The following article is written by Jeff Leland, CEO of Blue Chip Surgical Center Partners.
There is no doubt that the market for outpatient spine surgery continues to evolve and mature. However, surgeons who wish to develop a spine-focused ambulatory surgery centers or add spine to an existing surgery center must be prepared to address important questions, including those with regulatory, legal, financial and strategic impacts. In a time of constant market flux, new opportunities may present themselves, but there are real risks for those spine ASCs that are not closely attuned to the shifts.
1. Will hospitals regard ASCs as competitors or potential partners? Hospitals and health systems willing to think creatively and identify the right surgeon partners stand to enjoy many benefits of ASC ownership, like improved surgeon loyalty, lower price points and more convenience for patients. Even modest stakes can produce these gains. At several centers, we have found mutually valuable structures and working agreements based on shared risk and reward, clearly defined management responsibilities and open communication. A key starting point: Both sides must invest in building trust, rather than viewing the other side as the enemy. Outpatient spine is an arena where, we believe, surgeons and hospitals can collaborate productively.
2. How will self-referral and other relevant regulations evolve? Keeping track of regulatory concerns is nearly a full-time job, especially when it comes to outpatient spine. Unfortunately, there are no easy or sweeping rules that apply across the board. The devil truly is in the details. But, again, innovative structuring of legal entities and creative contracting may allow surgeon-investors to offer an integrated experience for patients, while still generating excellent financial outcomes and complying with state and federal regulations.
3. Will the growth of consumer-driven healthcare change the playing field? Fundamentally, we believe that consumer-driven healthcare will be a net positive for all types of ASCs, including spine-focused facilities. In a consumer-driven world, the benefits of ASCs (including superior comfort and convenience, more efficient treatments and lower out-of-pocket costs) only become clearer and more attractive to patients. Further, hospitals and health systems will want to join ASC partnerships to offer patients lower price points.
4. Will access to capital improve for groups of surgeon-investors? Our sense is that capital will flow more freely in 2011 than it has during the last few years. However, one lingering effect of the recent financial crunch is that business plans must be truly comprehensive and compelling. Financers are very careful in their evaluations and want to see, among other things, accurate revenue projections and proven management expertise before they will lease to or invest in new or expanding centers.
5. Can payors be induced to embrace cost-efficient outpatient surgical care through improved contracting models? Here, again, the opportunities are revealed only through careful examination of in the details and creative structuring of win-win contracts. Relationships also matter; often it is only senior-level executives at various payor organizations who are willing to listen to non-standard agreements or to renegotiate existing agreements.
6. How can targeted spine-focused centers compete in areas saturated with ASCs, many of which are underperforming? Size matters when it comes to spine-focused ASCs. But that doesn't mean bigger is always better. In our experience, the strongest business cases often involve small centers with 1-2 operating rooms. Overbuilding remains a real risk in the outpatient spine market. It's more important to master case volume and case payor mix. Volume is all about surgeon-partners delivering the cases they projected to bring, while the right case payor mix will vary by market and payor environment, though it may include pain management and orthopedic procedures.
Learn more about Blue Chip Surgical Center Partners.
Read more from the leadership team of Blue Chip Surgical Center Partners:
- Owning a Surgery Center: The Best Investment I Will Ever Make
- 4 Steps to Effectively Bring New Surgeons on Board