William Teague of VMG Health and Robert Haen, executive director of CenterOne Surgery Center. With shrinking margins, staffing shortages and shifting physician demographics, independent ambulatory surgery center (ASC) operators are increasingly considering whether they should continue going it alone – or turn to a strategic partner for backup.
Strategic partnerships can help mitigate common industry challenges by potentially securing better reimbursement rates, leveraging group purchasing agreements and bringing in additional patient volume, William Teague of VMG Health, a health care research and advisory firm, told Ambulatory Surgery Center News.
“[Small operators] don’t have any leverage with suppliers,” Teague said at the ASC News Investment & Operations conference. “A partnership is a way that I can address some of these issues. Find a partner who can help me with the payers and get reimbursement. … Maybe a partner that can bring additional volume to my center.”
What’s more, with physicians getting older, partnerships can be a way to address succession planning and ensure the sustainability of an ASC, Teague added.
“These days, [operators] are having a hard time recruiting young doctors to independent practice,” he said. “The older doctors that own the ASCs are looking for an exit strategy.”
VMG works with more than 400 surgery centers a year, ranging from those affiliated with large management companies and health systems to independent facilities. This broad exposure gives VMG a comprehensive view of the key stakeholders driving the ASC space, Teague said.
One recent survey from VMG showed that more than half of the independent ASCs surveyed were considering a strategic partnership by 2025.
“So with your lack of options to fix some of the issues that we talked about, a partnership model is maybe a way to solve them,” he said. “So [the results] are not surprising.”
An operator’s perspective
Although partnerships may be a way forward, there is a calculus behind joint ventures (JVs), longtime administrator Robert Haen and executive director of CenterOne Surgery Center, a seven-OR multi-specialty center in Florida, said during the conference.
After several years of debating if it was the right fit, Haen’s center ultimately made the decision to partner with two health care companies Haen thought could help ensure the center’s future viability.
“About three years ago, we did a joint venture, kind of a unique joint venture,” he said. “We brought in Ascension, and then a company called Healthcare Outcomes Performance Company (HOPCo). [They help us manage] value-based care, and we’ve had a joint mission with them for about three years.”
And it was just what the center needed, Haen said, as changing dynamics in managed care was making it harder to negotiate and collect on contracts.
“What I’ve seen in the last couple years, the games they’re playing are getting [more frequent],” he said. “They try to get into the case rate versus this and that.”
Additional red tape delays surgery centers getting reimbursed, he continued.
Mounting labor pressures, and a finite pool of experienced staff and increasing competition from other centers and hospitals, made it seem necessary. Still, his physicians’ priority was maintaining operational control of the ASC, particularly since many had risked personal collateral when founding the center.
While some of the competing offers came with a higher upfront payment, his doctors favored a culture-aligned partner that respected their operational autonomy.
“They did not take the highest bid. … They were very strategic in what they did and how they went about it,” he said. “They didn’t take the [most] money. It was who was going to let them still have the influence on the centers.”
Hospital interests
On the hospital side, there are three main reasons health systems want to invest in ASCs, according to Teague.
First, partnering with an ASC can help a health system build a relationship with independent physicians without the expense of employing them outright.
“If you look at the statistics, health systems lose $300,000 per [full-time employee] on doctors,” he said. “It’s very expensive to employ them, so, ‘Hey, I can partner with them on an ASC. I can create alignment; I can create a relationship, a partnership with them, but I don’t have to subsidize them on the practice side.’”
Second, if synergy opportunities are substantial, such as renegotiating contracts or driving volume, an ASC can deliver strong financial returns.
Lastly, health systems need to expand outpatient access or “off-ramp” certain procedures from their main facilities to remain competitive in today’s environment.
Yet despite benefits to all parties, once a JV partnership is finalized, with a health system or other partner, the first six months often bring surprises, from logistics challenges to merging contracting strategies, Haen added.
His center tackled payer contracting and aligned technology platforms with Ascension and HopCo only after the deal was done, because they wanted to avoid overwhelming surgeons and staff.
“We were very deliberate with it,” he said. “We didn’t go in [and say] , ‘We’re absorbing whatever was available to us on Day 1.’ … We actually went almost an entire year before we accessed their resource group … because what both parties didn’t want is to freak my doctors out.”
Above all, it is important to preserve an ASC’s unique culture, Haen said.
“I would hate to see that culture change,” he said. “You can have volume and serve yourself, but if you’re not doing the right things, you’re not taking care of your staff, your patients, and your surgeons, you’re not going to survive.”
