Insights Into Business and Financial Relationships Between Surgery Centers and Hospitals

At the 2011 Orthopedic, Spine and Pain Management-Driven ASC Conference in Chicago, Ed Hetrick, president and CEO of Facility Development Management, presented his insights on the types of business and financial relationships ambulatory surgery centers can embark on with hospitals.

According to Mr. Hetrick, there has been a dramatic increase in consolidation of healthcare facilities, merges and competition in recent years, driven by changing reimbursements and the introduction of accountable care organizations.

The most frequent types of business and financial relationships are joint ventures between ASCs and hospitals, sales of ASCs to become hospital outpatient departments and co-management agreements. If a surgery center is strong enough, it may decide to remain independent and continue operations as a freestanding ASC. “What is right for one center doesn’t necessarily mean it’s right for another,” Mr. Hetrick said.

Whether an ASC decides to remain independent or engage in a business or financial relationship with a hospital principally depends on the desire of physician-owners. However, the “environment” of the surgery center also plays a critical role in whether that surgery center can remain successful. For instance, in New York, the certificate of need process is relatively rigorous. In most cases, a surgery center can only get through the process if it is in a joint venture with a hospital, Mr. Hetrick said.

Related Articles on ASC Transactions and Valuations:
Houston Public Hospital District to Build Surgery Centers Rather Than Add Hospital Beds
Given the Economic Downturn, Why Now is Actually a Great Time to Develop a Facility
5 Initial Steps to Selling a Surgery Center

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