The U.S. healthcare industry is in the midst of a war for top talent. Inadequate supply of medical school graduates, higher demand for services and smaller recruitment budgets are all playing a role in a battle that’s only expected to become more severe in the next decade. According to the Association of American Medical Colleges, the number of physicians overall in the United States will only grow at a rate of 7 percent in the coming years; meanwhile, the U.S. senior population is expected to grow by more than 35 percent and ranks of the newly insured – either through a Medicare expansion or state-based insurance exchanges – may reach 50 million. All told, the AAMC predicts the total physician shortage in the United States may reach 130,000 by 2025. Surgical specialties are expected to be hit particularly hard in the coming years, with an expected shortage of 35,000 surgeons by 2020. The predicated surgeon shortage potentially poses a long-term issue for hospital executives. Surgical cases are frequently profit centers for hospitals, by some estimates representing 40 percent of overall profits for a facility, and they often subsidize more costly — but critically important – departments. Ambulatory surgery center joint ventures are an innovative way hospital executives can attract and retain the best surgical talent in their market. In particular, these strategies can be a particularly effective tool in capturing revenue lost to “splitters,” high-performing surgeons who perform procedures at two or more competing hospitals. These peripatetic physicians often represent a costly missed opportunity for hospital leadership. Surgeons split their time between multiple facilities for a variety of reasons, including reimbursement issues, scheduling conflicts, lack of equipment and staffing concerns. An ASC joint venture allows hospitals to address physicians’ concerns, while creating valuable ownership opportunities for surgeons, financial predictability for hospitals, and stable, long-term relationships between hospital executives and their top earners.
Identifying opportunities
In the past, hospital executives typically learned about splitters through word of mouth. The latest data analysis tools, however, allow decision makers to drill down into their caseload system wide and perform analysis on procedures, payer mix, and surgeon utilization and performance. For example, a surgeon may perform all of his or her Medicare cases at one facility, but then travel to another hospital to perform more profitable cases that are reimbursed by private payers. The reasons why these surgeons pick one facility over another to perform specific procedures are often varied and complex. Staffing and personnel issues, payer restrictions, inadequate equipment and patient satisfaction all contribute to these migrating caseloads. Referral arrangements may also play a role, as primary care providers are frequently pressured by hospitals, accountable care organizations and other sources to send cases to affiliated facilities. Joint-venture ASCs allow hospital leaders and physicians to address many of these concerns all at once by building a facility from the ground up, assembling a hand-picked, dedicated team and investing in the physician’s preferred equipment. The arrangements also allow the partners to create new financial models, aligned incentives and payment methodologies, and implement the latest software tools to shorten the revenue cycle. Comprehensive market research is the cornerstone of any successful ASC joint venture. Before potential partners can be identified, hospitals must take a deep look at their communities. What are the long-term healthcare needs of the population? What are my competitors doing? Where are the potential opportunities? Armed with these answers, hospital executives should then look at how their facilities’ surgeons are splitting their time with other facilities – and why. Are they issues that can be addressed with an investment in an ASC joint venture? If so, hospital leaders should prioritize potential physician partners based on specialties, population opportunities or biggest risk of competitor poaching. Financial analysis also should be conducted to determine potential revenue from the ASC and local population forecasts.
Building for the future
For virtually all U.S. hospital systems, financial success in the coming years will hinge on predicting the unique healthcare needs of the local community, creating the right facilities, programs and partnerships to meet these demands, spreading the word to potential patients, and delivering high-quality, cost-effective care. This national trend towards specialization means that some hospitals will opt for sports medicine centers of excellence to meet the needs of young communities, while others will build hip and knee replacement centers to meet the needs of an aging local population. Just the same, an ASC joint venture allows hospital executives to create a financial structure around the exact needs of a hospital leadership team and its physician partners. These agreements also are totally contracted, which limit payer issues down the road, and set in place long-term, mutually beneficial relationships between physicians and hospitals. Since 2001, Regent Surgical Health has led the way in developing and managing successful surgery center partnerships with hospitals. The ASC model is constantly evolving and Regent positions its facility partners to meet these changing market conditions and succeed. Our outpatient strategy research comes at no risk to hospital clients. If we determine a transaction is not feasible, there are no fees for our time. If we recommend moving forward, you can be confident in achieving long-term financial success. For more information on these strategies, please contact Jeffrey Simmons at jsimmons@regentsh.com.
