Organizational Factors that
Impact Health and Use
Urologist Ownership of Ambulatory
Surgery Centers and Urinary Stone
John M. Hollingsworth, Zaojun Ye, Seth A. Strope,
Sarah L. Krein, Ann T. Hollenbeck, and Brent K. Hollenbeck
Objectives. To understand how physician ownership of ambulatory surgery centers
(ASCs) relates to surgery use.
Data Source. Using the State Ambulatory Surgery Databases, we identified patients
undergoing outpatient surgery for urinary stone disease in Florida (1998–2002).
Study Design. We empirically derived a measure of physician ownership and exter-
relationship between ownership status and surgery use. We measured how a urologist’s
surgery use varied by the penetration of owners within his local health care market.
Principal Findings. Owners performed a greater proportion of their surgeries in
ASCs than nonowners (39.6 percent versus 8.0 percent, po.001), and their utilization
rates were over twofold higher (po.001). After controlling for patient differences, an
owner averaged16.32 (95 percent confidence interval [CI],10.98–21.67; po.001) more
cases annually than did a nonowner. Further, for every 10 percent increase in the
penetration of owners within a urologist’s local health care market, his annual caseload
increased by 3.32 (95 percent CI, 2.17–4.46; po.001).
Conclusions. These data demonstrate a significant association between physician
one possibility relates to the financial incentives of ownership. Additional work is nec-
essary to see if this is a specialty-specific phenomenon.
Key Words. Ownership, ambulatory surgery center, utilization, physicians’ prac-
Over the last two decades, escalating health care costs in the United States
have led to sweeping reforms in reimbursement for physician services
(The Omnibus Budget Reconciliation Act of 1989; Health Care Financing
Administration 1991). The overall effect of these reforms has been to increase
rHealth Research and Educational Trust
compensation for outpatient evaluation and management, while decreasing
reimbursement for many surgical procedures (Litwin, Sacher, and Cohen
1993; Goluboff and Olsson 1994). These changes in reimbursement have
compelledsurgeons to seek alternative sources ofrevenue inorder to maintain
of urinary stones has servedas one such economic resource (Lotan et al. 2004).
morbidity of stone surgery, allowing more and more procedures to be done in
theoutpatientsetting(Pearle, Calhoun, andCurhan2005).The profitabilityof
lithotripsy stems, in part, from the unique financial structure of the freestand-
ing ambulatory surgery centers (ASCs) and lithotripsy centers in which many
stone surgeries are currently performed. As the provision of lithotripsy ser-
vices is exempted from the federal statute prohibiting physician self-referral
(American Lithotripsy Society et al. vs. Tommy G. Thompson 2002), urol-
ogistscan refer and treat patients at an ASC or lithotripsy center in which they
are invested. Physicians with ownership interest in these centers collect not
only a professional fee for the services provided, but they also share in their
facilities’ profits. Indeed, over the last decade urologists’ financial interests in
ASCs have increased from 12 to 21 percent, and the proportion of U.S. urol-
ogistsinvested in a lithotripsy centerhas risen from 36 percentto an estimated
54 percent (Gee et al. 1998; O’Leary et al. 2002).
While there are data to support medical therapy and observation for
many patients with urinary stones (Hollingsworth et al. 2006), a variety of
ultimate decision for intervention is left to the discretion of the surgeon. Thus,
the potential exists for the perversion of those incentives associated with phy-
sician ownership. Specifically, urologists with investment in an ASC may be
driven by financial pressures to relax their indications for treatment, which
would manifest as higher stone surgery rates (McGuire and Pauly 1991;
McGuire 2000). With this in mind, we characterized use of stone surgery
among urologists as they relate to their ownership status. The results of this
Address correspondence to Brent Hollenbeck, Department of Urology, University of Michigan,
1032B Michigan House, 2301 Commonwealth Blvd., SPC 2967, Ann Arbor, MI 48105–2967;
e-mail: email@example.com. John M. Hollingsworth, M.D., M.S., V.A. Scholar, is with the
RWJ Clinical Scholars Program, The University of Michigan, Ann Arbor, MI. Zaojun Ye, M.S.,
Biostatistician, and Seth A. Strope, M.D., M.P.H., Clinical Lecturer, are with the Department of
Urology, The University of Michigan, Ann Arbor, MI. Sarah L. Krein, Ph.D., R.N., Research
Assistant Professor, is with the Department of Internal Medicine, Ann Arbor, MI. Ann T. Ho-
llenbeck, J.D., is partner with the Honigman Miller Schwartz and Cohn LLP, Detroit, MI.
