COVER STORY
Expect More Joint Ventures in 2019 Examine values, business approaches and levels of trust before you partner BY ROBERT KURTZ
I
f you have sensed an increas- ing number of reports about phy- sician-hospital ASC joint ventures over the past few years, you would not be alone in this observation, says Roger Strode, partner and health care business lawyer with Foley & Lard- ner in Chicago, Illinois. “Joint ventures are becoming
more prevalent, with much of the momentum for these partnerships being driven by hospitals,” says Joan Dentler, president and chief execu- tive officer of Austin, Texas-based Avanza Healthcare Strategies. “They are taking a proactive approach to making ASCs an integral part of their surgical services.” While many ASCs are electing to remain independent, says Lisa Cooper, principal of Woodside, Cal- ifornia-based Advocare+, a grow- ing number are looking for a part- ner. “For ASCs not already part of a joint venture, there is a tremendous opportunity because of the increased interest from hospitals. But suc- cess is not guaranteed just because an ASC finds a hospital partner. There is a tremendous amount of planning that is required, and part- ners must be willing to tackle this work jointly.”
How We Got Here Contrary to what Dentler says she often hears joint ventures are not a new phenomenon. “When I speak with people in the ASC industry, many are surprised to learn that my first joint venture project was in the late ’90s, and it was not the first one ever completed.”
on joint
Strode, too, says he has worked venture deals for many
years. Cooper says El Camino Sur- gery Center in Mountain View, Cal- ifornia, where she worked between 2001 and 2011, was a joint venture. A significant contributor to the recent surge in joint ventures is the Patient Protection and Afford- able Care Act (PPACA or ACA), Strode says. “ACA, along with dif- ferent payer initiatives like Medi- care Advantage, has encouraged pro- viders like hospitals, physicians and ASCs to move under a shared risk model. Hospitals are being incen- tivized by payers to direct healthier patients into outpatient settings and save their tertiary care and nursing force for sicker patients.”
Dentler suggests that as hospitals
faced pressure to migrate appropri- ate surgical procedures out of their operating rooms, many viewed ASC partnerships as ways to accomplish this objective without losing those cases to independent ASCs. In other instances, hospitals have acquired ASCs almost unintentionally, she says. “Oftentimes, the acquisition
20 ASC FOCUS JANUARY 2019 |
ascfocus.org
of a physician practice includes the surgery center owned by the prac- tice, essentially triggering an ASC joint venture.” Roughly two out of every five hospitals own or are affiliated with at least one ASC, according to a 2018 national survey of senior executives and clinical leaders at hospitals and health systems commissioned by Avanza and the law firm Clark Hill. For Dentler, that figure was lower than expected. “It is rare that we speak with a hospital without at least one ASC affiliation, and many have more than one,” she says. The survey data (
https://avanzastrategies.com/ avanza-exclusive-2018-hospital- asc-survey-results/) also indicates that nearly 40 percent of all hospi- tals with ASCs have two or more in their portfolio.
What the Future Holds Do not expect the proliferation of ASC joint ventures to slow down soon, Strode says. “The movement that occurs will be highly dependent upon local markets and what hos- pitals believe are the right configu- rations for accountable care orga- nizations (ACOs) and clinically integrated models of care. If hospi- tals view ASCs as an effective means to support these efforts, they will pursue partnerships.” In the coming year, Strode
expects owners of independent ASCs to consider partnering with hospitals more seriously than in the past. “Competing with hospitals for payer contracts remains an uphill battle for ASCs. Partnering with a hospital can make managed care contracting much easier. It also can
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