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Simpler Surgeries, Complex Market

Elyas Bakhtiari, for HealthLeaders Magazine, May 11, 2009
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"One of the reasons why the phenomenon of the ASC and physician-owned hospital is growing is because the average general surgeon is having a very difficult time paying bills. If you invest in an ASC or physician-owned hospital and it generates income, that's a way of supporting yourself," says Sewell, who is a partner at Harris Methodist Southlake Center for Diagnostics and Surgery, a 16-bed, physician-owned hospital with six operating rooms in Texas. He is one of roughly 45 physician investors who collectively own less than 50% of the joint venture with Texas Health Resources.

Joint ventures are often set in motion only after physicians set up a specialty hospital and begin taking patients away from a competing hospital or health system. The hospital will often notice the drop in revenue and offer to buy a portion of the business from the doctors to align after the fact. In this case, it happened the other way around, Sewell says. Texas Health Resources approached the physicians about starting the facility, and the two have had an amicable relationship from the start.

"If the hospital system sees its physician coowners as true partners in the process, it can be very successful. If you can find a way to align incentives and get everybody on board and have quality patient care at the top of the list of priorities, you'll be successful," he says. "If it's all about who can control who, the house of cards will fall apart."

Such partnerships are becoming more common as physicians and hospitals butt heads, but they aren't the only option. Some hospitals opt to build their own ASC or specialty facility, going head-to-head with their new physician competitors. Like joint venturing, this is a high-cost, high-risk option that may not always be the best option for a hospital with little capital to invest.

The alternative is to focus internally on lower-margin ways to compete or collaborate. Hospitals can cede certain ground and instead laser their efforts on other inpatient service lines, or focus on improving operating room efficiencies to maximize revenue potential.

The approach taken by both physicians and hospitals depends significantly on the competitiveness of a given market and, perhaps more important, the risk tolerance of both parties.

Service Line Success Key No. 4: Adjusting outcomes for risk
Regardless of the setting, quality and safety are becoming increasingly high-profile distinguishers for patients and payers. Infections, medication errors, and other mishaps that can happen in nonsurgical service lines may be equally high priorities for the healthcare industry, but nothing can entice the mainstream media and spark a public outcry like a surgeon operating on the wrong body part or leaving an instrument inside a patient.

Checklists and other process improvements have helped surgery departments make great strides, and for a comprehensive approach, surgical care naturally lends itself to outcomes-based quality improvement. Unlike the more cognitive physicians who may be managing patients in teams or dealing with diseases that don't show improvement for months or years, surgeons typically deliver one episode of care for a patient and have a 30-day window to gauge the effects. It's easy to distinguish what happened and who is responsible.

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