Executive Director of Proliance Orthopedic Associates Michael McClain has spent his career in healthcare as an ASC administrator and physician group leader. He has first-hand experience with creative ASC partnerships and alignments.
Here, he discusses his insight on the biggest challenges for ASCs today as well as the best opportunities to build a strong center in the future.
Mr. McClain will speak at the Becker's ASC 25th Annual Meeting: The Business and Operations of ASCs, October 18-20, 2018 in Chicago. Click here to learn more and register.
Question: What is the biggest issue facing your ASC today?
Michael McClain: I feel like there are two or three big challenges we have as the ASC market matures. To start, the early adopters of the ASC model are beginning to age out of their practice or multispecialty groups. Those physicians brought the horse power and creativity to developing their centers, which are now coming to the end of their lifecycles. ASCs were a great investment for physicians years ago, and there is still an opportunity to sell a portion of their share, but ASCs aren't a growth model that they once were for investors.
Joint ventures are also becoming more complex; it's not just the nuts and bolts of a transaction. The joint venture ASCs are a much more planned, robust and complex business model today than they were 10 years ago. When you combine this with the need to bring in new physicians, there is a huge burden for young physician investors to shoulder.
Secondly, payer consolidation is a huge challenge for us. Payers are moving in as operators such as Kaiser or Optum; what does that mean for ASCS? Does that help drive reimbursement or make it more likely a small subset of centers will excel based on who they affiliate with in terms of operations? There is a potential for payer partnerships to go very well if the payers are involved directly, such as co-businesses that are involved with ASCs, because payers may finally understand the significant savings with surgery centers. But you do have to worry about whether payers are coming to the table with a value proposition for the center or just because it would further define the exclusivity of their narrow networks. This has the potential to give the payer a huge amount of direct information about what makes a successful ASC and practice, and what doesn't, as well as what value really is.
If a payer has access to all contracts in a particular market and knows what everyone is paid, it's difficult to successfully negotiate a new facility because the payer knows more than you do. Payer consolidation represents all sorts of potential risks. A successful administrator today is a lot more savvy, or needs to be more savvy about the greater healthcare environment considering payers, politics and the relationship between healthcare facilities in the community than they used to be. You have to be much more astute and educated about what is going on around you today. What used to be your competitor might be your partner in the next month, or an enemy might partner with another one of your enemies.
Constantly be aware of what physicians are working on and how to identify yourself as a unique opportunity in your market.
Q: How has the role of an administrator evolved over the past decade?
MM: The new ASC is much more complicated and takes a different set of skills to run than it did 10 years ago. The ability to look critically and strategically at ways to partner with non-traditional partners is critical. I had the good grace as a consultant to spend time with organizations in Southern California, and there are a lot of progressive models of ASCs working with physician groups and others to go at-risk for lives, even in the fee-for-service model. You see more joint ventures and practices having to diversify their businesses with urgent care and ancillaries; the ASC has gone from being a value driver for surgeons to becoming just a piece of their portfolio. As an administrator, you have to know where the ASC fits.
In some cases, you may need to take on procedure types that weren't typically performed in the ASC because they weren't reimbursed highly, but that gives you the opportunity to partner with physicians who wouldn't otherwise take cases to the center. We were partnering with a thoracic surgeon that was looking to develop private pay reimbursed procedures that were ASC appropriate, but most other centers around the country didn't have them. We had to figure out how to set up payment systems for the procedure that didn't exist in most ASCs with a cash-only model. You have to get anesthesia providers and surgeon leadership to agree on allowing these cases even if they're not the bread and butter of the ASC if it makes sense clinically and financially.
The administrator has to be more creative today to bring in cases they didn't have before and develop relationships with atypical surgeons or non-owner surgeons.
Q: What is different about managing a joint venture center versus an independent ASC?
MM: If you're going into a joint venture center, you have to be an expert of managing people who don't report to you. I've seen that as a consultant and first hand at my own ASC, a 12-operating room center in Seattle. The whole idea of going into the joint venture is to leverage the support services of the hospital, but you are in essence managing people who don't report to you so you have to create a service agreement to get the services out of them that you expect. Medicare depends on the ASC to drive the bus, so you have to make sure everyone on the hospital end is providing services to the ASC up to your standards. If you use their power systems, make sure the engineers know how to generate power for the center; if you're using their HR, you have to make sure you can control the subcontracted services.
In that instance, you are managing managers and working with practice managers in the hospital setting that don't have skin in the game and don't understand what an ASC is about. They aren't indoctrinated to the ASC culture. Joint ventures are becoming more common, but you have to understand how hospitals operate and how to manipulate the system to the ASC's benefit. You can't wait six weeks for a new hire and you don't have the revenue as a reimbursement. You don't get the cash that the hospital gets, so you need efficiencies that the hospital doesn't have internally to stay running.