Future of ASCs in Five Years: Predictions on the Most Common Ownership Model

As of 2006, the most common ownership structure of an ASC was 100 percent physician-owned (61 percent of ASCs), followed by hospital/physician-owned (16 percent of ASCs) and corporation/physician-owned (11 percent of ASCs), according to data provided by VMG Health in the 2009 Intellimarker.

With the healthcare reform law, payor issues, the decline in available physicians for recruitment and other challenges impacting the financial stability of ASCs, what will be the most common ASC ownership structure in five years — physician-owned, ASC, joint-venture ASC or HOPD? Here are several predictions.

Keith Metz, MD, Anesthesiologist and Medical Director of Great Lakes Surgical Center in Southfield, Mich., and Member of the Board of Directors for the ASC Association: We all recognize that the ASC industry is maturing. The main impact of the maturation of the industry is that the pool of available physicians that have practices and case volumes to support an ASC is dwindling.

Even with the right group of surgeons, the ability to develop an ASC without corporate or hospital support will be limited by the limited access to capital to private physicians.

I believe that most growth will occur in the physician/hospital joint-venture ASC for two reasons. First is that hospital/physician is the model that is favored politically under the imminent healthcare reform. Second is that by partnering with a hospital, an ASC may be able to access the employed or integrated physicians and associated procedures that would otherwise be restricted from using an ASC.

David Shapiro MD, CASC, CHC, CHCQM, CHPRM, LHRM, Partner in Ambulatory Surgery Company: I think we're looking at some kind of joint-venture model, such as a hospital/ASC joint venture. That is with the assumption that services will continue to migrate towards sites of service with adequate reimbursement.

If we don't bend the cost curve on the way ASCs get reimbursed, many are going to cease to be able to provide services. So they're going to have to migrate over to affiliation with a hospital that can provide them with some sort of leverage in terms of being able to attach to the HOPD or at least HOPD-type rates.

Also, there are several things going on concurrently to foster the trend of physicians becoming aligned with hospital systems. For instance, hospitals are buying physician practices and incentivizing physician participation. We don't know where the concept of accountable healthcare organizations is going to go; however, the model may migrate health systems toward an integrated, capitated system gaining a big part of the market share. If that locks out freestanding ASCs that don't have a hospital or some kind of larger affiliation, I think that will cause their decline or possibly their demise.

Tom Mallon, Co-Founder and CEO of Regent Surgical Health: Quite a lot depends on whether President Obama is reelected in 2012. If he is and we have the bill that passed for healthcare reform, I believe that we will see independent ASCs selling out 100 percent to hospitals as doctors become employees. There is too much in this bill that pushes in that direction to resist it.

On the other hand, if President Obama is not reelected and we can amend this bill, then the joint-venture model which we use in half of our centers will work great. Doctors, hospitals and management companies to serve as the "United Nations" will be a sustainable model.

Larry Taylor, President and CEO of Practice Partners in Healthcare: Most crystal balls are rather cloudy with the current situation surrounding our national debt, Medicare funding and Social Security solvency. One point of clarity driving cost reduction in the correction of these issues will be the need for greater access to cost effective healthcare and specifically ambulatory surgery to address our aging population and projected increases in orthopedic care.

At Practice Partners we expect to continue to see increased activity of hospitals employing specialists. We expect to see increases the realm of HOPD and hospital joint-venture models. The ASC industry will continue to see both physician joint ventures and hospital/physician joint ventures in the future. Management companies will continue to be a critical component to these ventures both with and without equity positions.

Some of the most critical work will be focused on start-up entities replacing older, poorly planned centers that have experienced surgeon attrition. The process of turning around underperforming centers that are in need of restructuring and resyndication will be greatly required as well. Also, centers that exist in geographic areas of ASC high concentration will require the merging of entities and consolidation of partnerships to one center by closing the non strategic site and merging assets and surgeons into a new model.

Additional commentary:

Joe Zasa, Co-Founder and Managing Partner of ASD Management: All three models will be seen going forward. Healthcare is really a "local" business and each community is distinct with its owns standards, politics and competitive issues. There will always be room for physician-owned surgery centers in the market due to the desire of many physicians to operate in an independent setting.

However, due to payor issues, or changes in the medical community or a desire to collaborate with the local hospital, the ASC JV model will still be prevalent and is an excellent model. Our most successful surgery centers are hospital-physician joint-venture ASCs. Finally, the HOPD model is extremely attractive and is becoming a viable option. This is an excellent vehicle in CON states, for ASCs that have had limited success, or for communities where many of the surgeons are employed by the hospital. Again, this hospital (similar to the ASC JV model) employs a collaborative approach between the physician and the hospital. In sum, all three models will continue to thrive and the best model for one community could be different for another community.

Send your comments to rob@beckersasc.com.

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