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Physician-Hospital Joint Ventures: How to Prevent Failure

At the Becker's Hospital Review Annual Meeting in Chicago on May 18, Brent W. Lambert, MD, FACS, principal and founder, and Luke Lambert, CFA, CASC, CEO of Ambulatory Surgical Centers of America, discussed how hospital-surgery center joint ventures fail and how to fix struggling joint ventures.

There are several red flags that characterize struggling joint ventures, including revenue loss and deep physician distrust and dissatisfaction with hospitals. The following common threads underlie failed joint ventures:

•    Hospital's lack of experience in ASC management
•    Hospital's lack of respect for physicians, their ownership rights and interest
•    Hospital's lack of recruitment of cases
•    Hospital's business failure

"ASCOA works hard and has succeeded in joint venture arrangements where physicians, at the end of the day, have the control. Even though the hospital may have the majority interest, the physicians are vital to the success of the business," Dr. Lambert said.

Mr. Lambert suggested the most successful model is where the hospital partners with a corporate management company to joint venture with physicians. These joint ventures are ideally majority owned (51 percent) by the hospital and corporate entity, though the nature of these models really reduce the hospital's control to 26 percent. Under these models as well, hospitals can count on the experience and expertise of corporate management companies to help the surgery center see success.

Once hospitals have fixed structural problems, there are four cures to fix what ails struggling ASC joint ventures:

•    Renegotiate payor contracts
•    Recruit new surgeons and their cases
•    Get staffing costs to 21 percent of collections
•    Get supplies to no more than 20 percent of collections

Related Articles on Joint Ventures:

12 Tips for Successful Hospital-Physician Joint Ventures

Building a Co-Management Agreement: Legal and Valuation Issues

LifePoint, Norton Joint Venture May Lease Scott Memorial Hospital

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