More ASCs are being sold to hospitals and these deals have been initially proposed by both sides, says Joan Dentler, president of ASC Strategies in Austin, Texas.
Ms. Dentler says surgery centers may be interested in selling to a hospital because reimbursements have been falling and arrangements like out-of-network opportunities have been shrinking. Negotiating contracts under the hospital umbrella could produce better reimbursements. Other reasons for selling are the need for capital and impeding retirement of physician-owners without new owners to take their place.
Hospital buyers, on the other hand, may see ASC acquisition as part of their physician alignment strategy, might want to move into a new market or are looking for more inpatient cases, she said, citing a few common examples.
Ms. Dentler advises ASC owners to ask themselves the following questions before putting their center up for sale.
1. Could it be converted into an HOPD? Becoming a hospital outpatient department would make the ASC more valuable because the hospital could charge higher HOPD rates. But to become an HOPD, the ASC would have to share the hospital's provider number, which means meeting criteria such as being located within a certain distance from the hospital. The center would also have to meet the hospital's licensure requirements, which could include minimum size of OR and meeting conditions for the rest of the hospital's physical plant.
2. What are physician-officers paid? Hospitals have to follow strict rules on paying physician-officers such as the medical director a "fair market value" for their services, based on benchmarks. If these physicians are being paid more than fair market value, the amount might have to be reduced. Would they agree to do this?
3. Does the ASC meet Joint Commission standards? Hospitals tend to use Joint Commission standards, which may be different from those used by the ASC's own accreditor.
4. What is the hospital looking for? This will help the ASC develop its pitch to the hospital. For example, if the hospital wants the acquisition to aid its efforts for physician integration, focus the hospital's attention on attributes of the center fitting that need.
5. Do you have an equity partner? Many hospitals would view having a management company as an equity partner as a concern, though maybe not a deal-breaker. For the hospital, a third party might complicate the relationship.
6. Would other doctors on staff join the ASC? The hospital might want to bring in another group on its staff in the same specialty to use the ASC. Would the current owners be comfortable with that prospect?
Learn more about ASC Strategies.
Read about other ASC transactions issues and trends:
- Growing ASC Trend: Sell to a Hospital and Manage the Surgical Unit
- 4 Things to Know About HOPD Management Service Organization Arrangements
- Hospital/Surgeon/Management Company Joint Ventures: A Key Strategy For New and Continued Success For ASCs
Ms. Dentler says surgery centers may be interested in selling to a hospital because reimbursements have been falling and arrangements like out-of-network opportunities have been shrinking. Negotiating contracts under the hospital umbrella could produce better reimbursements. Other reasons for selling are the need for capital and impeding retirement of physician-owners without new owners to take their place.
Hospital buyers, on the other hand, may see ASC acquisition as part of their physician alignment strategy, might want to move into a new market or are looking for more inpatient cases, she said, citing a few common examples.
Ms. Dentler advises ASC owners to ask themselves the following questions before putting their center up for sale.
1. Could it be converted into an HOPD? Becoming a hospital outpatient department would make the ASC more valuable because the hospital could charge higher HOPD rates. But to become an HOPD, the ASC would have to share the hospital's provider number, which means meeting criteria such as being located within a certain distance from the hospital. The center would also have to meet the hospital's licensure requirements, which could include minimum size of OR and meeting conditions for the rest of the hospital's physical plant.
2. What are physician-officers paid? Hospitals have to follow strict rules on paying physician-officers such as the medical director a "fair market value" for their services, based on benchmarks. If these physicians are being paid more than fair market value, the amount might have to be reduced. Would they agree to do this?
3. Does the ASC meet Joint Commission standards? Hospitals tend to use Joint Commission standards, which may be different from those used by the ASC's own accreditor.
4. What is the hospital looking for? This will help the ASC develop its pitch to the hospital. For example, if the hospital wants the acquisition to aid its efforts for physician integration, focus the hospital's attention on attributes of the center fitting that need.
5. Do you have an equity partner? Many hospitals would view having a management company as an equity partner as a concern, though maybe not a deal-breaker. For the hospital, a third party might complicate the relationship.
6. Would other doctors on staff join the ASC? The hospital might want to bring in another group on its staff in the same specialty to use the ASC. Would the current owners be comfortable with that prospect?
Learn more about ASC Strategies.
Read about other ASC transactions issues and trends:
- Growing ASC Trend: Sell to a Hospital and Manage the Surgical Unit
- 4 Things to Know About HOPD Management Service Organization Arrangements
- Hospital/Surgeon/Management Company Joint Ventures: A Key Strategy For New and Continued Success For ASCs