How to Fix a Troubled Hospital-Physician ASC Joint Venture

Dr. Lambert said the following characteristics suggest a troubled joint venture:

• The ASC is losing money or just breaking even.
• Physicians are unhappy and have a lack of control over operations.
• The ASC did not receive a "bump" in commercial insurance rates following the partnership.
• Physician recruitment stops after the hospital becomes an owner of the ASC. This often occurs because hospitals gain more by recruiting physicians to the hospital, rather than a joint-venture ASC, where it owns less of the facility's shares.
• Share of physician ownership becomes so small that physicians are no longer significantly incentivized to ensure ASC success.

Despite these issues, Mr. Lambert said these ventures are not doomed. Instead, they can be turned around through giving physicians a greater incentive to fight for the center's success by increasing physician equity in the center. While Mr. Lambert promotes a minority interest for the hospital (26 percent or less), he said maintaining physicians' incentives is possible even under a hospital majority ownership model, which may be required if the ASC needs a certificate of need or access to the hospital's contracts. "The more the hospital owns, the more you decrease the interest the physicians have in how the center is run," he said.  

After this occurs, Mr. Lambert recommends the following steps to improve a surgery center's success:

• Renegotiate payor contracts. If a center does not receive a "bump" in payments after a joint venture, ensure the hospitals' negotiator is qualified and/or suggest a contracting a consultant.
• Recruit news surgeons and their cases.
• Get staffing costs to 21 percent of collections through compressing scheduling.
• Get supplies to no more than 20 percent of collections through physician education and standardization.

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