Mr. Zasa has decades of experience in the ASC and hospital partnership space, and he shared lessons learned through dozens of partnerships between hospitals and physician-owned ASCs during the Becker’s ASC 22nd Annual Meeting – The Business and Operations of ASCs on Oct. 22 in Chicago.
The following are seven unforgettable lessons to help build a healthy hospital-physician ASC partnership.
1. Inform hospital executives what works for ASCs. According to Mr. Zasa, hospital administrators generally acknowledge they don’t know the ASC business that well and it can be difficult for them to delve into the level of detail necessary for a specialized ASC. Therefore, the ASC experts need to demonstrate to the hospital leaders what they can provide and what works in ASCs. He recommended orienting hospital management to trends in ASCs as well as how ASCs differ from hospitals in areas like staffing, contracts, policies and business office operations.
2. Come to a clear agreement on goals. It is especially important to have both groups sit down to hash out goals, objectives and a timeline for the partnership, according to Mr. Zasa. Hospitals and physicians may want different things, and a big impediment to success can be that that hospital’s bottom line drives the venture rather than a desire for a true partnership with the physicians and the ASC. Mr. Zasa said being forthcoming at the beginning of a relationship can make the whole venture more successful in the long run. “If you start off with an adversarial relationship, it generally doesn’t get better.”
3. Set a clear understanding of timeline. When a center gets a certificate of occupancy on day one, “you cannot necessarily do cases,” according to Mr. Zasa. It could take up to six months to become fully operational, so setting a realistic timeline at the beginning is extremely important. “Working through expectations and having a clear picture before you build a center…is extraordinarily important,” he said.
4. Talk about financial management. “We think it’s important to have a third party do the financials of the surgery center so that there’s nobody saying that the hospital is gaming it or the physicians are gaming it,” he said. Mr. Zasa also noted he sees many surgery centers get “eaten up” by banking fees. When looking for a bank partner it is important to not only look at interest rates, but their fees as well.
5. Review assumptions on budget and debt. Since it can take around six months for a venture to become cash-flow positive, expectations need to be set upfront about money before the venture breaks even and can start paying dividends. It is also important to get physicians acquainted with accrual accounting. “We think accrual accounting is absolutely the proper way to account for a surgery center,” he said, but physicians are typically more accustomed to cash accounting.
6. Spell out differences of ownership and control. Even if a hospital owns the majority of the joint venture, that does not mean they automatically get a majority on the board, Mr. Zasa said, but if a hospital is a nonprofit, they need to maintain specific controls of the joint venture to maintain their tax-exempt status. The ASC operating agreement, or governing agreement, needs to articulate these things. Before putting one together, the parties need to talk about ownership and control differences, rights of shareholders, ownership eligibility and partner buy-out and buy-in provisions. “These things need to be discussed and be integrated into your ultimate governing document.”
7. Make agreements on moving services. Hospitals need to agree to move appropriate services to the ASC, if they are attractive to payers, reduces the out-of-pocket cost to the patient and can give the patient a more satisfying experience, Mr. Zasa said.
The bottom line from these seven lessons is that trust and respect, and having the right conversations upfront, can ensure a successful relationship between hospitals and ASCs.