Urologist Ownership of Ambulatory Surgery Centers1371
analysis have relevance to the policy debate surrounding federal Anti-Kick-
back Statute safe harbors and Stark Law definitions that permit physician
investment in ASCs.
Subjects and Databases
For this study, Florida data from the Healthcare Cost and Utilization Project’s
State Ambulatory Surgery Databases (SASD) were used. The SASD captures
100 percent of surgeries in a given year performed on the same day in which
patients are admitted and released (Healthcare Cost and Utilization Project
2008). Its completeness has been validated through alternative sources of
comparative data (Busch and Steiner 2007). Abstracted cases were restricted
to years 1998 through 2002. After this time period, a change in the surgeon
identifier supplied by the data source occurred, which did not conform to the
documented pattern, and it was impossible to track physicians across years
Florida data were chosen primarily for three reasons. First, Florida was
to follow individual physicians across discharges throughout the study inter-
val. Second, Florida requires no Certificate of Need review before the estab-
lishment of an ASC (Health Council of South Florida 2008). Therefore, the
competition between hospital-based surgery centers and freestanding ASCs is
largely unregulated by the State. Third, Florida is located within the geo-
urinary stones (Stamatelou et al. 2003), making it useful for assessing their
The study cohort was identified from the SASD files using Physicians’
Current Procedural Terminology codes for those surgical procedures used in the
definitive treatment of urinary stones, including percutaneous nephrolitho-
tomy (50080, 50081, 50130, or 50561), shockwave lithotripsy (50590), uret-
eroscopy (52320, 52325, 52330, 52335, 52336, 52337, 52351, 52352, or
52353), and conventional extraction (50060, 50065, 50070, 50075, 50610,
50620, or 50630). Ancillary procedures nonspecific for stone therapy, includ-
ing placement of a percutaneous nephrostomy tube (50040, 50398, or 52334)
or a ureteral stent (52332), were also included if there was a concomitant
9th Revision diagnosis codes (270.0, 271.8, 274.11, 592.0, 592.1, or 592.9). By
1372HSR: Health Services Research 44:4 (August 2009)
this algorithm, a total of 104,018 discharge records were abstracted, during
36.7 percent of which multiple stone surgeries were performed in the same
setting. Using the SASD’s surgeon identifier, we then aggregated across dis-
charges and constructed an analytic file, in which the surgeon-year served as
our unit of analysis (n53,910).
Next, we determined which of the urologists in our cohort were invested in an
ASC and which were not. One of the current safe harbors to the federal Anti-
Kickback Statute applicable to ASCs requires physician owners to perform at
least one third of their outpatient surgical cases at the center in which they are
invested (Health Care Financing Administration 1999; Becker and Biala
2000).Therefore,we considereda urologisttobeanowner ifhe performed30
percent ormore ofhisambulatorysurgery casesina yearata given ASC.This
ownership definition, which is independent of the urologist’s surgical volume,
is similar to that which has been used in the literature on cardiac specialty
hospitals (Mitchell 2005). The SASD maintains explicit codes, which allowed
for us to distinguish between hospital-based surgery center discharges from
those at freestanding ASCs, including lithotripsy centers.
1,367 (91.3 percent)——172 owners and 1,195 nonowners——remained constant
throughout the study interval. For the remaining 131 (8.7 percent) whose
statuschangedat leastonce, a urologistwasclassifiedasanownerofanASC if
he met our ownership threshold (one third of his outpatient surgical cases
a part of the study. Using this definition, we classified 35 and 96 additional
urologists as owners and nonowners, respectively.
