When physician-owners of an ambulatory surgery center partner with a management company or hospital, they forge a long-term bond that would be difficult to undo if circumstances deteriorate, says Kevin McDonough, senior manager in the Dallas office of VMG Health. Mr. McDonough advises ASCs to take seven precautionary steps before signing on the dotted line.
1. Find an active manager. A passive partner might provide the needed cash but won't benefit your center over the long term. "ASCs should not focus exclusively on maximizing the upfront payment," Mr. McDonough says. "While the buy-in price needs to be competitive, the center should seek a partner who will take an active role in shepherding improved performance moving forward."
2. What can they do for you? "Prospective partners should be able to present a short and long-term strategic plan to the existing physician owners," Mr. McDonough says. "This strategic plan should highlight what their organization can bring to the table." They should detail how they plan to attract new physician volume, enhance managed care contracts, improve supply contracts, train staff in best practices and identify long-term strategic opportunities.
3. Would they respect your center's culture? The new partner will want to implement certain changes with the goal of increasing efficiency and improving performance, but it should not destroy the culture of the place. "There is a difference between making strategic improvements and making changes that undermine morale and alienate any potential existing partners," Mr. McDonough says. "Make sure you can tell the difference before commitment."
4. Look for a pro-physician attitude. Find a partner who would keep physicians involved in day-to-day management. "Someone who doesn't listen to physicians is going to drive away existing physicians and deter new investment," Mr. McDonough says.
5. How would governance work? In many cases, the new relationship requires rewriting the operating agreement, so read it carefully. In cases where physicians are giving up equity ownership, what authority would they still have?
6. Meet with the candidate. Meet with your prospective partner not just once but several times. "Treat this as you would any long-term partnership," Mr. McDonough says. He advises doing this over a length of time before signing any deal.
7. Perform a background check. Contact centers that are already affiliated with your prospective partner. "They should be able to give you a great idea as to what can be expected over the short and long-term with your prospective partner," Mr. McDonough says. "Just as you would before entering into any business relationship, you'll want to get references."
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