Physician partnership disputes can be detrimental to ASC ownership models — are rarely discussed during the courtship phase of a merger or acquisition.
“The issues that break partnerships are almost never clinical,” Scott Freer, clinical administrator of ASC Bala Cynwyd (Pa.), told Becker’s. “They’re about utilization — specifically, whether each partner is bringing cases to the facility at the level they committed to.”
A partner who pulls back from that commitment doesn’t just create a staffing gap, Mr. Freer said, but a direct financial hit to every other owner in the building.
“A partner who commits to a certain volume and then migrates cases back to the hospital because it’s more convenient, or because their call schedule changed, or because they recruited a new associate who prefers a different venue, is effectively taking money from every other owner in the facility,” he wrote.
Utilization is only one source of friction. Mr. Freer also pointed to governance and capital, namely who is obligated to write a check when the facility needs new equipment or a cash infusion, and whether every partner can actually afford to. Exit terms compound the risk: what a partner’s shares are worth when they want out, and whether the buy-sell provisions in the operating agreement function the way everyone assumed they would when they signed it.
“Read the operating agreement as if you’re going to have every possible dispute with every one of your partners,” Mr. Freer wrote. “Because over a long enough time horizon, you probably will have most of them. The document that feels like a formality when you’re signing it is the document that governs your life when things get hard.”
Equity misalignment surfaces in similar form when private equity or larger platforms enter the picture, according to leaders who advise on those transactions. Speaking on a panel at Becker’s 22nd Annual Spine, Orthopedic and Pain Management-Driven ASC + The Future of Spine Conference June 11-13 in Chicago, Andrew Carlson, director of growth and strategy at Growth Orthopedics, said outside capital cannot paper over a group that was already divided.
“If there’s no physician alignment in the group, a strategic partnership won’t fix that,” Mr. Carlson said. “It’s really important to understand the goals of the group, and make sure that it’s aligned with every single physician and they understand what the future holds.”
One of the most reliable fault lines, Mr. Carlson said, runs between physicians who joined an ASC early and those who came later, particularly when real estate ownership is involved.
“A lot of times there are conflicts where you have different levels of physician ownership in the real estate and some members that do not have real estate ownership,” he said. “Typically what happens is a physician who’s owned for longer wants to sell the real estate interest and market value, and a younger physician wants to not pay market value but pay based on already being a part of the group. And that’s where there’s a real disconnect in what the value of the shares are of the real estate.”
Jason Winker, vice president at ASC Realty Advisors, said on the same panel that the disconnect rarely stays contained to the real estate ledger — it bleeds into operations and compensation, hardening into broader resentment between partners. His advice for groups bringing in a new financial partner doubles as advice for any ASC ownership group sizing up its own alignment.
“Get to know who your potential partners are and have a really clear understanding of what changes may happen post-transaction … if they’re aligned with your goals,” Mr. Winker said.
At the Becker’s 32nd Annual Meeting: The Business and Operations of ASCs, taking place October 29-31 in Chicago, ASC leaders, surgeons and healthcare executives will explore strategies to drive growth, enhance operational performance, navigate reimbursement challenges and prepare for the future of ambulatory surgery. Apply for complimentary registration now.