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Growing Market Share Through ASC Joint Ventures

Allan Fine and Brandon Frazier for HealthLeaders Media, June 3, 2011

Concessions and objectives    
In any successful joint venture ASC, both the hospital and physicians need to be amenable to considering some sacrifices before embarking on this endeavor. For example, hospitals have to be realistic in relinquishing some control over clinical and operational issues. Both parties should recognize that the objectives should be to deliver superior surgical outcomes, achieve optimal patient and physician satisfaction, maximize all efficiency and scheduling practices while establishing and enforcing proven benchmarks, and overall secure a healthy return-on-investment for all of the joint venture partners.

 Particularly in those geographic markets where the hospital has the ability to command higher reimbursement rates from the payers compared to what the physicians or ASC may be able to procure on their own, physicians may need to relinquish majority interest in the ASC in order to access hospital contracts. The value of having an experienced and trusted ASC development and management company as one of the partners is that it can serve as an impartial intermediary in aligning the long-term interests of all parties. This group can also neutralize and or mediate through internal politics that can be disruptive and in some cases threaten the viability of the project.

By operating as a separate business with its own mission, governance structure, and financial and accounting systems, neither the hospital nor the physicians will have to enter into what have traditionally been contentious negotiations with either side. When decisions, for example, have to be made relative to investment in new medical technology/equipment or other possible capital needs, the owners of the ASC consisting of all three parties will base their decisions on the results of the cost-benefit analyses that prove best for the venture rather than for the direct benefit of only one of the partners.  

Keys to success    
A key factor contributing to an ASC’s financial success is based on its ability to effectively manage labor costs. If the ASC is managed strictly by the hospital, the current hospital staffing structure would likely be applied to the ASC. Because ASCs are reimbursed significantly less than hospital outpatient departments, they are not afforded the luxury of over-staffing or down-time between cases. Management by an outside entity can alleviate this problem. In addition, separate human relations policies apart from the hospital will avoid confusion within the labor force.

It is also advisable that the ASC not be bound by any contractual obligations it may have through the provision of services such as anesthesia. It is conceivable that the all of the parties may agree to have the anesthesia provider of the hospital be selected to work in the ASC, but if this decision is made, it should be based on independent and thoughtful due diligence, on behalf of all partners, rather than a contractual obligation.  

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