On Feb. 11, David Thoene, managing member of Medical Surgical Partners, presented a Webinar titled "Hospital-Doctor Joint Ventures: A Highly Efficient Physician-Engagement Tool" that highlighted reasons for and benefits of creating hospital-physician ASC joint ventures.
Mr. Thoene began the presentation by noting that 1,700 out of around 5,900 ASCs in the United States are hospital-physician joint ventures. He then discussed why hospitals are looking to join with physicians in ASCs and why physicians may consider partnerships with hospitals.
Mr. Thoene offered the following reasons why hospitals are looking to partner with physicians:
- Hospitals are experiencing service line fragmentation, as a result of poor physician relations, income opportunities for physicians and workplace control needs of physicians.
- Hospitals have felt the impact by losing relationships with key physicians, experiencing high remaining cost structures and losing high margin income.
- ASCs are an uncommonly effective, profitable and durable means of providing high quality care.
Conversely, physicians may look to hospital partnerships for the following reasons:
- The market is favorable for the reconsolidation of services, including the maturation of physician ancillary businesses, declining sources of same-store revenue and declining sources of physician investors.
- ASCs and ancillaries can be difficult to grow.
- Physicians and ASC face reimbursement challenges.
Hospitals partners can help address some of these challenges for physicians by offering potential for higher ASC reimbursement through leveraging their commercial payor contracts, according to Mr. Thoene. Additional benefits of a hospital partner discussed include secure financing, ability to provide capital, ability to provide management decision support systems and a market presence. Hospitals may benefit by receiving increased physician engagement by aligning goals with physicians, improving access to efficient care and meeting the challenge of the government and private payors to provide coverage and access to care.
Mr. Thoene noted that successful physician engagement relies on four areas:
- Behavioral alignment — Physicians and the hospital share mutual clinical service and business goals, have a collegial relationship and are accessible, respectful and open to new ideas.
- Performance alignment — Actions of all members support growth, including meeting compliance standards, adhering to protocols, standards of care and managing referrals within the system.
- Operational alignment — Actions of members support efficiency goals. The group is responsive to health system and physician needs, and physician leaders are developed through the partnership.
- Strategic alignment — Hospitals and physicians should be aligned for long-term growth, and service lines and centers of excellence are supported. Services are also relocated strategically throughout the system.
- Economic alignment — Actions of the partnership support contracts, and physicians and the hospital share risk and reward in the ASC.
Mr. Thoene next identified four models of ASC ownership: 100 percent physician ownership, physician majority partnership, hospital majority partnership and the HOPD model. He noted each ownership model had its advantages and disadvantages.
Overall, hospital partners can allow physicians gain better contracts with payors, but the amount of hospital ownership drives their power in negotiations, Mr. Thoene noted. In a physician majority, hospitals can "gently persuade" payors to improve rates, but in a hospital majority, hospitals can include the ASC in its normal contracting process, according to Mr. Thoene. ASCs can also offer off balance sheet financing for hospitals.
The success of the joint venture also relies on important structural elements. Physicians should be able to provide services and be licensed and have privileges at both the ASC and the hospital. Governance must be equal between physicians and the hospital. Compliance should include adherence to safe harbor rules, distributions based on ownership, shared equity and non-compete covenants. Finally, business durability should include restriction to share transfers, right of first refusal and means to purchase shares of retiring and disruptive or nonactive members.
Mr. Thoene concluded by noting that joint venture ASCs are more efficient and less costly than other means of physician engagement, as it is a proven business model. Hospitals have a strong case for involvement, and ASCs can offer means for not only surgeon members, but non-surgeons as well through real-estate joint ventures.
Learn more about Medical Surgical Partners.