Hospital and health system leaders have made their position on ambulatory surgery centers clear. They want them, and most want to own at least half of each center.
Our new 7th Hospital Leadership ASC Survey found that 89% of participating organizations have at least one ASC owned, affiliated or in development, and 53% have five or more. Of the 11% with no ASC, most expect to have one, which means a hospital still weighing whether to invest is increasingly competing against peers that have already decided.
With ASCs this widespread, the more pressing questions for hospital and health system leaders involve how to own and run them, including whether to bring in physicians as partners and how to manage a growing network of centers.
Hospitals are mixing ownership models
Seventy-nine percent of respondents hold at least some of their ASCs as joint ventures with physicians. Only a small share hold every center that way, and most pair joint ventures with centers they own outright. In practice, health systems are choosing between physician partnership and sole ownership market by market.
Physician equity plays a growing part in those decisions. Ninety-seven percent of hospital leaders say having an ASC helps with surgeon recruitment, and 14% call it a requirement for most candidates. Recruiting surgeons, historically one of the lower-ranked reasons hospitals give for owning or affiliating with ASCs, has moved up notably in recent editions of the survey. As the survey report notes, how a hospital engages its surgeons is becoming as much a recruiting tool as the facility itself.
Ownership share remains a priority
More than 9 in 10 respondents want at least a 50% stake in their ASCs. Holding at least half of a center gives a health system a stronger position in payer negotiations and helps keep clinical operations consistent across sites, both of which matter more as the number of centers grows. Nearly all participants also say commercial payers are pushing them to move services to the outpatient setting.
Where the management decision fits
Whatever arrangement a health system chooses, someone needs to run its ASCs day to day, including staffing, compliance, revenue cycle management, payer contracting and accounting at every site. Three-quarters of respondents plan aggressive or moderate expansion, and how quickly an organization can grow often depends more on internal bandwidth and project management capacity than on appetite, according to the report.
Many health systems are bringing in an outside manager to add those resources, and how that manager is paid deserves as much scrutiny as the joint venture terms. A management company that takes equity becomes another owner, with its own claim on the center’s value and its own interest in board decisions. A fee-based manager adds support without changing who owns the center, which leaves every ownership interest available to the hospital and the physicians it wants to recruit. That is how we work with the hospitals and health systems we serve, and we see it as a practical way to protect a health system’s ownership position while preserving room for physician investment, if that’s what our partners choose. We explored how fee-based management fits alongside hospital and physician ownership in an earlier Becker’s ASC Review column, “Non-equity ASC management is redefining what owners should expect.”
Questions to ask about any hospital ASC partnership
Joint venture agreements often include transfer restrictions and rights of first refusal that make terms difficult to revisit later. Whether a health system is forming its first partnership or adding its fifth center, these questions are worth answering early:
- Are new sites being prioritized by patient demand and physician alignment, or added as opportunities come along?
- How much equity will remain available for surgeons recruited in the coming years?
- Does your team have the bandwidth to support the expansion you have planned?
- Are your centers’ payer contracts negotiated with the strength of the whole network behind them?
- Does your management partner hold equity, and how would that affect future ownership decisions?
Competition for outpatient cases is widening
Ninety-six percent of respondents plan continued ASC investment or affiliation, and they won’t be competing only with each other. Physician offices and office-based labs are drawing volume in specialties such as ENT, ophthalmology and pain management, while more than a quarter of respondents cite entering new markets as a reason to own or affiliate with an ASC. As hospital networks grow, decisions about who partners in each center and who manages it will shape performance long after the agreements are signed.
The survey report also ranks the reasons hospitals invest in ASCs and shows how they have shifted in recent editions while detailing what’s keeping some organizations from having an ASC. It’s a must-read for any hospital and health system leader involved in outpatient surgical strategy.
Download it now at medhq.com, and if you’re planning a new center or rethinking how your current ones are managed, we would welcome a conversation.
Derrick Idbeis is Chief Commercial Officer of Avanza + MedHQ, a healthcare services organization providing non-equity management, advisory, and administrative solutions to ambulatory surgery centers, physician practices, and healthcare systems nationwide. Write him at didbeis@medhq.com.
At the Becker’s 32nd Annual Meeting: The Business and Operations of ASCs, taking place October 29-31 in Chicago, ASC leaders, surgeons and healthcare executives will explore strategies to drive growth, enhance operational performance, navigate reimbursement challenges and prepare for the future of ambulatory surgery. Apply for complimentary registration now.
