ASCs have the option of partnering with either a corporate partners or a hospital to secure a more financially stable position in the ASC marketplace. However, the two options are significantly different and offer varying benefits to ASC owners. Jon Vick, president of ASCs Inc., explains these differences in more detail.
Q: What are the key differences in selling an ASC to a corporate partner versus a hospital?
Jon Vick: Corporate partners, or ASC management companies, are typically managed by people who have worked in the ASC industry for many years. So they know how to work with physicians to set up their surgery center for success, and they are already tuned in to providing management services to help ASCs achieve their original goals of efficiency, economy and patient satisfaction. The whole idea of partnering with a management company is to help the ASC's business grow and to help it grow in a way that was originally envisioned by the physician-owners. So, these management companies don't want to take over control of the ASCs but simply augment what the physicians are already doing to become more profitable. They want the physicians to continue to play a dominant role in how the center is run so the ASC continues to operate efficiently and economically. Hospitals, on the other hand, typically want to control all aspects of an ASC if they acquire a majority interest.
Q: Is there a way to make sure ASC physician-owners retain control if they decide to partner with a management company or a hospital?
JV: Physicians think that if they sell 51 percent of their center to an ASC management company or to a hospital they will lose all control. This isn't necessarily the case because protective measures in the operating agreement, such as super-majority votes, can protect certain areas where the physicians want to retain some control. So physician-owners need to establish a governance structure that retains the control they want. This way, the control is shared and not lost.
Operating agreements are extremely important. Operating agreements define how the ASC will be operated, managed and governed, and within these agreements, the parties can specify management processes, how each entity will exercise control, how new medical staff will be added, the way the board will be structured and so on. Even if the physician-owners sell 51 percent of their ASC, the governing body may be two ASC physicians and two hospital administrators, so operationally it's still essentially a 50/50 deal.
Learn more about ASCs Inc.
Q: What are the key differences in selling an ASC to a corporate partner versus a hospital?
Jon Vick: Corporate partners, or ASC management companies, are typically managed by people who have worked in the ASC industry for many years. So they know how to work with physicians to set up their surgery center for success, and they are already tuned in to providing management services to help ASCs achieve their original goals of efficiency, economy and patient satisfaction. The whole idea of partnering with a management company is to help the ASC's business grow and to help it grow in a way that was originally envisioned by the physician-owners. So, these management companies don't want to take over control of the ASCs but simply augment what the physicians are already doing to become more profitable. They want the physicians to continue to play a dominant role in how the center is run so the ASC continues to operate efficiently and economically. Hospitals, on the other hand, typically want to control all aspects of an ASC if they acquire a majority interest.
Q: Is there a way to make sure ASC physician-owners retain control if they decide to partner with a management company or a hospital?
JV: Physicians think that if they sell 51 percent of their center to an ASC management company or to a hospital they will lose all control. This isn't necessarily the case because protective measures in the operating agreement, such as super-majority votes, can protect certain areas where the physicians want to retain some control. So physician-owners need to establish a governance structure that retains the control they want. This way, the control is shared and not lost.
Operating agreements are extremely important. Operating agreements define how the ASC will be operated, managed and governed, and within these agreements, the parties can specify management processes, how each entity will exercise control, how new medical staff will be added, the way the board will be structured and so on. Even if the physician-owners sell 51 percent of their ASC, the governing body may be two ASC physicians and two hospital administrators, so operationally it's still essentially a 50/50 deal.
Learn more about ASCs Inc.