5 Strategies for a Winning ASC-Hospital Partnership
In a session titled "Physicians, Hospitals, and Management Companies - What it Takes to Make a Winning Partnership and ASC" at the 10th Annual Orthopedic, Spine and Pain Management-Driven ASC Conference in Chicago, Jeff Simmons, chief development officer at Regent Surgical Health, and Nap Gary, chief operating officer, discussed the strategy of pursuing a hospital partnership.
1. A hospital can be a good partner if it has higher contracted rates and does not require operational control. "There is a historical reason why less than 20 percent of hospitals are partnered with physicians, and it mainly has been because the hospital not only wanted majority ownership, but also control of operations, " said Mr. Gary. Historically, most hospitals only wanted to partner with surgeons if they could own and manage most of the ASC, but this has changed dramatically in the past several years, he said.
"Regent's ownership and governance model is a hybrid that allows the physicians to keep operational control while providing the doctors a healthy financial result both in a sale and on future earnings," he said. "Most of our transactions provided the doctors who sold half of their interests with similar or higher financial returns annually than before the sale."
2. There are advantages to partnering with hospitals. Surgery centers receive significantly higher payments for cases with the hospital model versus the independent ASC model, Mr. Simmons said. "Hospitals are now buying practices again and acquiring or developing ancillary services of which ASCs are a primary target, and this provides a wonderful hedge against shrinking surgeon reimbursements in their practices and at their ASCs," he said.
3. Regent recommends the "hospital contracting" model. Under this model, a hospital forms a strategic alliance with select surgeons, minimizing their financial investment and risk and preventing surgeons from competing with them in other transactions. If this model is structured correctly, the payments per case are at least 30 percent higher than those of an independent ASC, said Mr. Simmons. "At the same time, it provides protection for the doctors that the hospital cannot compete with them in other transactions, and it allows the doctors to maintain daily clinical and operational control over the facility," he said.
4. Physicians should maintain more operational control than they yield to the hospital. According to Mr. Simmons, responsibilities allocated to the hospital should include budgetary control; strategic decisions; disposition of assets; and super majority rights related to the types of procedures conducted. Physicians should maintain control by making medical executive committee recommendations; selecting anesthesia providers; making daily operations decisions that require board approval; approve physician members that go to partnership votes; determine clinical operating policies and procedures; and approve equipment purchases as part of the budget.
5. Pay attention to signs that the "hospital contracting" model is ideal. The hospital contracting model would be recommended "in a community where payors squeeze the independent ASCs on price and out-of-network facilities have to change to a contracted model, " said Mr. Simmons. The model would also be ideal in a competitive, oversaturated ASC market or in a market where the hospital of choice is accustomed to joint ventures with physicians.
Mr. Simmons added that the hospital should show an interest in partnering with physicians and should have a strong track record of negotiating favorable contract rates. "It is ideal if the local surgeons can utilize this model to form a strategic alliance with the local hospital of choice," he said.
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