Considering the growing trends of physician employment by hospitals and hospital acquisition and integration of ambulatory surgery centers, seven ambulatory surgery center physician-owners discuss whether they expect to still maintain ownership in an ASC in five years, as well as the factors that could facilitate a change in ownership.
Ken Austin, MD, orthopedic surgeon and president, Ramapo Valley Surgical Center in Ramsey, N.J. "I do expect to maintain my ownership in some form five years from now. I am not yet anxious to jump on the band wagon and sell. Maintaining ownership and, [more importantly], control, is important.
"Hospitals tend to run much like the government. They have difficulty staying proactive and tend to get bogged down in layers of unnecessary bureaucracy. They are good at filling out the correct paperwork, but they lose sight of patient care and patient satisfaction along the way, let alone keeping the surgeons happy. Hospitals have a habit of making the surgeon an afterthought.
"As a private facility, we are able to cater to our patients and surgeons alike and provide the highest level of personalized care possible. That's a hard combo to match."
Brad Lerner, MD, urologist and medical director, Summit Ambulatory Surgical Centers in Maryland. "I would still expect to maintain ownership of our ASCs in the next five years although there is a higher likelihood that this may change from our present structure of 100 percent physician ownership. The pursuit of a hospital or hospital system partner may be dictated by a change in our ability to continue to control the care and flow of patients. This has already been impacted by the growing trend of hospitals employing not only primary care physicians but also surgical subspecialists as well.
"The ability to maintain ownership would likely allow the physician-owners to better control daily operations as well as to direct the methods of providing high quality, cost effective care in an ASC setting. There would likely be less control if a majority ownership was not maintained. However, there certainly may be benefits to partnering with a hospital or hospital system given the uncertainty of the future of healthcare, current trends of hiring more hospital employed physicians and the potential impact of accountable care organizations.
"Partnering with a hospital or hospital system in a formal manner may provide increased financial security, the ability to become part of a larger purchasing group to improve buying power and potential ability to increase reimbursement rates. Partnering with a hospital or hospital system may also lessen the chance of having them hire their own competing surgical specialists as well."
Allen Hord, MD, anesthesia/pain management, West Paces ASC in Atlanta, an Interventional Management Services partner center. "There is a trend for medical specialists and surgeons who do mostly inpatient procedures to become hospital employees. However, I do not believe that pain specialists or surgeons who do mostly outpatient procedures will follow this trend. These specialists are generally fiercely independent and tend to want more control than is possible as a hospital employee.
"In two previous experiences in hospital-contracted (although not employed) groups, I found that the hospitals rarely acted in the economic best interests of their doctors. They want to control the revenue stream and reap all the benefits. However, I do believe that there will be a trend toward hospital/physician joint ventures, where doctors maintain control of the surgery center."
Kenneth Pettine, MD, spine surgeon and founder, The Spine Institute and Loveland (Colo.) Surgery Center: "As far as surgeons being employed by hospitals, that is a trend, but if you look at this historically, generally what happens is the hospital becomes unhappy or unsatisfied with the situation. Usually it takes about a year or two. What happens is you take a physician who is working 60-80 hours a week in private practice. Let's say his income is a couple million dollars. The hospital buys him out and a contract is negotiated, but it's based on the fact that this physician was doing 400 cases a year at the hospital.
"Now he's an employee and he decides he's not going to work 60-80 hours a week. He's going to spend more time with his family. Maybe he's never been on any of the hospital committees and decides to join a few. Now he has committee meetings so he can't be in clinic or operating as often as he used to. Historically what happens is the physician's volume goes from 400 cases a year to 200 cases a year. Generally after about two years of this, the hospital is the one that divorces the situation by saying the physician is not fulfilling his side of the bargain.
"I think this whole thing is a trend that will go by the wayside, and I think there's going to be a huge resurgence in doing spine surgery in ASCs. With physician income dropping and overheard increasing, there is a very renewed interest by surgeons in passive outcome. To obtain this income, there are physician-owned distributorships — those are under great scrutiny. I don't see that as the future. However, if you have ownership in an ASC, you can do a similar arrangement at your ASC as far as the implant costs go and there are no Stark issues. A surgeon can accomplish what you would do with a POD through an ASC — do exactly the same thing as far as acquiring implant profits — without any of the legal problems.
"I think that is definitely a better avenue for surgeons. I think there's going to be a very renewed interest in ASCs. I think spine surgeons are looking for passive income and what I'm describing is perfect. It is profitable to do spine surgery at an ASC for both the spine surgeon and other owners. In addition, implant costs can be a source of additional passive income. Include 12-minute turnaround times and overall efficiency, patient satisfaction and this situation is too good for a spine surgeon not to desire. We just need to educate surgeons to realize they can duplicate exactly what we have accomplished.
