A joint venture ASC will incentivize all of the parties to openly evaluate the merits of introducing certain specialties and procedures and most importantly expand the level and mix of physician participation as well as the referral base. The expectation is that the parties should use the opportunity to also aggressively recruit physicians who may not currently be affiliated with the hospital. This component will significantly contribute to the growth of market share. An ASC development and management company will likely have greater success to attract “non-admitting” surgeons who otherwise may be more reluctant to respond simply to overtures by the hospital or physician group.
An additional advantage of the joint venture model is that there will be greater certainty that the facility and specifically the number of ORs will be “sized” appropriately, based on the projected volume and types of cases that will be performed. It is not infrequent that some physician groups or even hospitals may overstate projected volume based on optimism or inaccurate information provided to them. The third partner, i.e., the ASC development and management company, can provide the objective analytical validation that will mitigate against false assertions. Failure to rigorously scrutinize the projections will inevitably have profound and dire financial consequences.
Increasing shareholder value should be the predominate concern of the joint venture. This can be accomplished though implementing different programs and services designed to lower the cost of the provision of care. Success will only be realized when the partners share in the risks and rewards associated with ownership. At different intervals, opportunities may present themselves for the partners to sell a portion or the entire ASC. The benefit of an ASC development and management company partner is that it can work on behalf of the partnership to maximize the value of the venture by expediting the analysis and due diligence that will help determine whether there is any benefit to such overtures.
Given the current and anticipated economic and regulatory environment, progressive hospitals and physician groups will increasingly see the benefit of collaborating through such structures rather than attempting to grapple separately with these challenging market conditions.
Allan Fine is senior vice president and chief strategy and operations officer for The New York Eye and Ear Infirmary in New York City. Brandon Frazier is vice president of development & acquisitions for ?Ambulatory Surgical Centers of America in Hanover, MA.