Subsequently, we constructed a variable to serve as a marker of local
competition within a health care market. Based on the association between
physician density and health care utilization (Paul-Shaheen, Clark, and Wil-
liams 1987; Folland and Stano 1990), we defined physician ownership pen-
etration as the ratio of ASC owners to all urologists in a health care market.
This ratio has values ranging from 0 to 1. The hospital referral region (HRR)
boundaries for tertiary medical care (Wennberg 1996) were used to divide
Florida up into 19 separate health care markets.
Those surgery centers where the urologists in our cohort operated were
assigned to their corresponding HRR in one of two ways. For hospital-based
surgery centers, our dataset could be linked to the 2003 American Hospital
Urologist Ownership of Ambulatory Surgery Centers1373
Association Annual Survey, which gives a hospital’s HRR as a data element.
For freestanding ASCs, we examined the frequency distribution of their pa-
tients’ five-digit ZIP codes, and we ascribed each ASC to the ZIP code from
which the majority of its patients emanated. We then cross-walked these fa-
cilities from their ZIP codes to their corresponding HRR using content from
the Dartmouth Atlas (The Dartmouth Atlas Project 2007).
Validation of Ownership Definition
We then performed a query of public records. The Agency for Health Care
Administration (AHCA) maintains the FloridaHealthStat website (AHCA
2007), through which we identified those freestanding ASCs at which 10 or
more urologic surgeries were performed annually (n560). Because every
hospital’s AHCA identifier is in the SASD files from Florida, we were able to
determine which of these freestanding ASCs were also present in our study
The Florida Department of State, Division of Corporation makes the
ownership records of these facilities publicly available (Florida Department of
State, Division of Corporations 2007), through which we could determine
their nonprofit status. Using the Florida Department of Health physician lo-
cator (Florida Department of Health 2007), we identified the specialty of each
to a urologist in 17 (35 percent). The physician locator was then used to find
those urologists who practiced at the same address as the index owner. The
total number of physicians with ownership interest in the facility was then
determined, and this was compared with the number derived from our em-
While we are prohibited from identifying individual physicians and fa-
cilities, the SASD’s data use agreement does permit us to report aggregate
statistics. For those 17 facilities whose ownership was traced back to a urol-
ogist, we identified 88 actual physician owners, or 94.6 percent of the 93
owners predicted by our empirically derived measure. In addition, 19 of the
21 urologists at the two nonprofit facilities were properly classified as non-
We arrived at our primary outcome measure by summing a urologist’s pro-
cedural volumes for stone disease across all freestanding ASCs and hospital-
based surgery centers in which he practiced during a calendar year. Our
1374 HSR: Health Services Research 44:4 (August 2009)
secondary outcome was the annual utilization rate of stone surgery within a
given health care market measured at the urologist level. For this rate calcu-
lation, the numerator was a urologist’s annual stone surgery count. The de-
nominator represented the population of the HRR in which the urologist
practiced. Total population counts for these HRRs were obtained from the
Dartmouth Atlas (The Dartmouth Atlas Project 2007). These crude rates were
then age-adjusted to the 2000 U.S. population using direct adjustment meth-
ods and are expressed per 100,000 U.S. population.
To examine the association between ownership status and urologists’
annual surgery use, we employed linear mixed models. The relationship be-
tween ownership penetration and annual caseloads was modeled in the same
way. Use of the mixed models corrected our standard errors for the potential
correlation of our observations (i.e., repeated measures of the same urologist
over time). The surgeon’s identifier and the HRR in which he operated were
primary payer, socioeconomic status, and level of comorbidity, in addition to
operative year, were then introduced into our models as fixed effects to adjust
for potential differences in a urologist’s patient population. To determine a
patient’s comorbidity status, we constructed indicator variables identifying
those cases for which there were 0, 1, 2, 3, 4, or 5 comorbid conditions on the
discharge record. Socioeconomic status was measured at the patient ZIP-code
level using a summary measure as described by Diez Roux et al. (2001).
