5 Ways for ASCs to Leverage Their Hospital Partnership

Ambulatory Surgery Center (ASC) joint ventures with hospitals, once a rarity, are becoming a common operational and ownership model for surgery centers.

A 2018 survey of hospital and health system executives focused on hospital-ASC partnerships revealed that more than two out of every five hospitals already own or are affiliated with at least one ASC. The survey, commissioned by consulting firm Avanza Healthcare Strategies and law firm Clark Hill, also found that nearly half of hospitals have plans to invest in more ASCs.

ASCs already in such joint-venture partnerships or those that plan to enter one in the near future have the potential to achieve improvements that may be out of reach or more difficult for independent ASCs, says Joan Dentler, president, and chief executive officer of Avanza. "Hospitals and health systems, thanks to their size, market reach, reputation, and resources, can be a tremendous source of help for their ASC partners," she says. "The assistance they can provide can enhance many areas of an ASC's operations."

Dentler identifies five ways ASCs can most effectively leverage their partnership with hospitals and health systems.

1. Grow case volume. Payers, physicians, and even patients, to some extent, are pressuring hospitals to move their lower-acuity, elective procedures over to outpatient settings like ASCs. Surgery center leadership, Dentler says, should reach out to their hospital partner's outpatient leadership to discuss what procedures still being performed in the hospital's ORs would be more cost-effective if done in the ASC.

   "The hospital should be a feeder system for the surgery center," Dentler says. "Collaborate to streamline the procedure migration. ASCs will benefit from the volume growth and hospitals can free up their ORs and clinical staff to handle higher-acuity — and likely higher-reimbursing — procedures."



2. Improve payer contracting. Hospitals tends to have stronger relationships with payers because of their high patient volume and wide range of services.

   "An ASC should make sure its payers know about the hospital partnership and any ongoing efforts to migrate appropriate inpatient volume from the hospital into the surgery center," Dentler says. "Payers benefit from this migration because third-party payer reimbursement to the ASC tend to be lower and patients receive as good, if not better care in the surgery center than the hospital. The partnership may help an ASC negotiate better contracts, and get new procedures approved."



3. Support with physician buyouts and recruitment. One thing most hospitals have that many ASCs do not are deep pockets, Dentler says. Such financial resources can be helpful when an ASC is faced with physician transitions.

   "ASCs that lack substantial cash flow often struggles with how to effectively address the challenges that come with retiring and exiting owners," she says. "If the ASC cannot acquire these owners' shares, the physicians will remain as partners and continue to collect distributions despite not bringing any or many cases. Such 'deadwood' can harm an ASC's bottom line and the morale of other owners.

   A hospital typically has the money required to buy out these partners, holding them for new physician partners. Many hospitals that are partnering in ASCs also have the resources and the desire to look for new physician partners who would be interested in purchasing available shares as a part of overall campus recruitment, Dentler says. "ASCs can work with their hospital partners for advertising, marketing and other outreach efforts that can help recruit new physician-owners and members of the ASC medical staff."



4. Influence with vendors. Hospitals typically spend a lot more money with vendors than ASCs, particularly concerning the supply chain. This higher spend usually gives hospitals greater weight and negotiating strength with vendors.

   "Purchasing is an area where ASCs in a joint venture-partnership can save substantial money, and acquire newer devices and equipment at lower costs," Dentler says. "ASCs should work closely with their hospital partner's chief financial officer and materials management department to help ensure they are taking advantage of the hospital's purchasing power. ASCs should also make sure they can access their hospital partners' group purchasing organization contracts as the hospital will likely negotiate better rates than a standalone ASC."

   Dentler notes that an ASC performing high volumes of certain procedures may be able to negotiate better rates for the supplies supporting those procedures without the hospital's resources. "The bottom line here is ASCs may benefit from using the hospital's group purchasing organization for general items and negotiating locally for specialty items."



5. Expand the facility. ASCs that want to grow their physical presence, whether it be building out an existing facility or breaking ground on a new structure, need access to the money required for such an investment. A hospital partner with financial resources, as discussed earlier, can help address this barrier. In addition, Dentler says hospitals are often building new or replacement facilities that would benefit from an ASC as an anchor tenant.

However, for many ASCs, access to cash may not be enough to overcome another obstacle: regulatory requirements. A hospital partnership may be what's needed, Dentler says. "In Certificate-of-Need (CON) states, it's nearly impossible to build or expand without such a partner. ASCs with a hospital partner willing to back an expansion project could help the center get a big leg up on the competition. Physicians, staff and patients tend to find a new or renovated facility quite attractive."

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