Jon Vick is president of ASCs Inc. in Valley Center, Calif., which advises physician-owners of ASCs on forming strategic partnerships with ASC companies and hospitals. Here he identifies eight changes affecting ASCs in the next 5-10 years.
1. Decline in new centers. Very few new centers are opening, and the few that are tend to be specialty centers such as spine and bariatric centers.
2. Existing centers doing well. The recession has affected some centers that have a lot of elective surgeries, but the centers Mr. Vick deals with have not shown a significant drop in revenue.
3. Physician-owned ASCs eventually need help. "Physician-owned centers do well at first, then after about two years they tend to plateau," Mr. Vick says. "Physicians can't make them grow any more." ASC volume grows as physician-founders gradually move their cases into it, but volume hits a brick wall. The physicians need management companies to help them recruit new doctors, expand into new specialties and negotiate better contracts, he says.
4. ASC management companies can help. Physician-owners reach out to management companies because they want to grow or they want to retire and transfer ownership. A management company can open access to more lucrative payor contracts and help ensure a relatively easy transition from out-of-network to in-network status with payors. Companies can also assist with recruitment. It's hard for a physician-owner to recruit a new doctor because these potential recruits are wary. They need to have a convincing business plan, which the management company can put together.
5. More companies agree to minority interest. In a relatively recent trend, some management companies will accept minority interest in the ASC. These companies are now large enough to be satisfied with a smaller revenue stream coming from each center. Also, they want the more successful centers and understand the physician-owners of these are less willing to give up a majority share. When physicians approach the companies, their centers are not at full potential and they see their shares as underpriced. They want to hold on to them until they become more valuable.
6. Partnerships with hospitals may have problems. The hospital generally wants a majority share and has different goals than the physicians have. The hospital wants to fill its beds, direct referrals and control all services in its area, but physicians in an ASC have no interest in these goals. They simply want an efficient, well-run center that makes a profit. These differences may lead to dissatisfaction.
7. ASCs will adapt to ACOs. Little is known about what accountable care organizations will be like, but whatever changes they bring, surgery centers will adapt, Mr. Vick says. "They have always found a way to be flexible about whatever comes up in the marketplace," he says. "They are used to accommodating to changes in the healthcare system."
8. More consolidation of the industry. Over the next 10 years there will be additional consolidation of the industry. In mergers and other transactions, the 40 existing ASC management companies will be whittled down to half that number. The share of centers that are independent will decline from about 50 percent to 20-25 percent. The rest will be affiliated with a hospital or management company or both. Many of the centers that stay independent will be the smaller ones that are less desirable.
Learn more about ASCs Inc.
Read more insight from Jon Vick:
- Critical ASC Mistake: Waiting Too Long to Find a Partner
- Predictions for the Immediate Future of ASCs With Jon Vick of ASCs Inc.