Before partnering with a health system, one question would have saved Riverwoods Surgery Center thousands of dollars a month, administrator Adam Shurtz said: What does the fee cover?
Mr. Shurtz spoke Oct. 30 at Becker’s 32nd Annual Business and Operations of ASCs conference in Chicago.
About eight years ago, the Provo, Utah-based center partnered with a health system that charged a 5% management fee. The invoices started almost immediately.
“I started getting these invoices from the hospital for certain things that I thought were included in that 5%,” Mr. Shurtz said.
The extra charges included:
- Accounting and bookkeeping: $5,000 to $8,000 a month
- The hospital’s EHR, which replaced the system the center had built: about $6,000 a month
- Preferred vendors the center was required to use, which cost more than its own
- K-1 preparation, which the center’s current partner includes
The accounting and EHR charges alone added roughly $11,000 to $14,000 a month, he said.
The 5% rate itself was typical. ASCs spent a median 4.9% of net operating revenue on management fees, according to VMG Health’s 2022 multispecialty ASC benchmarking study, the most recent available data. The middle half of centers paid 3.9% to 5.9%.
His physicians were caught off guard.
“It was all a shock to my physicians,” he said, “Why didn’t we know that?’” he said.
Mr. Shurtz said ASC leaders should ask a partner to “physically put it down on paper and let me know what I get for your 5%.”
“Is it contracts? Is it accounting? Are you going to do the K-1s?” he said.
A different experience
Jeany Dunaway, administrator of Sarah Bush Lincoln Effingham (Ill.) Surgery Center, said her health system partner covered those services within its percentage.
Mattoon, Ill.-based Sarah Bush Lincoln Health Center became the center’s majority owner in April 2024. It bought about 72% of the center from USPI after holding a minority stake since 2018.
“I think that’s where that trust came through in that partnership,” Ms. Dunaway said. “They viewed it more as a partnership.”
Geri Eaves, vice president of ambulatory services at MedHQ/Avanza Strategies, said sellers should ask for integration plans and references and talk to other centers partnered with the buyer.
“Just ask questions and don’t ever stop asking questions,” she said.
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.
