This article was written by Bo Hjorth, vice president of business development at Regent Surgical Health, and republished here with permission.
Regent has been at the forefront of creating joint ventures between hospitals and surgery centers because at an early stage we recognized the strategic value of hospitals or hospital systems owning ASCs, and then crafted a joint venture model that benefits both physician-owners and hospitals equally.
With a few exceptions, independent ASCs should be actively seeking hospital partnerships. Below are five reasons why independent ASCs should look for hospital partnerships immediately:
1. Reimbursements are dropping for independent ASCs—hospitals have leverage.
Out-of-network reimbursements have evaporated, and CMS reimbursements for independent ASCs have continued to decline. Within the last five years, independent ASC reimbursements per case have dropped to almost half of HOPD reimbursements.
ASCs partnered with hospitals capitalize on the systems leverage in payor contracts and are in a more secure position with regards to future federal regulation on health care.
2. Hospitals see value in giving physicians greater ownership and control in ASCs.
Physicians partnering with hospitals no longer see the value of a 10 or 20 percent ownership position. Hospitals recognize ASCs have proliferated in the last thirty years as cases left their ORs because physician-owners were the drivers and were incentivized to bring patient volume.
Regent's partnership model allows the physicians to retain a 49 percent ownership position in the ASC, but more importantly, hospitals are allowing physicians to have operational and clinical control at the board level. Hospitals benefit with physician expertise, and physicians benefit by being aligned with a larger physician network. Both parties benefit from having Regent serve as manager to represent each party's best interests.
3. Hospital partnerships make your ASC more attractive to physician partners.
ASCs looking to bring more physician investors into their center should recognize the prevailing market attitudes towards independent ASCs. There is great uncertainty about what future federal regulation may entail for reimbursements at independent ASCs, and many physicians believe that ACO reimbursements will be driven through hospitals in the future.
Physicians looking to acquire a share of an ASC are more inclined to seek ASCs whose future is financially secure. In today's environment that usually means investing in a hospital/physician joint venture.
4. Your referral network could be shifting as hospitals expand their reach.
Hospitals are employing an increasing numbers of primary care physicians and some physician specialties are starting to see changes in referral patterns. On the other hand, specialty physicians in most cases still remain independent, so hospitals seek to acquire these physicians by purchasing strategic multi-specialty ASCs.
Aligning your ASC with a hospital allows the physicians to be part of the hospital's larger physician network, therefore securing the
ASC's future. On the flip side, ASCs that are idle while their competitors' partner with their region's top health providers could soon find themselves squeezed out of the market entirely.
5. Liquidity for physician partners.
There are numerous considerations for ASC physician owners when contemplating a transaction with a hospital partner. Many ASCs were developed in the last twenty years and physician owners have to seriously discuss exit strategies to maximize return on investment.
Strategically aligning the ASC for the future with the right hospital partner can create a legacy for the physicians. The transaction will create a "liquidity event" allowing physicians to "cash out" some of their equity and reduce risk. For physicians this pay day can unlock new opportunities for private practice investment or personal pursuits. At the same time, the transaction is not an outright sale of the ASC; the physicians still retain a sizable equity stake with a hospital partner and now have long term growth potential.
Hospitals are aggressively scouring their markets for ASCs to acquire. Regent will work with the leadership of the ASC to determine the right hospital partner and will work with both parties to ensure a successful transaction.
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