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Getting started with an ASC joint venture: 4 key steps

Developing a successful hospital-physician ambulatory surgery center (ASC) joint venture — whether it be a de novo facility, acquisition of an existing ASC, or conversion of a hospital outpatient department (HOPD) — requires a tremendous amount of work as well as buy-in and engagement from all parties.

More hospitals and physicians are interested in partnering on such joint-venture ASCs but are often finding that they don't know how to begin. When such a collaboration is uncharted territory for either of the partners, a poor start can cast significant doubt over the future of the project — whether it can be completed and then done so in a manner that meet the short- and long-term needs of both parties.

While no two joint ventures are alike, our experience has shown us that the foundation for success is built upon the completion of several critical steps early in the project. They include the following:

1. Development of an ASC steering committee. This committee should be comprised of physicians and hospital leaders. It is advisable to keep this group small — likely fewer than 10 people so it does not become unwieldy — and ensure it meets regularly and consistently.

The importance of the work performed by the steering committee cannot be understated. The committee allows representatives from the potential physician partners and hospital leadership to work together (i.e., not in a vacuum) on all of the relevant partnership issues. Such collaboration helps build trust and transparency between the parties, which are critical in any successful partnership.

The steering committee should also serve as an educational forum. Someone knowledgeable about ASCs, and preferably joint ventures — whether an internal team member or external advisor — should spend time during those meetings explaining the pros and cons of the various options concerning ASC operations to help inform both parties of how to make educated decisions for the unique partnership they are creating. The meeting is also a time to review best practices in the ASC industry.

Finally, the meeting serves as a great venue to explain the differences between an ASC and a physician office or hospital concerning a wide range of issues, including regulatory, operational, technology, and revenue cycle management processes.

2. Creation of financial projections. One of the first — and most important — items that should be discussed by the steering committee is the ASC joint venture's financial projections. While the projections are initially used to determine if it makes sense to move forward with developing the ASC, these projections should undergo continuous updates and revisions during the development process as decisions are made that move assumptions to tangible numbers.

It is not unusual to see more than two dozen iterations of financial projections by the time the doors open on an ASC joint venture. This is due to all the various decisions that impact the numbers. View these projections as a dynamic document that help guide decision making and reflect the way the partners want the ASC to operate.

3. Designating a facilitator. To keep the steering committee and project on track, the partners should assign an individual to the role of facilitator. This may be a third-party consultant or project manager from the hospital. Choose someone who understands all of the steps involved in opening the new ASC. The facilitator should keep the project moving along by serving as the guide for conversations, setting meeting agendas, and completing other critical projects in support of the committee.

The facilitator is also tasked with building a project plan for the new ASC joint venture and timeline for the endeavor's various activities. This project plan and timeline will help guide the development process and the steering committee meeting agendas. The project plan and the financial projections should both reflect the decisions made by the group.

Note: It is essential that the facilitator does not represent the interest of one class of investor. Rather, this individual should remain unbiased and be focused on the overall success of the new entity, including getting the ASC surveyed, accredited, open, and operational as successfully and as timely as possible.

4. Formation of the governing board. Once the legal entity is formed and syndication occurs, the steering committee — some or all of its members — can morph into a limited liability company (LLC) governing board. Decisions that were made by the steering committee will be approved and documented in the LLC governing board minutes, as required by the Centers for Medicare & Medicaid Services.

Establishing a Foundation for Collaboration
By taking the time to bring together the right people — internally and possibly externally — and carefully working through the necessary steps, such as those described above, you have a better chance of creating a solid foundation for an ASC joint venture and putting the project on a path toward success. By emphasizing communication and transparency, you will further strengthen collaboration between the partners, thus helping to accomplish one of the primary goals and benefits of an ASC joint venture: enhanced hospital and physician relationships.

Joan Dentler (jdentler@avanzastrategies.com) is president and CEO of Avanza Healthcare Strategies, which provides healthcare organizations with strategic guidance, with a focus on outpatient services. For more than 25 years Ms. Dentler has been consulting on, developing or operating ambulatory surgery centers, hospital outpatient services and community health initiatives.

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