Next, we performed several secondary analyses to evaluate the robustness of
our findings. One threat to our study’s validity stems from our choice of an
outcome measure. Utilizing a urologist’s annual count of ambulatory stone
surgeries assumes that theprocedures performed arerelatively homogeneous.
However, if this is untrue, then the count may obscure the use of more re-
source-intensive procedures with higher relative values. Therefore, we con-
ducted subgroup analyses, fitting separate regression models for the five stone
treatments examined: percutaneous nephrolithotomy, shockwave lithotripsy,
ureteroscopy, conventional extraction, and those ancillary procedures non-
specific for stone therapy. In addition to measuring annual volume counts for
each procedure, we also assigned resource-based relative value units (RVUs)
to the individual stone treatments based upon the surgery’s complexity, as
tabulated a urologist’s RVU total by procedure type.
Urologist Ownership of Ambulatory Surgery Centers1375
We also recognized the possibility for design selection bias. Specifically,
without a minimum annual caseload criterion, we may have included some
urologists in our analysis who do not treat stone disease on a regular basis. If
we designated theseurologists asnonowners, then ourresults would be biased
findings to the inclusion criteria used, first, by limiting our study population to
those urologists who performed 20 or more stone surgeries annually and,
second, by performing an outlier analysis estimating our models with and
without the top and bottom deciles with respect to surgeon annual caseload.
Despite the elimination of extremes in the data, the observed associations
To assess for potential misclassification bias and measurement error, we
varied the share of a surgeon’s cases in a given year at an ASC to constitute
ownership (i.e., 10, 20, 40, and 50 percent) and repeated our analyses. Finally,
to evaluate whether those urologists with several years of observations had an
a randomly selected year of cases for those whose participation spanned mul-
tiple years, results from which remained consistent with our primary analyses.
All tests were two-tailed and performed at a significance level of 0.05 using
Stata version 9.0 (Stata Corp, College Station, TX). In accordance with the
Code of Federal Regulations Title 45 Subpart A Section 46.101 paragraph b
subparagraph 4, Institutional Review Board approval was waived for this
Table 1. Patients operated on by owners appeared to be healthier with 56.8
percent having no comorbid conditions compared with 45.3 percent of pa-
tients treated by nonowners (po.001). The patient population cared for by
owners compared with nonowners was also more likely to be white (90.0
versus 81.0 percent, po.001). In addition, owners carried out a higher pro-
portion of their cases at freestanding ASCs than nonowners (39.6 versus 8.0
percent, po.001), and they were less likely than nonowners to perform mul-
tiple procedures in the same setting (32.8 versus 38.0 percent, po.001).
Overall age-adjusted utilization rates were higher among owners versus
1376 HSR: Health Services Research 44:4 (August 2009)
for shockwave lithotripsy, ureteroscopy, and ancillary procedures (Figure 1).
From our mixed models, a highly significant association was noted between
physician ownership and a urologist’s overall annual case volume (b522.92;
(adjusted b516.32; 95 percent CI, 10.98–21.67; po.001). Moreover, this
association persisted regardless of the threshold used to define physician
ownership status (Table 2). Our adjusted models reveal that this caseload
difference translates into higher annual utilization rates among ASC owners
compared with nonowners by 3.57 cases per 100,000 U.S. population (95
percent CI, 2.63–4.52; po.001).
Table 3 displays the results from our subgroup analyses in which we
examined the annual volume counts and RVUs for each procedure as a
Table1: Comparing the Patient Mix between Owners and Nonowners
Age ? standard deviation (years)
Socioeconomic status (%)
Number of diagnoses (%)
53.3 ? 16.4
53.8 ? 16.3
Urologist Ownership of Ambulatory Surgery Centers1377
function of physician ownership status. These data reveal that the difference
between owners and nonowners with respect to their stone surgery use is
largely driven by an increase in the use of shockwave lithotripsy by owners.
