1. More hospitals will joint venture with physicians. “We’re seeing increased activity among leading hospitals and health systems in pursuing partnerships with their physicians,” says Mr. Hanley. “There are nearly 6,000 surgery centers in the country and 5000 are owned by somebody other than hospitals. All that growth represents lost market share or competition. They also represent a missed opportunity for hospitals and health systems. As economic pressures mount, hospitals need to fight for market share and become more entrepreneurial. Through joint ventures they can buy back or partner with their doctors to become more formidable competitors. Most hospitals get very low marks as competitors on ambulatory care side.”
2. An evolving competitive landscape. All major ASC chains are targeting ASC acquisitions for expansion, Mr. Hanley says.
“If I’m Hospital X in a market with five to six ASCs that are a nuisance, but not currently a large threat to my business, and suddenly those local doctors are joined by a large, well-financed ASC chain, they become much more formidable competitors and pose a far greater threat to my future,” he says.
Hospitals need to reposition themselves to regain market share and think outside the wall of their hospitals for revenue and expansion opportunities, he says..
3. Worsening economy presents both challenges and opportunities. Physician-owned centers that are not well managed may feel pressure to sell as volume drops from reductions in elective procedures.
“If hospitals don’t pay attention to local doctors’ need to sell, the for-profits chains certainly will," says Mr. Hanley. "The economic climate will create a need for physician to sell as well, which could multiply problems for hospitals that don’t act.”
4. Increased legislative activity at the state level. “We’re seeing more and more legislative changes at the state level, with New Jersey topping the list,” Mr. Hanley says. “New Jersey won’t grant new ASC licenses unless physician owners partner with hospitals. It’s a concern of our industry, but there may be other states taking similar paths. We’re seeing a lot of activity in Pennsylvania as well. Others may follow in restricting access. This gives hospitals more opportunity.”
5. Pressure on volume and rates of growth. “With unemployment approaching double digits in the months to come, we can see some troubled times ahead," Mr. Hanley says. "Anytime lots of people out of work and benefits packages change, adding higher co-payments and bigger deductibles, it will affect elective healthcare. This will reach hospitals, too, without question.”
6. Big ASC chains face challenges. Large ASC companies surveyed said they want to expand acquisitions, but are so highly leveraged that they may have trouble going after them, Mr. Hanley says.
“These ASCs are bought with very expensive money and that debt will affect growth,” he says. “Any company with cash reserves will be in a powerful position. But some tapped into it so deeply, (they’re) a little concerned about cash flow that could restrict acquisitions.”
Dick Hanley (contact via lynda.goodrich@healthinventures.com) is president and CEO of Health Inventures, which currently manages 30 ASCs in the U.S., three abroad and has plans to develop centers in the Middle East. Learn more about Health Inventures.
