Summer/Fall 2018


Protecting Your Interests in a Hospital JV By Joan Dentler


Physician-hospital ASC joint ventures (JVs) have always had the potential to be an ideal form of surgery center ownership. The


structure, when executed skillfully, can be a win for all involved: physicians, hospital administrators, patients and payers. Given the support for growing joint-venture ASCs that exists in the health care marketplace today, you may now find taking on a hospital partner particularly attractive.


While collaboration with a hospital has the potential to bring significant improvements to an ASC, poor planning and execution of the partnership could lead to missed opportunities or even bring undesired changes to a successful ASC. Some key considerations when entering into a partnership with a hospital and working to strengthen the joint venture are as follows.


Involve outside counsel. During discussions with hospital leadership about the joint-venture parameters and when it comes time to draft the deal terms, the partnership should have its own legal representative and not work only with hospital in-house counsel (which should be advising the hospital on the partnership). The physicians and hospital may want to engage a neutral attorney experienced in ASC governance requirements for the partnership as a whole. The physician partners should each consult with their own legal counsel to look after their personal interests.


Embrace select hospital services. While you will want to avoid inefficiencies associated with acute- care operations from creeping in to the joint-venture ASC, there are hospital services that can benefit the surgery center without harming efficiency. These can include human resources, payer contracting, maintenance, housekeeping and purchasing. If you receive support from the hospital for these or other services, maintain administrative oversight to help ensure the ASC’s needs are met.


4 ASC PHYSICIAN FOCUS


Focus on case migration. One of the most appealing aspects of entering into an ASC joint-venture partnership with a hospital is the potential to move appropriate (e.g., low-acuity, non-emergent) procedures out of the inpatient setting and into the surgery center. Encourage hospital leadership to assess its outpatient surgery portfolio. Emphasize the benefits of moving some or all of it to the ASC. These include freeing up the high-cost operating room time for higher acuity (and higher reimbursing) cases and increasing patient satisfaction. Payers are increasingly reimbursing ASCs only for certain low-acuity cases, so having an ASC in their portfolio is a benefit to hospital leadership if payers stipulate such requirements.


Develop a cooperative relationship. Success of the joint-venture enterprise is contingent on several factors, including both parties serving as committed partners. Through this commitment, physicians and the hospital can build a collaborative culture supported by open lines of communication and transparency. This cooperative relationship, once solidified, will help open the door for the ASC to lean on the hospital for timely assistance, such as when hospital in-house expertise can help tackle a challenge or the borrowing of supplies and/or instrumentation is required. A cooperative relationship can help in other areas as well, including joint marketing and community education efforts.


Adopt an ASC-specific IT system. A hospital may try to push for adoption of technology designed for its setting into the ASC, but this can be problematic. Reasons why include the cost of the system and requiring ASC staff to


navigate a solution with features and data fields designed for a hospital, which can negatively impact staff efficiency and productivity. Since ASCs typically follow an established routine and schedule, with short cases and patient stays, information requested in a hospital-based IT system can be overkill for an ASC. If your hospital partner encourages such a transition, make sure its leadership understands the potential risks and explore whether solutions exist to provide the hospital with the data access it needs without requiring the adoption of an inpatient- focused IT solution.


Involve a third-party adviser. Bringing aboard a third-party consultant can prove invaluable to the partnership negotiation and ongoing joint-venture ASC management processes. This adviser can provide guidance focused specifically on the sustainability of the ASC rather than representing the interests of the physicians or hospital. The insight from the consultant, delivered on an ongoing or periodic basis, should ultimately benefit both partners when the ASC is successful.


Note: There are advisers that require equity and those who do not. There are advisers that require long-term management agreements and those who do not. Do your due diligence and match the services provided to your special situation and needs.


Joan Dentler is president and chief executive officer of Avanza Healthcare Strategies in Austin, Texas. Write her at jdentler@avanzastrategies.com.


The advice and opinions expressed in this column are those of the author(s) and do not represent official Ambulatory Surgery Center Association policy or opinion.


Vol. 2, No. 2


Repurposing of Properties for Medical Facilities on the Rise


Health care providers are increasingly using entrepreneurial real estate strategies, contributing to a surge in the transformation of underused or vacant property into medical facilities, according to an Avison Young report.


The report examines how more services are being untethered from the high-cost


hospital setting and established on an outpatient basis (e.g., ASCs) in locations nearer to where people live and shop and the factors encouraging these developments.


Access the free report.


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