1. Hospitals are slowly coming around. As finances become tighter, many hospital CEOs are trying to look at old problems in new ways, which can mean reassessing their attitude toward ASCs. They may even have heard success stories. “CEOs talk with each other and hear about someone having success with joint-venture ASCs,” Mr. Hyde says.
However, some hospital CEOs are still completely opposed to partnering on ASCs, even if advantages to the hospital are pointed out to them. “They simply refuse to do it,” Mr. Hyde says. They may have issues with for-profit ventures or with the extra income physicians could make on these deals.
2. Beware of stalled negotiations. When a hospital is interested in partnering on an ASC, the arrangement must enter extensive review through a variety of committees, departments and offices. “In the hospital culture, these decisions don’t happen quickly,” Mr. Hyde warns. This slow process may even grind to halt and chances of any further progress may slowly disappear. “You may find that you are no closer to consummating a deal than you were two years before,” he says. When this happens, would-be physician partners will have to decide whether they should end negotiations and consider other strategies.
3. Hospitals want control. Hospitals will push for 51 percent controlling interest, especially when building an ASC on campus. This means the facility may be managed very differently than what physicians would like. Physicians may win some exclusions, such as the right to pick their own clinical personnel, but it would not be the same thing as having a controlling interest. Some hospitals, however, have been willing to agree to physician control, especially when the site is off-campus and the alternative is losing valued specialists to another ASC.
4. Insist on fair terms. “Good hospital partners are rare,” Mr. Hyde warns. “Some hospitals are still stuck in the old antagonistic paradigm. My advice is to stay away from those systems.” Closely scrutinize the terms the hospital is offering. “If you get fair, acceptable terms, you can wind up with a decent surgery center that enjoys a nice revenue per case,” he says.
5. Require outside management. Hospital-managed centers are often poorly run because hospitals pick internal managers with no experience in ASCs. “The smart hospitals go out and contract with a management company rather than manage the new entity with internal people,” Mr. Hyde says. In addition to providing specific expertise, the management company can act as a buffer between the physicians and the hospital. Depending on its policy, the management company may require no equity or a minority interest in a three-way joint venture.
6. Physicians should take the lead. Physicians who start planning their own ASC have better chances of getting a favorable deal from the hospital than those who wait for the hospital to make an offer. “Physicians who are valuable to the hospital and are ready to walk have a great deal of leverage,” Mr. Hyde says. “Hospitals tend to make a move when they see themselves in a defensive position.” However, while a walk-away mentality can bring the hospital around, “you really can’t bluff it,” he warns. “If they don’t come around, you have to be prepared to go forward.”
Learn more about Surgical Development Partners.
Related Articles on Partnering With Hospitals on ASCs:
Joe Flower: How Healthcare Will Change in 10 Years and Its Impact on ASCs
10 Years of Trials and Triumphs – Regent Surgical Health: Q&A With CEO Tom Mallon
5 Steps Surgery Centers Should Take Before Selling to a Hospital
