How value-based care breeds joint venture ASCs & key characteristics hospitals look for in partners

As healthcare moves towards value-based care, joint venture ASCs are becoming more commonplace, and traditional reimbursement practices are going to become history.

Joan Dentler, president and CEO of Avanza Healthcare Strategies, has been helping develop hospital physician surgery center partnerships since the late 1990s. In the '90s, many of the ASC joint ventures with hospitals were reactionary; hospitals were looking to affiliate with physicians who were threatening to leave. Now, Ms. Dentler feels that hospital systems are coming to her proactively, making ASCs a part of their strategic plan.

The reason for that is two-fold. Not only do joint ventures allow hospital systems to keep talented physicians, but as payers place increasing pressure on providers to lower costs, ASCs become indispensable.

Ms. Dentler says joint venture ASCs can deliver "win-win-win-win combination" for providers, partners, payers and patients. Surgeons have a more efficient and cost effective arena to perform elective surgeries and, hospitals have increased surgical capacity; payers can reimburse at lower rates for common surgeries and patients can be back home quickly.

In the current and projected healthcare landscape, Ms. Dentler is cautious with clients who prefer developing a physician-only owned ASC because of the reimbursement uncertainty. Although not impossible, she is advising physician owners always be on the lookout for a hospital partner.

However, as Paul Eiseman, vice president of business development for Regent Surgical Health, notes, some physician-owned centers can still be sustainable if they have the right mix of specialties.

"If you have orthopedic, spine and pain [together] sometimes the [CMS and managed care rates] are high enough that you can get a decent reimbursement without the hospital affiliation," he says. "That's true for several markets."

Profitable surgery centers will remain valuable for hospitals in the value-based healthcare environment and surgeons could choose to sell in the future and still reap the benefits.

"[The ASC owners] can sell off their 51 percent at some point and get a nice multiple in return," he says. “That said, a JV that includes a hospital partner is still the recommended approach, especially in a value-based environment that is looking to hospitals for lower cost venues, bundled payments, etc.”

Hospitals look at several characteristics when deciding whether to purchase ownership of an ASC; some of them include:

  • Whether a physician or the physician group is notable
  • Whether the ASC is an established brand
  • Clinic location
  • Whether it's in a market the hospital wants to target
  • Extra capacity to accommodate new cases

"If the ASC has the capacity to add additional cases, that can be valuable to a hospital because they can migrate some of their lower acuity cases to the ASC, freeing up ORs for higher acuity, higher reimbursing cases ," Ms. Dentler says.

ASCs that track performance metrics — e.g., clinical quality, patient satisfaction, workflow and cost — are also attractive to hospitals as well. Quality and performance metrics can be used by the ASC "to "make the case to why they would be a good acquisition partner," Ms. Dentler says.

The exact future of the field is a moving target, but Mr. Eiseman isn't afraid to place his bet on joint ventures, particularly with hospital partners.

"[The landscape] is always going to change," he says. "But I think the general concept is lower cost, higher quality. The volume of value based healthcare practices are advancing at different paces in different places, but I think it's an ongoing thing. I don't see us going back to traditional reimbursement. This is the future."

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