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5 key trends in hospital/physician joint venture ASCs — And how to make sure yours is successful

Ambulatory surgery center joint ventures with hospitals and health systems is a huge opportunity as the healthcare system encourages collaboration to provide the best quality care at the lowest cost.

For the past 12 years, Regent Surgical Health has perfected a three-way hospital-physician-management company joint venture ASC. At the Becker's Hospital Review 6th Annual Meeting, Regent CEO Tom Mallon and CDO Jeffrey Simmons gave a presentation titled "How to Structure a Hospital/Physician ASC Partnership the Right Way."

Under Regent's typical ownership model, the hospital and management company together own the majority share of the ASC, while the physicians together own a larger percentage than either the hospital or management company individually. This model has been successful, and Mr. Simmons sees the model continuing to grow.

"In the past, we've seen hospital-physician joint venture ASCs have issues because hospitals wanted to control the operations," said Mr. Simmons. "It's different today. Hospitals are willing to partner with physicians. Around four out of every five hospitals we talk to are willing to work with physicians."

Five key trends Mr. Simmons sees in the market include:

1. There are 70 percent of ASCs in the market today that are single physician-owned centers; that number will likely fall significantly over the next five years.

2. In the next five years, there will be a significant movement toward hospitals entering into joint ventures with ASCs, eventually acquiring them.

3. The number of Medicare-certified ASCs has been flat, which will likely continue.

4. Hospitals that need to save as they take on more risk will want to embrace the ASC joint venture strategy instead of performing cases in the hospital's outpatient department.

5. Out-of-network opportunities for ASCs are dwindling, and affiliating with a healthcare system can help ASCs access patients who are fully contracted.

Regent conducted a survey on why physicians want to have their own ASCs and what motivates them. Financial returns weren't at the top of the list; the most important reason was control followed by efficiency and then economic return.

"Create a business model that allows the physician to have control and achieve better reimbursement," said Mr. Simmons. "Under the arrangement, hospitals can contract for the ASC even though the hospital owns less than 100 percent."

The ASC physician partners can also look for hospital partners that will leverage their contracting power. Without that leverage, the ASC isn't going to be successful.

Another important issue to consider is the board of directors. At Regent joint venture centers, physician owners typically have four seats on the board and hospital representatives have two seats; Regent has one seat. Typically, Regent asks hospital executives to fill seats on the ASC's board.

"Don't make the joint venture ASC be the hospital's first joint venture," said Mr. Simmons. "You want the hospital to have a past relationship, even if it's an MRI partnership. Then they are familiar with negotiating with physicians."

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