ASC joint venture 101: When to run toward your partner, and when to run far, far away

The ambulatory surgery center industry has matured over the past few decades, and ASCs' relationships with hospitals are changing as well.

"In the early days of ASCs, many hospital leaders were caught off-guard when they lost large percentages of outpatient surgery revenue to physician-owned ASCs," says Joan Dentler, president and CEO of Avanza Healthcare Strategies. "There was significant scrambling to gain at least some of the revenue back in the pockets of the hospital through partnerships with their physicians. But in 2015, ASCs have been a critical part of healthcare delivery in this country for decades, and it is difficult to find communities without at least a few successful outpatient surgery centers co-existing successfully with hospitals."

Additionally, healthcare reform is in full-swing and key stakeholders are looking to reduce costs while improving quality at every turn. ASCs have long been considered a higher quality, lower cost setting for care and payers are now insisting routine outpatient care be performed in freestanding ASCs to receive full reimbursement.

Patients are also looking for hospital alternatives for elective surgeries and shopping around — online and otherwise — to find the best providers.

"If hospital leadership is not eager to be included in an ASC partnership or does not appreciate the importance of an ASC's role as an integral part of their organization, I would strongly recommend physicians be weary of the partnership," says Ms. Dentler. "The good news is that if you do not choose to pursue a partnership with such an organization, you may not have to wait long for an opportunity with a different hospital."

Being better partners
When ambulatory surgery center owners and operators understand what their joint venture hospital partners desire, they're able to make the agreement mutually beneficial for both parties.

"A central reason hospitals consider ASC joint ventures in their outpatient strategies is to create or improve relationships with their physicians," says Ms. Dentler. "Physicians will often try to play one hospital against another to obtain the best deal for themselves. While that may have been an understandable and acceptable practice in the past, today's healthcare environment requires transparency around more than just pricing."

A few key issues that often come up between physician owners and hospitals during joint venture negotiations include:

• Concerns about the division of equity
• Who will have control over ASC operations
• What types of cases will be performed at the center

"Physicians and hospitals are speaking more candidly and directly than ever before," says Ms. Dentler. "Physicians who serve as a committed partner will do all they can to make the enterprise a success. This is not only measured in the financial success of the ASC but in building a collaborative culture between the hospital and physician partners that can spill over into other areas of collaboration."

Surgeons can strengthen this mission by:

• Arriving on time for cases
• Not wasting supplies
• Respecting staff at all levels of operations
• Thoughtfully serving on the governing board

ASC management
Running an ASC will be different for surgeons — it's not just like sitting on a hospital committee. "It requires a much higher level of responsibility and dedication," says Ms. Dentler. "ASC board members have a fiduciary responsibility to their patients and their partners; they must be sure they have the commitment — which includes the time and energy — to take this on."

Surgeons will need a good grasp on whatever will be discussed in the meeting and seek out additional information; they can't just show up to the meeting and pick up a check. All board members are expected to contribute to conversations and compromise as appropriate.

"A strong partnership is one where everyone brings their strengths and acknowledges their challenges," says Ms. Dentler. "A joint venture ASC is no exception."

For the hospital's part, the strongest and most committed hospital partners have leaders that come to the partnership with enthusiasm and eagerness. They are able to share decision-making and welcome innovation. They also have a mindset toward:

• Moving away from the "one-size-fits-all" healthcare delivery to stay competitive
• Patient-centric care delivery
• Collaboration with physician partners — as well as other types of partnerships — which are critical for long-term stability
• Giving up control when it's appropriate
• Seeing physicians as partners, not just revenue-generators

"The best hospital partners are those with leaders who recognize the importance of including a high-quality, lower-cost, convenient location for elective, outpatient surgeries in their portfolio," says Ms. Dentler. "These are leaders already working to right-size their surgical services cost, on-campus operating rooms and are encouraging the use of the ASC for as many appropriate cases as possible."

There are some hospitals allowing non-acute care to migrate to the outpatient setting, even some higher acuity cases like spine and orthopedic procedures. The inability to see ASCs as a long-term strategy for their hospital or health system is a huge red-flag for ASC owners and operators considering a joint venture.

"If hospital leaders participate in a joint venture purely to hold on to surgical revenue and lack dedication toward developing long-term ASC strategies, chances are they are not going to be fully committed to the ASC," says Ms. Dentler. "If they cannot view the ASC as a viable and often preferable alternative for patients and payers, they will not be ideal partners in a joint venture."

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