wrong with wanting to be bigger, he worries that SightLife’s decision to create a for-profit entity will ruin “something pure and beautiful” and damage the eye bank industry’s “integrity.”

“You have to look at where the money raised comes from,” he says.

If SightLife Surgical was underwritten through a bank loan, Mr. Waitzman would be less concerned because a loan has a “more formal etiquette.” The eye bank could still develop new products and technologies, but the money would have to be repaid.

Taking money from a financial investment group, Mr. Waitzman says, is a different story. Investors expect a return on their investment.

“Now you are talking about issuing ownership,” Mr. Waitzman says. “It’s a different approach. It is a different reason for growth. What happens when there is the pressure to have a yield on [their investment]? How are you going to do that? I think that is where there are some challenges.” OM

Employee longevity, employee concerns

A few points to consider as we enter yet another new year.

In an online survey conducted by our sister publication, Ophthalmic Professional, nearly half of the 500-plus respondents said their greatest career-related concern was the “growing complexity of the work load.”1 Last year, more than half of the 665 ophthalmic employees who answered a similar survey said the same thing. 2

This year’s respondents, 161 of whom were office managers or administrators and 211 of whom possessed ophthalmic certifications, weren’t thrilled with their remuneration — 35% said their salary was inadequate. Also, 30% said they were dismayed by lack of a clear career path — running parallel with the latter was lack of organizational support for additional training, at 23.56%. Last year’s percentages were very similar.

Respondents answer the same question, with very similar responses, in Ophthalmic Professional surveys from 2015 and 2016.

Interestingly enough, the vast majority of this year’s respondents — most of whom were employed in private practice, namely cataract or general — had worked in the ophthalmic field for more than 16 years. And, 35% had worked in the same practice, in the same position. The longer they stayed in one practice, they reported, the greater their income.

Cross-training continues to be important to the well-run ophthalmic practice. Last year, 75% of the respondents said they were cross-trained in a primary position; this year, respondents said they perform 2.5 functions on average in their practices. OM


1. Tertel Z. The road to a rewarding career. Ophthalmic Professional. July 1, 2016.

2. Thomas J. Readership Study. Ophthalmic Professional. July 1, 2015.

J & J sees growth potential in AMO acquisition

Gaining a strong position in cataract and LASIK.

By Jerry Helzner, contributing editor

Johnson & Johnson (New Brunswick, N.J.) had been content for years to have a limited involvement in eye health, primarily through its highly successful Acuvue contact lens business. But with the announcement in September that it had agreed to acquire Abbott Medical Optics (AMO, Lake Bluff, Ill.) from Abbott Labs for $4.325 billion in cash, J&J suddenly found itself poised, — once the transaction closes in early 2017 — to be number one in LASIK, number two in cataract, and number three in OTC consumer eye care formulations.

Tecnis Symfony IOL

“We really like the eye health business and it will now make up more than 5% of overall company sales,” says Ashley McEvoy, Company Group Chairman for Johnson & Johnson Vision Care Companies. “We believe we are the world leader in terms of a differentiated portfolio of intraocular lenses.

“Our Tecnis Symfony extended depth of focus IOL has had a wonderful reception in Europe and been gaining market share there. It was approved in July in the United States and has gotten very positive reviews.”

Ms. McEvoy says the aging of the baby boomers is not the only thing driving an increase in cataract procedures.

“Cataract surgery is the most-performed surgery in terms of numbers, but it is also growing because the newer and better technologies are encouraging people to have the surgery at a younger and younger age. They are looking at it as a cataract-refractive procedure.”

While the eye health marketplace (including AMO) is growing organically at about 5% a year, Ms. McEvoy says J&J’s goal is to outperform the market, though she won’t put out a specific growth target.

“We can benefit from our broad geographical footprint,” she asserts. “For example, we do about 25% of our eye health business in emerging markets while AMO does about 12%.

Complementary AMO product lines can now be marketed with J&J offerings, according to Ms. McEvoy.

“We manufacture the Acuvue contact lenses but we have never made a lens-cleaning solution. People re-use these lenses so they buy a cleaning solution. Now, we will have AMO’s Blink lens-cleaning solution to offer Acuvue users. It’s a nice fit.”

Research into retina

Ms. McEvoy says J&J isn’t excluding anything when it comes to ophthalmic innovation.

AMO already has a line of glaucoma shunts (Baerveldt), which could be a foothold for a greater presence in glaucoma and glaucoma/cataract procedures, though Ms. McEvoy will only say that J&J is always paying attention to next-generation innovation.

One thing that may surprise readers is that J&J (with no partner) is already doing research in the retina sector.

The company is starting a phase 2b clinical trial of a cell therapy intervention for geographic atrophy. The 255-patient PRELUDE study, which is being conducted by the company’s Janssen drug discovery unit, will consist of a single subretinal injection of the company’s proprietary CNTO 2476 cells using a specially designed delivery device. Primary endpoints will be safety, performance of the delivery device, and improvement in BCVA.

“We have built up a base of science in drug delivery and drug development,” concludes Ms. McEvoy. “We have a number of areas in which we can move ahead in eye health.” OM

Aerie’s glaucoma drugs advancing

By René Luthe, senior editor

Rocket 4 phase 3 trial results for glaucoma drug Rhopressa (netarsudil) showed a once-daily dosing achieved its primary efficacy endpoint of demonstrating non-inferiority compared with b.i.d. timolol for patients with baseline IOPs ranging from above 20 to below 25 mmHg, says maker Aerie Pharmaceuticals. The drug also showed noninferiority to timolol at the prespecified secondary endpoint range of above 20 mmHg to below 27 mmHg in the 700-patient trial. Aerie also showed a consistent reduction of IOP across all baseline IOPs and throughout the 90-day efficacy period.

The most common adverse event, reported in 40% of patients, was hyperemia, 85% of which was scored as mild. No systemic or serious adverse events were reported.

Rhopressa’s once-a-day dosage is a “huge” competitive advantage, says Michael McCleerey, Aerie’s vice president of marketing. He sees Allergan’s Alphagan as its biggest competitor. And Roclatan, Aerie’s single-drop fixed-dose combination of Rhopressa and latanoprost, also “met clinical superiority and statistical significance” in phase 3 results, says Mr. McCleerey — and with no side effects. An NDA filing is planned in the latter part of 2017. OM

FDA approves XEN treatment system

It only took 13 months for the AqueSys acquisition to pay off for Allergan. The FDA approved its XEN glaucoma treatment system, comprised of a gel stent and injector, which are indicated for various types of glaucoma, including refractory glaucoma and its management. Patients are considered candidates if they had failed surgeries. The system is also indicated in patients with primary open-angle glaucoma who didn’t respond to medical treatments. The XEN, Allergan said in a release, reduces IOP so well that patients at 12 months post-implantation were using fewer drops than prior to implant, according to studies. OM

CORRECTION: In the August issue of The Ophthalmic ASC on p. 28, the Symfony lens (AMO) was incorrectly identified as a multifocal lens. It is the first in a new lens class that provides extended depth of focus. In addition, the correct model number is ZXR00.