Key Thoughts for a Physician-Hospital ASC Joint Venture

In a session at the Becker’s Hospital Review annual meeting in Chicago on May 18, three C-suite executives for Westchester, Ill.-based Regent Surgical Health, CEO Tom Mallon, Chief Development Officer Jeff Simmons and COO Nap Gary discussed ASC and physician-hospital partnerships.

“Ambulatory surgery centers are much more inclined to be interested in exploring relationships with hospitals [than in the past],” Mr. Gary said.

He noted this is because hospitals generally get reimbursed more than ASCs by payors.

“We’re seeing a lot of hospitals around the country that want us and other groups to partner with surgery centers as an easy way to show their doctors that they want to partner with them,” Mr. Simmons said.

Regent maintains a hospital-contracting model that, if structured correctly, reaps payments per case at least 30 percent higher than an independent ASC. It also provides competition protection for the physicians of the surgery center.

In the typical hospital contracting model, Regent acts as a holding company with a minority share of 10 to 20 percent ownership, while physicians and hospitals divvy up the remaining ownership shares.

The three executives of Regent Surgical discussed when it is best to use a hospital-contracting model.  Here are eight examples:

1. When physicians trust the local hospital
2. In an over-saturated, competitive ASC market
3. In a community where payors squeeze independent ASCs on price and out-of-network facilities have to change to a contracted model
4. In a market where the choice hospital is accustomed to join ventures with physicians
5. When and where hospitals are interested to partner with physicians
6. In a market where the hospital has a strong track record of negotiating favorable contract rates and also has contract power
7. In an existing ASC, when the ASC has matured and does not see a significant increase in profits in the future
8. If the local surgeons can utilize this model to form a strategic alliance

Mr. Mallon then discussed a case study at Knightsbridge Surgery Center in Columbus, Ohio. The Knightsbridge Center was founded in 2001 and did not produce returns under its initial management company. It engaged Regent Surgical Health in 2004 and Regent increased profits at the facility by negotiating payors and canceling inadequate contracts. There was a problem and this payor strategy was losing momentum. A partnership with OhioHealth provided Knightsbridge a partnership with a hospital that ended up profitable for both parties and allowed physicians to maintain autonomy.

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