5 healthcare C-suite leaders on how private equity is 'reshaping the industry'

The value of healthcare private equity deals in 2021 was 378 percent higher than that of 2012, and many executives say that trend is here to stay. 

Five healthcare leaders recently connected with Becker's to discuss how leadership structure at ASCs, hospitals and health systems could be affected by the evolving healthcare landscape. 

Q: How do you expect the health system/hospital/ASC ownership structure to shift in the next year?

Note: Responses have been lightly edited for length and clarity.

Bob Bush. CEO of Austin (Texas) Diagnostic Clinic: I think that we will begin to see third party (i.e. private equity) become more involved as health systems are trying to regain their footing after the financial demise of the pandemic.

Karen Flinn Fowler. CEO of Trisource Health (Plano, Texas):

1. I believe we will continue to see growth in physician-owned ASCs as well as additional partnerships with equity investors or affiliated hospitals.  

2. Payers will continue to push on reimbursement to ASCs and continue to bundle services. 

3. As technologies advance, it appears that many services that were only able to be done in a hospital ASC will be approved to be done in freestanding ASCs.

4. Services in ASCs will continue to grow in the areas of pain management, orthopedics, podiatry, ENT and ophthalmology.

Kim Mikes, BSN, RN. CEO of Hoag Orthopedic Institute (Newport Beach, Calif.): As the popular saying goes, "follow the money." When CMS moves more orthopedic and spine procedures from inpatient-only status to ACS status, more surgeries will be performed in ASCs. Our orthopedic surgeons were pioneers in doing joint replacements in ASCs, so our model of care is built around an inpatient hospital and a growing network of ASCs. We plan to open at least one more ASC this year to serve the growing need in our community. It reduces costs for all stakeholders when orthopedic procedures can be done in the ASC with no reduction in clinical outcomes. That's why more hospitals and health systems are acquiring more ASCs. More importantly, private equity — so-called smart money — is reshaping our industry. Because of the value proposition, these deals will continue to accelerate. With this shift, we may see more consolidation and investment in ASCs across the country. 

Herbert Pierce. CEO of Vistar Eye Center (Roanoke, Va.): Our ASC is ophthalmology-specific, so I don't expect much movement towards hospital ownership. The trend that may move ownership of ophthalmology-only ASCs is the trend of practices joining private equity. When those practices sell to PE, they almost always include a separate deal to sell the ASC to PE as well.   

Raghu Reddy. Chief Administrative Officer of SurgCenter of Western Maryland (Cumberland): The investments by the hospital systems in ASC have been steadily increasing in the past few years. There is a significant movement towards value-based care, increasing employment of physicians by health systems, and competition among health systems is growing. There is a lot of M&A activity in the ASC space by health systems, corporate chains and private equity firms. The health systems are either pursuing their own ASC strategy by developing their ASCs or buying into the existing ASCs with different ownership structures. This move is driven by the shift of ASC-eligible cases from HOPDs to ASCs mainly due to CMS adding more procedures to the ASC-covered list, payers requiring patients to opt for ASCs or stand to pay higher out-of-pocket expenses when they utilize the HOPD. Also, patient outcomes, satisfaction and profitability favor ASCs, and health systems are trying to create or broaden their ecosystem with the ASCs in their portfolio. The physician owners of ASCs welcome health system partnerships to mitigate issues like supply chains, payer contracts and other tangible benefits. This partnership between physicians and health systems in an ASC could lead to fewer politics, and the focus will be on serving the patient population in their demographics. The future is bright for the ASCs, with more high-acuity cases shifting with evolving technology and a drive that payers accelerate to reduce their spending, and the health systems see it.

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