These results also highlight increased use of ureteroscopy and ancillary pro-
cedures among owners. Data on the most resource-intensive surgeries——per-
cutaneous nephrolithotmy and conventional extraction (Appendix SA2)——
show no difference in utilization between owners and nonowners. Of note,
centers (99.5 percent of percutaneous nephrolithotomies and 99.4 percent of
conventional extractions) and accounted for only a small fraction (0.8 percent
combined) of all ambulatory stone surgeries.
Physician Ownership Status and Procedure Type
Age-Adjusted Rates of Urinary Stone Surgery Stratified by
Rates expressed per 100,000 U.S. population. Bars represent the mean utilization
rates for physician owners (black) and nonowners (white). Error bars represent the
of a percutaneous nephrostomy tube or a ureteral stent.
1378HSR: Health Services Research 44:4 (August 2009)
Finally, the results from our models on ownership penetration revealed
higher surgeon annual caseloads associated with increasing health care market
competition. For every 10 percent increase in the penetration of physician own-
ers, we observed an increase in a urologist’s annual volume of stone surgery by
annual case volume would increase by 3.32 (95 percent CI, 2.17–4.46; po.001).
Ownership Status and Annual Case Volume
Linear Mixed Model Output, Examining the Association between
Percentage of Annual Surgical
Volume at an ASC
for Ownership (%)
b-Coefficient for Ownership Statusn
Unadjusted95% CI Adjustedw
Note: The significance level for both the unadjusted and adjusted beta coefficients in boldface is
nInterpretation of model output: The annual case volume for stone surgery, on average, is
expected to be higher among owners of an ASC compared with nonowners by the amount of
wModels adjusted for patient age, gender, race, payer mix, socioeconomic status, level of comor-
bidity, and operative year.
ASC, ambulatory surgery center; CI, confidence interval.
Volume and Relative Value Units Stratified by Procedure Type
The Association between Ownership Status and Annual Case
Annual Case Volume
Raw Count Relative Value Units
95% CI Adjusted bn
nModels adjusted for patient age, gender, race, payer mix, socioeconomic status, level of comor-
bidity, and operative year.
wAncillary procedures include placement of a percutaneous nephrostomy tube or a ureteral stent.
CI, confidence interval.
Urologist Ownership of Ambulatory Surgery Centers1379
Our data demonstrate a significant association between physician ownership
of ASCs and higher use of surgical services for the treatment of urinary stone
disease. Further, surgeon annual caseloads were found to rise as the penetra-
tion of physician owners increased within a health care market. With the
Centers for Medicare and Medicaid Services new prospective payment sys-
tem for ASCs, reimbursement for several lithotripsy procedures is slated to
increase (CentersforMedicare & Medicaid Services,HHS 2007). As such, the
observed differences in stone surgery utilization may become even more
pronounced, resulting in higher health care expenditures.
physician ownership and the provision of increased and/or nonbeneficial pa-
tient care, and we acknowledge that there are multiple plausible explanations
for our findings. For one, the higher surgery rates associated with ownership
may reflect surgeon specialization. Physician owners may have clinical prac-
tices tailored toward treating patients with urinary stones——the majority of
surgeries for which can be performed on an ambulatory basis. Conversely,
nonowners may lack the caseloads needed to justify the cost of investment. As
such,owners’utilization wouldbehigherbecause oftheirskillset,notbecause
they own facilities.
Another possible explanation forour findings, which is also unrelated to
financial incentives, pertains to efficiencies in patient care. Proponents of
ASCs have long argued that by focusing solely on one component of patient
care, ASCs are more efficient in their care delivery (Davis 1987). Without the
huge infrastructures and associated maintenance expenses that burden hos-
pitals, ASCs can maintain low overheads, keeping costs to patients down
(Wolfson, Walker, and Levin 1993). Physicians who see a large number of
their patients treated more readily and for lower costs at ASCs may under-
standably make the decision to become owners themselves.
and nonowners with respect to their desire for financial gain. Profit motive
works no less among nonowners as it does among owners, and nonowners
maximize personal profits in the same way that owners do——by operating
more. While most would agree that the majority of urologists do not practice
medicine for monetary reasons alone, they do face a business reality, and it
seems reasonable to assume that those urologists who are the most motivated
structure. By virtue of their profit preferences, some owners may be driven to
1380 HSR: Health Services Research 44:4 (August 2009)
the point of relaxing their indications for intervention and inducing demand
(McGuire and Pauly 1991; McGuire 2000).
