Ambulatory Surgery Center Partnerships With Hospitals: Possibilities & OpportunitiesAt the 19th Annual Ambulatory Surgery Centers Conference in Chicago on October 25, a panel of experts talked about ASC relationships with hospitals. The relationships discussed include joint ventures, hospital outpatient departments and co-management arrangements. President of Acquisitions and Development for Ambulatory Surgical Centers of America Jeff Peo, Vice President of Acquisition and Development for ASCOA Donna Greene, and CEO of Lake Park Surgery Center Robert Scheller, Jr., participated in the panel.
“I think that joint ventures are being looked at with more frequency than they used to be,” Mr. Peo said. “With the combination of the pressure and uncertainty surrounding what the medical system will look like over the next 10 years and declining reimbursement, surgery centers are looking for ways to feel more secure.”
Depending on the market, there are still opportunities to convert ASCs to HOPDs. Mr. Scheller described his projects in northwest Indiana and Chicago area converting ASCs. There are several reasons ASCs decide to transition into HOPDs, including higher reimbursement rates. However, the conversion means surgeons no longer have ownership in the ASC and may not be able to run as efficiently.
“If you are going to flip from an ASC to HOPD, you better like going to a lot of meetings,” said Mr. Scheller. “I see the rates from some isolated surgery centers where there is no other competition. Their net revenue is fantastic. Without that hospital influence, ASCs can run circles around the hospital. Our physicians insisted that the management group from the original surgery center stayed and managed the center going forward.”
Joint venture ASCs are also an option, including three-way partnerships between physicians, hospitals and a management company. Hospitals may push for 51 percent controlling interest, but with third party owners hospitals can still own shares without owning more than half of the center. However, when the hospital is a minority owner it becomes harder to leverage the relationship for better payor contracts, according to Ms. Greene.
“I think there is a real movement to try to recapture some of those high-dollar cases, and hospitals want to recapture as much as they can,” says Ms. Greene. “Joint ventures with physicians creates loyalty, and those physicians are more likely to admit cases into the hospital. Like any business model, it all boils down to the relationship: it’s got to be transparent. If you do that on the front end you are more inclined to have a better relationship going forward.”
Mr. Scheller also added the importance of communication between all members of the joint venture to make sure everything runs smoothly. “We were very strong in believing that if we were a good partner, and they were a good partner, we would both benefit,” says Mr. Scheller.
Finally, the panel touched on a growing trend of ASC surgeons becoming employed by hospitals. “It’s a real threat to the ASC market and surgeons if the hospitals choose to employee physicians and say they can’t perform cases at the center,” says Mr. Peo. “If it makes financial sense — like being in a small market where physicians are leaving — they might allow surgeons to perform cases at the ASC. It’s really very market-driven.”
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