"I have no intention of changing my ownership stricture. In fact, I just want to own more."
Rollins Tindell, MD, ophthalmologist, Surgicare of Mobile (Ala.), an affiliate of Surgical Care Affiliates: "I'm not aware of any hospitals purchasing eye practices and I'm not sure why I would partner with a hospital if I'm not employed by them. I truly believe surgery center companies run surgery centers much better and more efficiently than a hospital can run an ASC.
"I have no desire to join the ranks of a hospital unless something comes up that makes it worthwhile, whether it's financially better or better from a patient access standpoint. At this point in time in our area, there is no benefit to partnering with a hospital. Since we're a big practice, we continue to bring new partners in so there's no problem with replacing old partners when they retire. I can understand if some centers are getting weighted toward the older age group and not bringing young people in, so there's nobody to buy them out. Then they might sell to a hospital at that point, but that's not a problem with us. Every young physician that comes in immediately wants to be a part of the surgery center."
Joshua A. Siegel, MD, orthopedic surgeon and director sports medicine, Access Sports Medicine and Orthopaedics in Exeter, N.H. "I believe that the consolidation that is taking place in the entire healthcare industry will require institutions to grow through acquisitions or partnerships. This is not exclusive to ASCs and includes hospital mergers and acquisitions. Local hospitals have found that the healthcare industry is not immune to the economic conditions facing the rest of the country. Medicaid reimbursement, regulations and pressure from insurance companies are forcing hospitals and ASCs to look at their models and strategically assess their opportunities.
"Looking forward, healthcare will be required to show efficacy in outcomes and value for its costs. The fragmented, parochial nature of the healthcare system including ASCs require capital to modernize and grow beyond what small, local systems can deliver.
"I believe medicine will always be individualized from a delivery of care aspect, but economically, partnering will create growth and economies of scale that will be critical for the survivability of ASCs in the future."
David J. Abraham, MD, orthopedic surgeon, The Reading Neck & Spine Center in Wyomissing, Pa. "I don't want hospital partners. I try to look at the bigger picture, and I'm not making decisions about my ASC based on security. With a hospital partner, basically what you're doing is saying, 'I want to team up with the 800-pound gorilla and we're going share bananas. I'm going to behave just like him so I can have a profitable ASC and he can crush me when he wants to.' I don't believe in that. I think that's just contributing to the power these organizations already have, not to mention the fact that it totally devalues the physicians' profession and I won't give in on that. I will never sacrifice an independent facility for the perceived benefit of security.
"This is a catastrophe for the profession. We don't understand the implications of physicians as a profession becoming employees. We don't understand the impact of the mega-monopoly called the hospital institution. The hospitals are the largest government-subsidized monopoly in our country and we don't need a monopoly in healthcare right now. The Obama bill essentially makes healthcare a guaranteed monopoly by withdrawing any sense of competition that in our capitalistic society is supposed to drive down healthcare costs.
"Talk to business owners who employ more than 150 people and who are self-insured. Where is the money in healthcare going? It's going to the hospitals. They are shaking down our economy and our business owners and charging them ever-increasing costs. The only sense of competition is going to come through the entrepreneurial spirit of capitalism and competition to be able to include the patient in the decision of how to spend the healthcare dollar, have them experience some liability and have them say, 'I'm not going to go to the hospital and pay $15,000 for a knee scope when I can to go an ASC and pay $2,000.'
"As physicians, as a profession, become more employed, it takes away their ability to participate in the market forces that should be present in our economy to lower healthcare costs. The hospital is the enemy of every American who is paying health insurance right now but unfortunately they play on an emotion of need. They hide behind their not-for-profit status. My [local] hospital — Reading Hospital and Medical Center — posted a gross income for the first time of over $1.3 billion with an operating margin of over $120 million in profit. Those numbers are ridiculous. That's money siphoned off of this local economy that business owners and subsequently workers have to bear the cost of. The money has to come from somewhere.
"To me, this is a monopoly where we are all experiencing the effects, we're all paying into this monopoly and it's wrong. Then there's the concept of a certificate of need, which is insanity. The concept that you need to go to the government to open a business is wrong. Why is healthcare not looked at like any other business? Our country does not historically tolerate monopolies and yet the government has done anything it can do to protect the hospital monopoly."
Send comments and thoughts to rob@beckersasc.com.
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