Over the past 30 years, the health-care industry has witnessed the birth and growth of the ambulatory surgery center (ASC) industry, and a great migration to an ASC setting of procedures that previously were performed in hospitals. Today, procedures performed in ASCs are broad in scope, including shoulder, hip, knee and spine surgeries, as well as many pain management and diagnostic services. For example, more than 50 percent of colonoscopy services performed in the United States are completed in ASCs. Over the past decade, surgeries and procedures performed at ASCs have risen drastically, along with the number of ASC locations. According to the Medicare Payment Advisory Commission (MedPAC), in 2010, ASCs served 3.3 million fee-for-service Medicare beneficiaries, an increase of 0.9 percent from 2009. Moreover, there were 5,316 Medicare-certified ASCs in 2010, an increase of 2.6 percent over the previous year. In all, Medicare spent roughly $3.4 billion on ASC services in 2010 alone.

Although the number and types of procedures that are performed in an ASC setting continue to expand, studies and reports indicate a slower growth in the number of ASCs and volume of services performed at ASCs compared to previous years. Furthermore, the heath-care industry has experienced a reverse migration of sorts in the increasing acquisition by hospitals of freestanding ASCs and their conversion to hospital outpatient departments (HOPDs). This paper will discuss several areas related to conversion of ASCs to HOPDs. First, it will examine factors driving conversion of ASCs to HOPDs. Then, it will explore various legal considerations for hospitals considering converting an ASC into an HOPD. Finally, it will discuss co-management agreements and their place in the conversion of an ASC to an HOPD.