How to go "All-In" with ASC joint ventures — And make sure your partner is too

There is a huge opportunity for physicians to partner with hospitals on joint venture ambulatory surgery centers today.

But not every partnership is a good match. Both sides want to make sure their partner is "all-in" for the center's success. Here are three key qualities for hospital systems to look for in their physician partners:

• Willingness to make a financial investment in the center
• Maximum facility usage for appropriate cases
• Willingness to save money on physician preference items

JeffreySimmons"If it's the physician's only surgery center joint venture, the center's success is extraordinarily critical to their investment," says Jeffrey Simmons, CDO for Regent Surgical Health. "If it's their second or third ASC, then they're doing it for political reasons and you have to question their commitment and whether the cases they say they can contribute would be accurate."

Additionally, the size of the investment is critical. If the surgeon is young and can't afford a huge investment, that may not be a red flag. However, if the surgeon is more experienced and still wants small ownership, the surgeon is treating the ASC as a stock deal which could lose money.

"Some doctors will say whichever surgeon isn't coming to the meetings isn't interested, but that's not necessarily the case," says Mr. Simmons. "Some physicians are just really busy. While it's always good for physicians to show up, it's not necessarily a problem when they don't. I'd rather see them have skin in the game."

For physicians, three key qualities to look for in hospital partners are:

• Hospitals that already have partnerships with physicians
• Willingness to give physicians operational control
• Hospitals with strong market positions

Tom Mallon"The hospital needs to value the physician relationship and treat physicians like customers instead of indentured servants," says Tom Mallon, founder and CEO of Regent Surgical Health. "If the hospital executives respect the surgeons and what they bring to the hospital, that's the first step toward a successful partnership."

Hospitals that haven't done a physician joint venture before may not have the right attitudes or expectations. One red flag for physicians is hospitals that have lawyers on the front line of business decisions.

"Working with lawyers is a necessary part of making the transaction happen, but it has to make good personal and strategic sense, and then the lawyers can make sure it makes legal sense," says Mr. Mallon. "The physicians should control the day-to-day environment they work in and the hospital has to control the ASC from a financial standpoint so they can contract for the facility."

As more higher-acuity cases are going to the outpatient setting — including total joint replacements — joint venture ASCs will make sense for hospitals. This is especially true for hospitals with risk-sharing agreements or their own health plans.

"It's hard for the hospital to agree with allowing higher acuity cases into the ASC where it pays less, but if the hospital has its own health plan or assumes risk, they'll want patients in the low-cost venue," says Mr. Mallon.

Consider why the hospital is entering into the partnership: is it for strategic gain in the future or are payers pushing them in that direction? Is the partnership an offensive or defensive move? "Hospitals that are truly interested in partnerships for the future produce the most successful ASC joint ventures," says Mr. Simmons. "You can just ask them directly to figure out where the CEO is at. If the CEO doesn't want the partnership to occur, you're never going to be successful."

Developing the trust necessary to become business partners may be difficult for some physicians and hospital executives, especially if the two groups have an adversarial past. But bringing everyone together toward one goal—the ASC's success—can be beneficial for both parties. Additionally, ASC boards that include both physician owners and hospital executives bring the two groups together and give physicians an audience with their hospital executives, which is extremely valuable.

"Most board members are physicians in our ASCs," says Mr. Simmons. "We look for key physicians with larger practices to take leadership positions on the quality and management side. They add tremendous value to the center and the physicians also control most of the votes on the board."

The physicians can become good partners by working with the hospital executives to grow the ASC. To become even deeper partners, physicians can:

• Bring more inpatient work to their partnership hospital
• Give up unused block time for potential new partners
• Take call hours at the hospital
• Serve on additional leadership committees for inpatient departments

The physician partners can also be valuable in recruiting future partners. While administrative leadership can compile statistics and facts about new potential partners and forecast how they would impact the ASC, current partners will know whether the surgeon is actually busy and produces quality outcomes.

"Most of the time they also know the surgeon's personality," says Mr. Simmons. "Once we're open and we get used to a certain way we operate, there is a pace to the decision-making and culture we like to instill. We want the physicians to fit that culture."

Hospitals can become better partners by allowing employed physicians to perform cases at the center. "Hospitals are already getting revenue from those physicians because they're employed, and they can use the ASC as a recruitment tool," says Mr. Simmons. "Physicians like the ASC because they can get in and out quicker."

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