Joint ventures with physicians remain the default structure for hospital-owned ASCs, and the agreements behind them can be hard to undo.
Seventy-nine percent of hospital and health system leaders surveyed structure at least some of their ASCs as joint ventures with physicians, according to the 7th Hospital Leadership ASC Survey from Avanza + MedHQ, released Nov. 2 and conducted with HealthLeaders Media. JV agreements often include transfer restrictions and rights of first refusal that can make it harder to renegotiate terms or change direction once a partnership is in place, the report said.
Five provisions that shape hospital-physician ASC partnerships, and where they have come into play:
1. Buyout and valuation clauses. West Des Moines, Iowa-based UnityPoint Health and The Iowa Clinic have sued each other over the value of The Iowa Clinic’s 50% stake in Lakeview Surgery Center, which the two have jointly operated since 2002. The Iowa Clinic exercised its contractual right to sell the stake to UnityPoint in May 2025. Their 2000 operating agreement calls for a third appraisal if the first two differ by 10% or more. Under the agreement, the price is the average of the two closest appraisals. UnityPoint’s appraiser valued the stake at $10.7 million and The Iowa Clinic’s at $38.3 million. A third appraiser put it at $37.3 million. UnityPoint argues the third report came after a contractual deadline and should not count. The Iowa Clinic says UnityPoint agreed in writing to the delay.
2. Control of the general partner. In a long-running North Carolina dispute, a group of physician partners argued that Fayetteville-based Cumberland County Hospital System violated the limited partnership agreement of Cape Fear Valley Ambulatory Surgery Center when it acquired 100% of the general partner’s equity in 2019. The hospital’s limited partnership stake also rose to 43.66% from about 22%. A state business court ruled for the hospital system in 2023.
3. Restrictive covenants tied to ownership. The same covenants show up at physician-owned surgical facilities beyond ASCs. Southwoods Health, which operates the Surgical Hospital at Southwoods in Boardman, Ohio, sued two physician owners Oct. 1, alleging the planned sale of their practice to Cleveland Clinic violated a two-year, 30-mile restrictive covenant. A magistrate approved a temporary restraining order barring the two physicians from taking part in the practice’s letter of intent while they hold ownership in Southwoods.
4. Governance rights. Ownership and board control don’t have to match. Amending an operating agreement generally requires a supermajority board vote, often 75%, and each investor class can hold reserved powers, such as a hospital’s right to limit the types of cases an ASC performs.
“Hospitals can own a majority share but the physicians can hold the majority of the governing board seats,” said Joe Zasa, managing partner of ASD Management.
5. Change of control. The pending $5.7 billion acquisition of Brentwood, Tenn.-based Surgery Partners by HealthSpan Partners, a Cincinnati-based Bon Secours Mercy Health affiliate, has physician partners asking how their stakes will be handled. Physician partners will want answers on “how syndicated ownership will be treated, whether referral patterns will shift,” said Raghu Reddy, chief administrative officer of MiOrtho Surgery Center.
Health systems still want the upper hand. More than 9 in 10 survey respondents want at least a 50% stake in their ASCs. That leaves the terms of the remaining stake, and how a partner exits, to the operating agreement.
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.
