non-partners. We now have a thriving new line of business. Our success in efficiently replacing the surgeons and volume we lost is attributable to our efforts to stay abreast of industry and market changes and developments.” Future opportunities like these might reside within every ASC, Schario says. “Make sure you are integrated with the practices that bought into your center so you know when they are bringing on new partners and how soon after you can offer them ownership shares. If you have physicians performing pro- cedures at your ASC who are not own- ers, speak with them regularly about their short- and long-term plans. Even though you may not have shares to sell them today, you always want to be cul- tivating future owners.”
By maintaining communication with potential leads, Haen says, you should be able to act much quicker when faced with an exiting physician. “If something happened to one of my busiest physicians today, I already know who I would go out and talk to.” Sometimes, Rosenquest says, a sig- nificant deterrent to bringing in a new partner is that the valuation of a suc- cessful center is high. This creates a big financial hurdle for new members to overcome and opens up the oppor- tunity to revalue the ASC. “Valuations are always forward-looking, so a cen- ter that is about to take a financial hit due to declining volume is also a cen- ter that can take advantage of the fact that the buy-in can be accomplished at a more affordable price.”
When thinking about succession planning, do not focus only on the finan- cial impact, Rosenquest adds. In more mature centers, it is not unusual for older physicians to hold much of the decision- making power. When these physicians leave, there may be no new decision- makers ready to step up. “Your govern- ing board should include some of your up-and-coming physicians.
This will
help them gain a greater understanding of the complexities of ASC manage-
Healthy centers tend to begin planning transitions for retiring physicians one to two years in advance.”
—John Schario, Medical Facilities Corporation
ment. They will be in a much better posi- tion to step up into leadership roles when senior members are ready to step aside.” Haen says he is facing this exact sce- nario. “My board president will be retir- ing soon, which could leave a huge lead- ership vacuum. The two new physician partners we added are now serving on the governing board. They are becoming much more informed about our opera- tions and will help fill the vacuum.”
Smoothing the Transition Make physician succession planning a topic for every strategic planning ses- sion, Schario advises. “As part of your discussion about volume and growth, evaluate how any upcoming physician changes, such as retirement, will impact that plan. Healthy centers tend to begin planning transitions for retiring physi- cians one to two years in advance.” Haen keeps his governing board apprised of all possible physician leads.
“This allows me to get the board’s feed- back on these candidates. I also ask our board members and all of our affiliated physicians for physician target sugges- tions and introductions to physicians. Those peer-to-peer relationships can help you get your foot in the door.” To prevent the derailment of a good succession plan, an ASC needs appro- priate language in its operating agree- ment. “In your agreement, there should be provisions for what will occur if a physician-owner leaves the facility, whether due to retirement, losing their license, moving out of the area or any other reason,” Schario says. “Each can be handled differently, based on the provisions. The best thing you can do is think these potential scenarios through before they occur and spell out the pro- cess so the rules are clear to everyone.” Work to eliminate potential barriers to bringing on physicians, Rosenquest says. “If you have not taken the time to think about how ASC equity can be offered by new practicing physicians, get with your management company or legal counsel to figure out how to do that in the most compliant and least complex way that provides the best on- ramp for these physicians.” That could involve restructuring some of the part- nership documents of the practice if the ASC equity is held by the practice instead of the individual physicians. When ASCs initially develop oper-
ating agreements, there can be a ten- dency toward focusing on how inves- tors will be added, but less on how they will be removed, Schario says. A good operating agreement will speak in detail to both. “Imagine you have a physician who is about to retire or leave your market to practice else- where but wants to retain ownership. If your operating agreement fails to ade- quately address exiting requirements associated with these scenarios, you may be faced with a non-producing physician making money off the ASC. That can greatly handcuff your ability to replace the lost volume.”
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