At the Becker's Hospital Review Annual Meeting in Chicago on May 9, 2013, a panel including Senior Vice President of Acquisitions at United Surgical Partners International Michael Stroup and Managing Partner and Founding Partner of ASD Management Robert Zasa, gave a presentation titled "Hospital-Physician Alignment: Closing Healthcare Organizations' Capabilities Gap." The panel was moderated by Amber McGraw Walsh, a partner at McGuireWoods. "There is a lot of health system activity in the ASC space, either acquiring for full ownership or joint venture partnership," said Mr. Zasa. "There are networks forming and you have to be on the program to play the game. Figure out what works best with physicians; because of the networking that is occurring, we have to look at these things and figure out how to take risk."
1. Market forces are bringing them together. In the past, physicians ran from hospital employment. However, regulatory changes and uncertainty from healthcare reform is changing the marketplace. Reimbursement is stronger for ASCs that include a hospital partner, and even stronger if the ASC is converted into a hospital outpatient department.
"We don't know how long the spending gap will last between the HOPD and ASCs," said Mr. Stroup. "It's shrinking, but it's still there. In a lot of markets it's two-to-one. However, if the joint venture is just based on economics, the marriage could be okay, but not great."
Lower reimbursement coupled with hospital employment of specialists and primary care physicians is forcing deeper alignment between ASCs and hospitals in many markets. If physicians see their referrals sources hired by the hospital, they may need to forge a partnership to keep their practice in business. The disappearance of out-of-network opportunities in some markets has also led to more ASCs searching for hospital partners to make a financial impact on the center.2. Communication is key to a healthy partnership. Economics shouldn't be the only driver bringing ASC and hospital partners together, and roles within the partnership should be defined from the beginning. Keep in mind that physicians have been running an efficient business with the ASC, and the hospital's bureaucracy will introduce change into the system.
"Physicians might think it's a financial transaction, but for good reasons they don't want the health system to be too involved with what has been their baby for a long time," said Mr. Stroup. "They don't want the bureaucracy. But the hospital isn't looking for a pure investment either. They have their eyes on a bigger prize: alignment with their specialty program. They want to get those physicians to fit into the larger picture. Make sure you understand what the physicians actually want."
The time line for completing the joint venture and then implementing changes can also make an impact on that relationship.
"Hospitals are process-driven and surgeons are not," said Mr. Zasa. "Surgeons want to make decisions quickly. Timelines are very important. It has to be brisk to keep the surgeons engaged."
3. Make sure you have enough capital to complete the transaction. Hospitals should have the capital on hand to purchase their percentage of the ASC, which means CEOs must understand financial constraints going into the deal.
"We deal with hospitals sometimes that have board meetings and develop an alignment strategy for the joint venture, but then they don't have the resources to support an ambulatory strategy," said Mr. Stroup. "Make sure everyone in the large organization knows what they are doing."
Hospital leaders must also understand that they can play a role in increasing the patient volume and revenue at the ASC.
"Multispecialty centers are most attractive, and when the hospital comes in there is an evident pop in the net revenue per case," said Mr. Zasa. "They have a larger foot print, but more importantly a volume of patients that will work into our ambulatory strategy."
4. May lead to a more evolved relationship down the road. Accountable care organizations, and similar risk-sharing models, are coming to markets across the country, and providers are scrambling to figure out where they fit. Large physician and specialty groups are beginning to form alliances that could have a lasting impact on the hosptial.
"Large physician groups are a lucrative target, but it's still so early in the game," said Mr. Zasa. "Everyone is trying to figure out who to play with. There are a lot of discussions on where groups want their partnership to go. Find out what the right relationship is. Those relationships haven't changed in terms of importance, but they have more potential than in the past. There is a lot of tension in the field right now; the environment and tenor of the business has changed."
ASCs are a good cost savings and have high quality, which are both goals of ACOs. "I think we are going to see more ASCs learning to market and promote themselves," said Mr. Stroup. "We never did direct-to-consumer marketing in the past, but with high deductible plans, physicians are going to focus on the consumer, hospitals and ACOs."
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