Avanza Healthcare Strategies recently surveyed healthcare leaders about investment in ASCs. Here, Avanza President and CEO Joan Dentler shares the findings and takeaways with Becker's ASC Review.
Question: What are the main reasons hospitals and health systems are seeking ASC ownership and affiliation?
Joan Dentler: This was a question we wanted to answer as well, which is why we included it in our recent survey of senior executives and clinical leaders at health systems and hospitals across the country. We learned the top reason cited by these executives is to 'increase outpatient surgical capacity.' This is not surprising, considering the ongoing migration of care out of inpatient settings and into outpatient settings like ASCs.
'Enhancing physician relationships' was the second most-cited reason. When hospitals and health systems develop strong relationship with physicians, it increases the likelihood that these physicians will become more engaged and take their cases to hospital-affiliated facilities.
Coming in third was "'respond to consumer-driven trends.'" What this tells us is that hospitals and health systems are cognizant of the growing number of patients becoming involved with making decisions concerning where they receive treatment. With out-of-pocket costs continuing to rise, patients are becoming more active participants in their care. This is motivating them to seek settings like ASCs that offer lower costs but still high-quality care.
With the way healthcare is heading, no matter what size a hospital or health system is, it needs at least one ASC in its portfolio if it wants to be competitive with patients, payers and physicians it wants to recruit in the future. Our survey showed 38 percent of hospitals have multiple ASCs.
Q: In addition to more joint venture interest, how do you see the ASC/hospital dynamic changing in the future?
JD: I think we will continue to see higher acuity surgical cases migrating out of hospitals and into ASCs. It wasn't long ago all the buzz was around spine cases in ASCs. Now, it's total joints, cardiac and vascular procedures and more complex cases in other specialties. It seems like it's only a matter of time until a majority of surgery is performed in outpatient surgical facilities, with hospital operating rooms reserved for high-risk procedures.
While hospitals will continue to pursue joint ventures, some ASC owners may not be interested in entering such partnerships out of fear they will be giving up too much control over operations. As we continue to move toward value-based reimbursement models, hospitals will need to determine how to provide elective, outpatient surgical services to their patients in a lower-cost environment. Involving surgeons in ownership of the ASC makes them much more cost-sensitive. They are the ones who can take actions, such as choosing lower-cost supplies and implantables that can ultimately reduce the overall cost of surgery.
Another thing we are seeing happening with hospitals and health systems that have multiple ASCs in their portfolio is the creation of an 'ASC liaison' position. This individual's role is to ensure all the hospital-affiliated ASCs have the support they need and, where feasible, create economies of scale benefitting the ASCs. They are doing this [by] entering into system-wide contracts with ASC vendors for services such as information technology, human resources and revenue cycle management, thus giving the ASC partnerships better pricing and the hospitals and health systems some standardization of the quality of services and reporting.
The ASC liaison will often hold regular meetings with the ASC administrators to share ideas, solve problems and find opportunities to improve operations. Many develop internal dashboards for comparison reporting on operational and financial metrics. One thing to keep in mind: The ASC liaison should not be seen as a supervisor to the ASC but rather a support service. We are seeing the creation of this position eliminate the need (and cost) of outside third-party management services.
Q: Why would you say it's important for hospitals and health systems to hold controlling interests in ASCs?
JD: Generally speaking, hospitals and health systems holding a controlling interest is not important to joint venture success. In fact, one could argue that such an interest could prove detrimental.
ASC joint ventures tend to succeed when the physician partners have meaningful ownership interest where they can 'feel' (i.e., reap the rewards of) the efforts involved in lowering costs at the ASC. Hospital partners must always maintain a careful balance between preserving outpatient efficiencies and leveraging inpatient resources that can benefit the ASC. These issues are critical regardless of who is the majority/minority owner. In a 2016 Becker's Hospital Review column, I detailed 10 steps hospitals should take to preserve the outpatient efficiencies that make ASCs successful. These include migrating elective cases with healthy patients, maintaining lean staff, avoiding the impulse to implement robust information technology and focusing on physician engagement. Hospitals can most effectively support ASCs they own by assisting in areas including supply purchasing, physician recruitment, managed care contract negotiations and marketing.
If a hospital holds a controlling interest, there may be a temptation to make significant, unnecessary changes even against the wishes of the minority owner(s). Where a controlling interest can be mutually beneficial is around payer contracting, vendor contracts and banking relationships. The hospital often has the clout of an entire system behind it and can flex those muscles to help the ASC in negotiations. Of course, it must do so in ways that don't cross lines with statutes or regulatory agencies.
Q: What advice would you give to hospitals or health systems looking to form a joint venture with an ASC in an increasingly competitive space?
JD: Focus on honesty and transparency. Ask the ASC's owners and governing board to share their goals and vision for the facility. Find out what they are looking for in a partner. Share your vision for how you believe your organization can help the ASC grow without hurting the efficiencies and culture that have made the surgery center successful and, therefore, an appealing partner. Be sure your goals align. Sincere hospital partners should be willing to open their data to the ASC and determine if there are cases being performed at the hospital that would be better suited for the ASC setting. After a joint venture is formed, the hospital leadership must be sure the entire hospital staff sees the ASC as an integral part of the organization, not a competitor.
It can be worthwhile for the ASC and hospital to jointly bring in a third party to serve as mediator for the joint venture negotiations. A good third-party representative will take the time to learn about both organizations and the reasons why they are interested in pursuing a partnership. With this information, the representative can help determine what arrangement and agreement will best serve both parties' interests and start the partnership off on the right foot.
To participate in future Becker's Q&As, contact Rachel Popa at rpopa@beckershealthcare.com.
For a deeper dive into ASC industry trends, attend the Becker's 17th Annual Future of Spine + Spine, Orthopedic & Pain Management-Driven ASC in Chicago, June 13-15, 2019. Click here to learn more and register.