begin,wedid notmeasureownership directly,but rather derived itempirically
relying on the safe harbor provisions (Health Care Financing Administration
1999; Becker and Biala 2000). Nonetheless, we externally validated our own-
ership definition, querying the public records of a meaningful subsample of
constitute ownership status, we may have misclassified some urologists; how-
ever, we conducted secondary analyses, varying the share of a surgeon’s cases
needed to establish ownership, and demonstrated our results to be robust.
We also recognize that our primary outcome——a surgeon’s annual case-
load——is not ideal. Summing procedure codes assumes that the surgeries per-
formed are homogeneous and that the amount of work required for each is
about the same. Since this is unlikely to be the case, we performed subgroup
analyses in which we examined the annual volume counts and RVUsfor each
procedure as a function of physician ownership status; and we found that the
difference in stone surgery use between owners and nonowners is largely
driven by owners’ greater affinity for shockwave lithotripsy——a finding that is
not surprising when considering that shockwave lithotripsy has one of the
highest reimbursement rates per hour of service provided among common
urologic procedures (Lotan et al. 2004).
Our secondary outcome has its shortcomings as well. If we knew the
number of patients with stone disease that each urologist saw, we would be able
to determine if the proportion of patients referred for a lithotripsy procedure
differed between owners and nonowners. Lacking these data, we used a urol-
ogist’s annual utilization rate of stone surgery as a proxy for his frequency of
surgery use. The problem with this measure is that the denominator for the rate
calculation——the population of the HRR in which the urologist practices——over-
estimates the urologist’s panel size. With population estimates for HRRs that
range from several hundred thousand to over two million people (The Dart-
mouth Atlas Project 2007), the urologist’s annual utilization rate surely under-
estimateshisactualfrequency ofuse.Consequently,theobserved ratedifference
between owners and nonowners, which is small in absolute terms, may be mis-
construed as having little clinical significance. Therefore, we caution the reader
against interpreting these rates in isolation. They are best viewed in conjunction
with the annual caseload difference between owners and nonowners.
Finally, we are limited by the granularity of the SASD. As such, we are
unable to control for those clinical features (e.g., urinary stone size, location,
Urologist Ownership of Ambulatory Surgery Centers1381
patient symptom severity) known to influence treatment. Thus, we cannot
comment of the appropriateness of the cases performed.
In summary, our data demonstrate a significant association between physician
ownership of ASCs and higher use of surgical services for the treatment of
a likely possibility relates to the perversion of financial incentives among phy-
sician owners. While it is naı ¨ve to believe that ridding the landscape of phy-
sician-owned ASCs would effectively address the problem of overutilization in
our health care system, these data suggest that such relationships may contrib-
ute to rising expenditures. Further work is necessary to elucidate the extent to
which misaligned incentives drive the use of discretionary surgery.
Joint Acknowledgment/Disclosure Statement: John M. Hollingsworth is a Robert
Wood Johnson Clinical Scholar.
Zaojun Ye, Seth A. Strope, Sarah L. Krein, and Ann T. Hollenbeck had
no specific funding support for their time on this project.
Brent K. Hollenbeck is supported, in part, by a mentored Research
The funding sources had no role in study design, data collection, data
analysis, data interpretation, or in the writing of the report.
M.P.H., for their review of our analytic methods and our interpretation of the
results. The authors would also like to thank Samuel R. Kaufman, M.A., and
Sonya DeMonner, M.P.H., for their help with data management.
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Additional supporting information may be found in the online version of this
Appendix SA1: Author Matrix.
Appendix SA2: Work RVUs Assigned to Each CPT Code.
Please note: Wiley-Blackwell is not responsible for the content or function-
ality of any supporting materials supplied by the authors. Any queries (other than
missing material) should be directed to the corresponding author for the article.
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