Rebecca Harrell is a medical office broker with Henry S. Miller Brokerage, one of the largest independent commercial real estate firms based in Texas. She discusses the trends and opportunities for ambulatory surgery centers in the future.
Q: What options are available for physicians considering ambulatory surgery center investment?
Rebecca Harrell: There are several different models and different states have different regulations regarding ASCs. Depending on the specialty, many surgeons have ownership interest in freestanding outpatient surgery centers located either on or off of a medical campus. These facilities can be in a multi-tenant medical office building or in a freestanding building. There are also different ownership models to consider – joint ventures with the hospital, management companies or full physician ownership.
Joint venture ownership usually consists of a hospital along with a group of physicians who utilize the facility for their cases. This model makes sense for hospitals who want to maintain a relationship with their top surgeons allowing both hospital and physician to share technical fees that previously were only available to the hospital. For physicians, the hospital can provide much needed capital to get the project off of the ground.
A recent trend is physicians joining together to build and operate the ASC without hospital involvement.
Q: What big challenges do surgery centers face today and how can they overcome them?
RH: Reimbursement is a big challenge, along with infection control. If your facility has good infection control protocol and you don't have a problem with infection rates being high, that's definitely a bragging point. Hospitals struggle with this. Acute care hospitals provide a variety of services because of their need in the community. This generalist approach to healthcare creates a need to be all things to all people. ASCs are more specialized in the types of procedures they perform. For this reason, there is the argument that better patient outcomes are achieved in the ambulatory setting.
Facilities must be proactive with risk management to reduce hazards. Facility managers should maintain their own internal protocols for infection control and disposing of medical waste. Patient and staff circulation patterns with regard to infection control should be optimized.
Q: How can freestanding surgery centers compete with hospitals in their communities?
RH: It's a real benefit to be in a multi-tenant medical office building that has its own ASC. Physicians like to build and have ownership in these facilities because they don't have to drive from their office to the hospital to perform their surgeries, the ease of scheduling, increased revenue from fees, patient satisfaction and better patient outcomes, as well as other benefits. Physicians who are equity partners in the building realize that investors are snapping up these properties as soon as they are available for sale (many times before they are on the market). This is encouraging when the physician partners are making the initial capital outlay to build the facility.
With licensing and certification, physician partners could allow other physicians who become tenants in the building to utilize the ASC if they are credentialed. This is a great amenity for tenants in the building. However, the physician owners don't always want to do this because they want operating room flexibility. If too many surgeons are scheduling surgeries, they might not have an opening when they want to perform their case. That's a factor depending on how many ORs they have and what their demand is.
You can't create demand for an ambulatory surgery center. A good way for physicians to determine whether the demand for services is being met is to perform a feasibility study. You might find that a community is underserved, so there is a demand for a facility in the area, or you might discover there is very little wait time to schedule a procedure, demand is being met.
Q: What are the advantages of surgery centers versus hospitals in the changing healthcare market?
RH: If a surgery center wanted to focus on the benefits for patients, they should highlight that it feels less stressful in a nice freestanding building versus going into a hospital where there are sick and injured people. In an ASC, surgeons are performing elective procedures, so you will not be in the same environment as in an acute care hospital.
Another benefit of an ASC as compared to a hospital is parking. Hospitals are at a disadvantage because parking garages and congestion in their lots is a turnoff to patients, friends and family. Independent facilities are attractive because friends and family can easily pull up, drop the patient off and park close by. Also, you cannot overlook the fact that there is greater flexibility in scheduling procedures in an ASC. Hospitals sometimes bump elective procedures on the surgery schedule if there are emergency patients.
Q: Are there any resources for surgery centers to help them survive in these competitive markets?
RH: There are companies with multiple locations – a network of ASCs – all over the country. This means there is a choice for location among your physician groups as well. People want to go to facilities in their neighborhoods and spend less time in the car after a procedure. ASCs want patients to be picked up as soon as possible. ASCs are convenient for that.
Q: Where do you think the ASC industry is headed in the future?
RH: The whole world of ambulatory surgery is going to do nothing but increase because physicians are performing more minimally invasive surgeries than ever before. This is due to the fact that we have better pharmaceuticals, i.e., anesthetics with a short duration of action, pain medications with a relatively fast onset and more antiemetic drugs for post-op nausea. The use of lasers, endoscopes and ultrasound technology requires fewer incisions, faster recovery time and lower infection rates, are more cost effective and provide better patient outcomes. Third party payors may not even pay for a procedure they deem should be done in an outpatient setting if it's actually performed inpatient at the hospital (out-of-network provider).
From a broker's point of view, when I'm working with surgeons who want to locate their office in or near a medical office building with an ASC, I have resources for them. I can show them where these facilities are, how many physicians are credentialed there and whether the facility will allow outside physicians to utilize the ASC. ASCs are highly regulated facilities and are costly to build, but they can serve a community well and add considerable value to a multi-tenant medical office building.
More Articles on Surgery Centers:
5 Steps for ASCs to Survive When Hospitals Employ Physicians
11 Ways for ASCs to Make More Money Per Procedure
7 Trends in ASC Buildings to Compete With Hospitals