Marshall Maran, senior vice president of operations and physician services at Health Inventures in Broomfield, Colo., outlines three choices physician-owners of ambulatory surgery centers have when looking for a new strategic direction.
1. Sell to an equity-based management company. These companies require the physician-owners to sell them shares in the center. This gives the companies extra funds to improve the center and also ensures the management company has skin in the game. Often these companies are content to leave majority control in the hands of the physicians, but sometimes they require a majority stake in the ASC, which can mean loss of physician control, Mr. Maran says.
Some physicians may actually want to sell off their stake, he says. The sale would render a large payment that could be put toward buying new equipment or making substantial renovations. Even at centers in good financial shape, physician-partners may want to sell majority interest so that they could exit the ASC for retirement or other reasons. "Selling majority interest may be a very attractive option for a retiring physician, but if you have 10 or more years before retirement, the loss of control could be very unappealing," he says.
But physicians who give up control in a center need to understand the buyer's motivations and future strategy, Mr. Maran says. "Are the buyer's values aligned with yours?" he asks. For example, a private equity fund or management company with majority control might veto requests for new equipment. Or, after a few years, the buyer might flip the center over to a new owner without getting the physician-partners' approval. As the ASC goes from owner to owner, he says, "you could end up like a shot in a pinball machine."
2. Partner with a hospital. Hospitals are increasingly seeking joint ventures with physicians for ASCs. "Alignment with a hospital could help the center get more favorable managed care contracts and perhaps better deals on supplies," Mr. Maran says. However, the hospital may insist on majority ownership or may even want to convert the ASC into a hospital outpatient department, forcing the physician-partners to cash in all their shares.
To ensure efficiency and long-term success, hospitals frequently bring in management companies[jc1] . Many management companies also buy a small equity share in the hospital-aligned ASC, which can act as a buffer between hospital and physician partners. "Within the network of ASCs that we manage, more than 90 percent of them are JV deals that we've put together between physicians and hospitals," Mr. Maran says. "So obviously, we believe in this strategy and have been intimately involved in developing a lot of success stories."
Another potential advantage for a hospital-aligned ASC is being included in advanced care delivery models, including Medicare accountable care organizations and similar arrangements set up by private payors. "Hospitals are taking the lead in the development of ACOs and there's a lot of promise in the ACO concept," Mr. Maran says. "However, joint ownership with a hospital is not the only path to inclusion in an ACO."
3. Remain independent. Physician-owners who decide to remain independent can still make significant changes in the structure of the ASC. For example, they could choose to resyndicate. The organization is then restructured so that it can bring in a large number of new physician-owners or merge with another facility. "Resyndication can be a good long-term strategy because it brings in new blood –– physicians who could stay with the center for years and years," Mr. Maran says. On the other hand, resyndication may be used not to remain independent but to make the center more attractive for sale to a hospital or a management company.
The ASC that chooses to remain independent could bring in a management company that does not require physicians to sell shares. Instead of depending on equity earnings, these companies are paid a flat fee or a percent of revenue. "Health Inventures has several management-only contracts with no equity stake," Mr. Maran says. Since the management-only company needs some time to make improvements, contracts last several years. Health Inventures' contracts, for example, last 3-7 years. "A good management-only company focuses more on management than spending its way into the black," he says. "Every day we wake up, we are out there proving our value to our physicians and our centers."
Learn more about Health Inventures.
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[jc1]If the source really wants this, it's fine, but I don't think it's necessary.