Sean Rambo, co-founder and president of Compass Surgical Partners, recently joined Becker’s to discuss the company’s new orthopedic ASC joint venture in Newport News, Va., developed alongside Bon Secours Mercy Health and a group of local physicians.
The project offers a glimpse into how Compass navigates certificate-of-need laws, one of the most complex regulatory environments in the U.S., and how those laws influence its growth strategy.
“With the CON laws in place, outpatient surgery is underserved and has an opportunity to migrate more out of the hospital setting — that’s why we’re excited about the market and working with Bon Secours,” Mr. Rambo said.
Compass sees opportunity where many see red tape. In states that require CON approval, such as Virginia, establishing a new ASC can be a long, uncertain process.
“In regulated states — states with certificate-of-need laws — like Virginia, it’s extremely difficult to get a new center through the CON process,” Mr. Rambo said. “So in those service areas, we focus on acquisition.”
The Bon Secours partnership in Newport News presented what Mr. Rambo described as a “slightly unique scenario.”
Virginia’s licensing framework includes a loophole that allows physicians to build what’s called an “operatory” without a CON. These facilities look and function like surgery centers but can only treat commercially insured patients, since they are not eligible for Medicare participation.
“With Bon Secours, they had an existing CON in another part of the market that they could contribute,” he said. “There was no new CON — just a transfer. We could then acquire the business and convert it to a licensed surgery center, allowing them to bring both commercial and Medicare business out of the hospital.”
According to Mr. Rambo, this is one of the advantages of working with health systems that already have approved CONs and operating room capacity. These hospitals “can look at transferring a CON into an existing operatory and converting it,” he said.
Compass Surgical isn’t deterred by regulation.
“Certificate-of-need laws certainly make it more challenging to grow rapidly, but they’re also a barrier to entry,” Mr. Rambo said. “Our firm was founded in North Carolina, which had aggressive CON laws — you just have to figure out how to navigate them.”
That experience has helped Compass build strategies suited for both regulated and nonregulated markets. In CON states, he said, development takes longer, but competition is also more limited.
CON restrictions also shape the type of partnerships that thrive.
“States with CON laws also struggle to have as many independent centers without health system partners, because of the politics around CON laws,” Mr. Rambo said.
For Compass, that reality has made collaboration essential. By teaming up with systems like Bon Secours Mercy Health, Compass can leverage existing CONs to expand access to outpatient care.
“In these service areas,” Mr. Rambo said, “we think outpatient surgery is underserved and has an opportunity to migrate more out of the hospital setting — that’s why we’re excited about the market and working with Bon Secours.”
