At the 11th Annual Spine, Orthopedic & Pain Management-Driven ASC Conference June 14, Kenneth Faw, MD, executive and medical director of Evergreen Surgical Center in Kirkland, Wash., and Neil Johnson, RN, senior vice president and COO of Kirkland-based EvergreenHealth, discussed the conversion of the ASC to a hospital outpatient department.
The surgery center began as a physician-owned ASC with four operating rooms in 1983 and was bought by EvergreenHealth in 1986. In 2003 the hospital and ASC physicians formed a joint venture and expanded the facility to nine ORs. About six months ago, the physicians sold their shares to the hospital.
Dr. Faw explained several factors that contributed to the ASC's decision to sell to the hospital in 2012:
• An ASC in a joint venture with a competing hospital went bankrupt, causing concern among Evergreen Surgical Center's physician owners that they could face the same fate.
• The ASC was filling only about seven of its nine ORs, and the hospital needed additional ORs.
• ASC staff were paid through the hospital's human resources department, which meant they enjoyed the same benefits as hospital employees, but the cost was significant for the ASC.
• Some physician groups had dual loyalties. For example, an orthopedic group that brought cases to the ASC also had its own ORs where they would bring cases.
• The ASC is located in a saturated environment with many competing ASCs.
• There were passive investors.
• The physician owners were aging and looking for a return on their investment in the ASC.
• There were few young physicians with capital to invest in the ASC.
• Increasing physician employment made hospital employment more attractive.
Dr. Faw said that one ownership model isn't necessarily better than any other; its success depends on market conditions and other factors. "All the ownership models succeeded. They all had great clinical outcomes," he said.
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The surgery center began as a physician-owned ASC with four operating rooms in 1983 and was bought by EvergreenHealth in 1986. In 2003 the hospital and ASC physicians formed a joint venture and expanded the facility to nine ORs. About six months ago, the physicians sold their shares to the hospital.
Dr. Faw explained several factors that contributed to the ASC's decision to sell to the hospital in 2012:
• An ASC in a joint venture with a competing hospital went bankrupt, causing concern among Evergreen Surgical Center's physician owners that they could face the same fate.
• The ASC was filling only about seven of its nine ORs, and the hospital needed additional ORs.
• ASC staff were paid through the hospital's human resources department, which meant they enjoyed the same benefits as hospital employees, but the cost was significant for the ASC.
• Some physician groups had dual loyalties. For example, an orthopedic group that brought cases to the ASC also had its own ORs where they would bring cases.
• The ASC is located in a saturated environment with many competing ASCs.
• There were passive investors.
• The physician owners were aging and looking for a return on their investment in the ASC.
• There were few young physicians with capital to invest in the ASC.
• Increasing physician employment made hospital employment more attractive.
Dr. Faw said that one ownership model isn't necessarily better than any other; its success depends on market conditions and other factors. "All the ownership models succeeded. They all had great clinical outcomes," he said.
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Acquisition and Valuation Trends: Where Do Orthopedics Fit in?ASC Acquisitions: What Are Currently Buyers Paying?
7 Steps for ASCs Considering Majority Ownership Sale