5 Steps to Fix a Failing Hospital-ASC Joint Venture

At a session at the 10th Annual Orthopedic, Spine and Pain Management-Driven ASC Conference, Brent Lambert, MD, FACS, principal and founder, and Luke Lambert, MBA, CFA, CASC, CEO, Ambulatory Surgery Centers of America, shared key concepts for fixing struggling hospital-ambulatory surgery center joint ventures.

Dr. Lambert explained he defines "failing" joint ventures as those with the following characteristics:

• ASC is not making money or breaking even.
• Physicians are unhappy.
• ASC has a "hospital mentality" toward efficiency.

While quantitative data is unavailable, anecdotal evidence suggests 50 percent of ASCs are not making money or breaking even, said Dr. Lambert.

One common reason for this lack of profitability following a joint venture is that the facility failed to get the "bump" in reimbursement rates expected due to the hospital partnership. Dr. Lambert defines this "bump" as the "increase in average reimbursement rate per case that the hospital was supposed to bring to the party." Beyond that, though, other factors can contribute to a failed joint venture, he said. These include:

• Hospital lacks experience in ASC space and has poor ASC management skills.
• Hospital is not a contributor in any measurable way to success of the center and does not work with payors on behalf of the center.
• Hospital is not valuing the physicians as partners.
• Physician ownership is insignificant.
• Recruitment is not part of the business plan.

"If I were to pick on thing responsible for these [ASCs] not thriving, I would say their inability to recruit," said Dr. Lambert. Adding, ASCs must "recruit for the center before surgeons are employed by other hospitals."

Mr. Lambert then took the podium and discussed some of the governance and other issues that lead to the "common threads" of a failing center highlighted by Dr. Lambert. These include:

• The hospital's ownership share far exceeds the 51 percent needed for control.
• The hospital is managing the center.
• The hospital is unable to improve rates for the center.

So what is the remedy for failing centers? Mr. Lambert shared the following recommendations to turnaround these centers:

• Reduce hospital ownership to 26 percent or less, unless they are able to provide a "bump" in rates. He said ASCOA's preferred model is an ownership structure where ASCOA (serving as the management company) and the hospital form a corporation that then owns 51 percent of the center, while the physicians own the remaining shares. Giving physicians a significant stake in the center is crucial. "As physicians own more, they are empowered to do many things to grow and enhance the center," he said.
• Improve payor contracts.
• Recruit new surgeons and their cases.
• Get staffing costs down to 21 percent of collections, through compressed scheduling and other methods.
• Get supplies to no more than 20 percent of collections.

 

More Articles on Hospital-ASC Joint Ventures:

Developing an ASC Joint Venture Strategy That Works: Balancing Ownership and Governance to Align Hospital and Physician Interests for Long Term Success
When a Physician/Hospital ASC Joint Venture Is Right

Developing an ASC Joint Venture Strategy That Works: Balancing Ownership and Governance to Align Hospital and Physician Interests for Long Term Success