Cabot Hyde, partner at Waller, discusses the essentials of surgery center partnership and alignment opportunities with hospitals.
Q: What information and data should surgery center administrators compile to prepare for approaching a hospital about a partnership or alignment?
Cabot Hyde: After executing a confidentiality or nondisclosure agreement, administrators will likely be asked to provide financial statements for the last several years along with data showing the surgery center's utilization broken out by physician and CPT. A potential hospital partner will also be interested in the center's payor contracts. The hospital will also want information on any risk factors associated with the surgery center, such as lease issues, pending litigation, partnership issues — even the upcoming retirement of a productive surgeon.
Q: What are reasonable expectations for surgery center physician partners when going through the alignment or partnership process?
CH: The expectations of the surgery center physician partners will depend a great deal on whether they plan to sell a minority interest in the surgery center or a majority interest. The physician partners should also get a sense of what the hospital brings to the table in terms of volume and payor contracts. When it comes to putting a number on the value of the surgery center, there are numerous factors that influence each individual valuation.
Q: What are the benefits of alignment or partnerships?
CH: There are a number of benefits for a surgery center and its physician owners associated with aligning or partnering with a hospital. First, there is the potential for increased volume as well as the potential for improved reimbursement rates. The alignment or partnership could also serve to improve the center's debt structure and opportunities to secure future financing — lenders prefer to work with centers with a hospital affiliation as opposed to standalone centers. Finally, the alignment or partnership may provide liquidity to the physician owners.
More Articles on Surgery Centers:
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Q: What information and data should surgery center administrators compile to prepare for approaching a hospital about a partnership or alignment?Cabot Hyde: After executing a confidentiality or nondisclosure agreement, administrators will likely be asked to provide financial statements for the last several years along with data showing the surgery center's utilization broken out by physician and CPT. A potential hospital partner will also be interested in the center's payor contracts. The hospital will also want information on any risk factors associated with the surgery center, such as lease issues, pending litigation, partnership issues — even the upcoming retirement of a productive surgeon.
Q: What are reasonable expectations for surgery center physician partners when going through the alignment or partnership process?
CH: The expectations of the surgery center physician partners will depend a great deal on whether they plan to sell a minority interest in the surgery center or a majority interest. The physician partners should also get a sense of what the hospital brings to the table in terms of volume and payor contracts. When it comes to putting a number on the value of the surgery center, there are numerous factors that influence each individual valuation.
Q: What are the benefits of alignment or partnerships?
CH: There are a number of benefits for a surgery center and its physician owners associated with aligning or partnering with a hospital. First, there is the potential for increased volume as well as the potential for improved reimbursement rates. The alignment or partnership could also serve to improve the center's debt structure and opportunities to secure future financing — lenders prefer to work with centers with a hospital affiliation as opposed to standalone centers. Finally, the alignment or partnership may provide liquidity to the physician owners.
More Articles on Surgery Centers:
10 Questions to Ask When Choosing a Management company for an ASC
15 Statistics on Surgery Center EBITDA
6 Important AAAHC Accreditation Updates to Know