10 Steps to a Happier Hospital Joint-Venture in 2012

Running an organization with multiple moving pieces is never easy, and a hospital joint-venture ambulatory surgery center is no different. "Experience has taught us that joint ventures that begin with the best of intentions can fall apart because of lack of structure, common vision and really the hard work at the beginning to make sure that the relationship is long-lasting," says Akram Boutros, MD, founder and president of BusinessFirst Healthcare Solutions, a consulting firm. "The aim is to be very specific methodically and consistent. These are the hallmarks of successful, long-lasting organizations."

Dr. Boutros and Luke Lambert, CFA, CEO, Ambulatory Surgical Centers of America, share 10 steps to create a happier hospital joint venture in 2012.

1. Ensure a shared mission and vision.
The first part of any successful joint venture between an ASC and a hospital is defining the shared mission and vision. This can be problematic, Dr. Boutros says. "Sometimes physicians have views of what the organization will be like versus what the hospital thinks," he says. "A hospital may see this as an expansion of geographic area, and the physicians may see this as their primary business venture.”

If both partners cannot get on board with a shared mission, there's no need to go further, Dr. Boutros says.

2. Create a detailed and realistic business plan. Dr. Boutros says physicians can have an unrealistic idea of what a joint venture will look like. "There are some physicians who overestimate the volumes and underestimate the costs," he says. "They need to be a little more methodical in their assessments and not shoot from the hip."

It's important for both the hospital partner and the physician owners to sit down and create the business plan together. If one party created it before inviting the other, they should spend time modifying it so that all parties can give input.

3. Create a strong board of directors.
Dr. Boutros says it's essential to create a board of directors that can be successful. Choosing members who can and are willing to "subjugate their personal ambition and needs to that of the greater good is absolutely necessary," he says. Measures of success for a board of directors include developing quality and financial improvement systems, hiring experienced management and putting in place a structure to deal with issues proactively instead of reactively.

4. Clearly define everyone's roles and responsibility.
Dr. Boutros recommends clearly defining the roles of the active physicians and hospital partners as well as the staff in the ASC. This ensures everyone is doing what they're supposed to do and removes ambiguity and reduces conflicts associated with undefined roles.

5. Increase physician interest in the center. Mr. Lambert says joint ventures can be turned around by increasing physician equity in the center and giving them a greater incentive to fight for the center's success by. While Mr. Lambert promotes a minority interest for the hospital (26 percent or less), he said maintaining physicians' incentives is possible even under a hospital majority ownership model, which may be required if the ASC needs a certificate of need or access to the hospital's contracts. "The more the hospital owns, the more you decrease the interest the physicians have in how the center is run," he says.

6. Focus outside the hospital's primary service area.
Dr. Boutros says the ASC should choose a geographic location that exposes a new area to the hospital's services rather than pulling cases from the hospital. He recommends looking for areas that are dominated by other hospitals, where the ASC can help the sponsoring hospital to get a foot in the door.

7. Look for unaffiliated physicians.
Along the same lines as location, Dr. Boutros says a hospital should not transfer its core physicians to the new entity but look to recruit unaffiliated physicians in the area to practice at the ASC. This way, the ASC is not cannibalizing the hospital's cases and physicians.

8. Define ground rules for interaction. Dr. Boutros says it's essential to outline appropriate interaction between all shareholders in the center. This includes how the staff interacts with patients, how the specialists interact with staff and how the owners interact with the manager. He says this needs to be done before the organization is set up because the process is much more difficult after the fact. At the same time, unacceptable behaviors, such as late arrival, should be explained and their consequences communicated to the staff and physicians prior to opening day.

9. Utilize metrics. Metrics are a valuable tool for ASCs, Dr. Boutros says. Centers should benchmark their financial and operational performance against their own historical performance as well as the performance of other centers. Collecting data over time can reveal trends about case volume, revenue, payor mix, staffing costs and other factors essential to profitability. These statistics are also a great way to encourage physician engagement in a center's operations. For example, a physician might be motivated to switch supplies if data shows that his case costs are significantly higher than his colleagues'.

10. Have fanatical discipline. Dr. Boutros says it's essential for an ASC to have a specific, methodical and consistent design related to center composition, staff responsibilities and measures of success. It's even more important that the center stick to that design. Dr. Boutros says even though ASCs are typically small business with less than 100 employees, they can also big businesses with healthy revenues and even healthier profits.


More Articles on ASC Turnarounds:
35 New Statistics on ASC Staff Compensation
Getting to 18,000 Cases a Year: 8 Steps to Increase and Accommodate Case Volume
5 Priorities for Surgery Centers in 2012

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