The world of joint ventures is changing as healthcare trends toward higher quality outcomes at lower costs.
A panel of ASC industry leaders discussed the evolution of physician-hospital joint ventures at Becker's Hospital Review 7th Annual Meeting on April 28. Within the last 10 years, some hospitals have starting seeing ASCs as a prime avenue to save money by moving lower acuity cases to the outpatient setting. "There are some health systems that have seen ASCs as an effective strategy," says Luke Lambert, CFA, CASC, CEO of Ambulatory Surgery Centers of America. "They are a tool used opportunistically to address certain issues including capacity."
Hospitals can accrue substantial cost savings by moving surgeries to the outpatient setting, but this approach has met some resistance. Jeff Simmons, chief development officer at Regent Surgical Health, explained joint ventures between hospitals and physicians were not plausible when he first joined Regent, and it took the company almost seven years for such ventures to truly start gaining traction. Smaller health systems may be stark adversaries who view ASCs as a competitor rather than an asset.
"We found the larger the health system, they more prominent position they have in the community," Mr. Simmons says. "They will want to move lower acuity cases into ASCs." Larger health system often may view ASCs as a part of their overall cost-saving strategy as ASCs will save hospitals both operating room time and capacity.
For successful joint ventures, alignment between both parties is essential to reap the full benefit a partnership offers.
"I am seeing quite favorable alignment from both parties. The health system gets to expand their footprint and become more aligned with a productive physician base," said Vince Kickirillo, CFA, CVA, managing director of VMG Health. "Physician groups can get better contract rates so they can focus on performing surgeries rather than dealing with the business side and reimbursement pressures which are first and foremost in the industry."
Successful hospital-physician joint ventures thrive due to strong physician practices combined with effective payer contracting. ASCs look to hospitals to improve their contracts, as hospital reimbursement is slightly improving and ASC reimbursement dwindles. Mr. Lambert explained a high case volume in combination with a solid contract with payers will ensure a joint venture's success.
Planning ahead is essential, especially when negotiating with payers on rates. Health system executives who engage in discussions with payers prior to joint venturing with a surgery center on why they are transitioning cases to the outpatient setting will likely receive better rates than those who buy the ASC prior to negotiations. An ASC partnership is an economic decision for the hospital and its effect on payers must be weighed carefully. If payers can see tangible savings from an ASC, the hospital will likely receive better rates.
Technological advancements allow ASCs to perform higher acuity cases, which present health systems an opportunity. Rather than taking cases from their own ORs, health systems can drive higher acuity cases out of their competitor's OR rooms, making the ASC attractive to payers.
"There is an interesting thing happening where some payers are taking a very forward view. They are setting up incentives for physicians to take cases in what I call a quality narrow network of facilities," Mr. Lambert explains. "Historically, while health systems have had concerns about costs, it hasn't been overwhelming imperative. As cases get steered away from hospitals, those costs will become imperative."
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