The outpatient surgery business is more competitive than ever before. After a decade of solid growth, the number of Medicare-certified ambulatory surgical centers in the United States is plateauing at about 5,500 locations. Hospitals, too, are increasingly entering the outpatient game. In an attempt to lower costs and capture new Affordable Care Act-driven market share, providers now are competing directly with physician-owned surgical facilities for patient volume. Regent Surgical Health is pioneering an innovative approach: the ASC joint venture. With a deep expertise in structuring and operating these outpatient facilities, Regent carefully balances the needs of all of a facility’s stakeholders, including hospitals and physicians, to create a successful community-focused facility that promotes excellent patient care. Negotiating, finalizing and operating an ASC joint venture offers no shortage of complex challenges. But they are not insurmountable with the right approach. In our experience, here are four hallmarks shared by all highly successful ASC joint ventures: Appropriate governance structure. Establishing the right leadership roles in an ASC joint venture can be the difference between an under- and over-performing facility. For example, too much non-physician ownership can discourage the recruiting of revenue-producing shareholders down the road, making it difficult to grab market share in this mature industry. Balanced buy-out terms. In hashing out an operating agreement, hospitals frequently are looking for physicians to make a long-term commitment to the ASC. And rightly so. Hospitals are putting up significant resources to open the ASC and want to limit their risk. But requiring physicians to sign long-term deals in all cases can provide false security for hospital administrators. In many cases, it’s better to structure short-term arrangements that meet the needs of all the parties.
Flexible non-compete arrangements. Local healthcare markets can change rapidly. Long-term operating agreements often include overly restrictive language that severely – and perhaps unnecessarily–limits physicians and hospitals from engaging in uncompetitive behavior with rival enterprises. In many situations, simply shrinking the non-compete zone from 10 miles to five miles can provide flexibility and ensure financial viability for all parties. Well-defined operational roles. What works in a hospital or private physician practice can lead to trouble in an ASC. For example, physician shareholders face more exposure to anti-kickback rules in an ASC setting. And, unlike within their four walls, hospitals cannot lend equipment to an ASC free of charge, nor can they trade in-kind acts or supplies in any way that may appear to induce referrals. That said, these transactions can occur in certain situations, but only if the ASC pays a fair-market rate. In recent months, we launched our 18th hospital/physician joint venture, the Plaza Ambulatory Surgery Center in Portland, Ore. Our new Pacific Northwest facility underscores the importance of addressing all four of these issues proactively, as well as showcasing the important role ASC joint ventures serve in bringing on and retaining top talent for providers like our partner Providence Health & Services.
