Hospital-ASC joint ventures for spine and orthopedics: An evolving relationship

Various forces in the industry — each with their own challenges — are pushing hospitals and spine- and orthopedics-focused ASCs together, but such relationships can be a win for all parties involved, according to a group of panelists at the Becker's 15th Annual Spine, Orthopedic and Pain Management-Driven ASC Conference + The Future of Spine.

Participants in the June 23 panel included: Kevin Fleming, vice president of musculoskeletal clinical portfolio for Providence Health & Services in Renton, Wash.; Don Phalen, vice president of business development with Regent Surgical Health; Jeffrey Peo, chief development officer with Ambulatory Surgical Centers of America; and Deepak Chavda, MD, an orthopedic surgeon with Texas Bone & Joint Center in North Richland Hills.

According to Mr. Peo, the move toward value-based care has pushed the unlikely bedfellows together in recent years.

"For a long time, hospitals viewed us as the enemy," he said, noting the parties kept each other at "arms length."

But now, he said, hospitals are increasingly taking on risk and forming their own insurance plans and therefore are looking for lower cost sites of care for things like spine and total joint replacement surgeries.

Mr. Phalen added that some payers are pushing hospitals to look into joint ventures so reimbursement rates will be lower. "[Hospitals'] hands are being forced by the payers, they don't want to lose partial revenue," he said.

Beyond value-based care and payer pressures, hospitals are also seeking to move appropriate procedures to the outpatient space to clear up inpatient beds. "Inpatient facilities are at capacity [and] building additional bricks and mortar is not cheap," Mr. Fleming said. Joint venturing with an ASC can "open up capacity" for the very sick.

While hospitals are actively seeking out joint venture partners in this space, it can be more difficult to convince the owners of a successful orthopedic or spine ASC to engage in such relationships.

To resolve that issue, Mr. Peo says to frame it as a "dollars-and-cents" situation for the physicians. Even though physicians have to give up some ownership to a new hospital partner, the joint venture partnership should increase referrals and therefore still be a boon for the physician owners, even if they own a smaller piece of the pie.

"Even if you lose half the ownership, you make a lot more financially," Dr. Chavda said.

Therefore, hospital-physician joint ventures in the spine and orthopedics space can be great for both parties — hospitals can move patients to lower-cost sites of care and free up bed capacity for sicker patients while physicians can earn more money.

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