Avanza Survey Reveals Significant Changes in ASC Joint Ventures

Dear Colleague,

A new national survey of senior healthcare executives and clinical leaders found that fewer hospitals and health systems are partnering with third-party investors to own and operate ambulatory surgery centers (ASCs). Equity-based partnerships with third-party investors dropped 9% in 2019, according to the survey, sponsored by Avanza Healthcare Strategies and conducted by HealthLeaders Media. The survey explored hospital-ASC trends for the second consecutive year.

Most ASCs Are Internally Managed

The survey also found that most ASCs (77%) are internally managed without the help of an external management company. Contracts with third-party management companies are down 21% in 2019. According to Joan Dentler, president and CEO of Avanza, "The cost-benefit of outside management and the development of in-house expertise may explain why hospitals and health systems are turning away from equity-based partnerships and long-term contracts with third-party management companies. Both are signs of a maturing marketplace."

Preferred Model Is Physician-Hospital Joint Ventures

As in 2018, joint ventures with physicians remain hospitals' and health systems' preferred ownership model for ASCs. According to the survey, hospitals and health systems are investing heavily in surgery centers as an integral part of their outpatient surgical strategy. Forty-one percent of organizations own or are affiliated with a freestanding ASC, and nearly three-quarters of those are joint ventures with physicians. From our experience, an issue many hospitals are dealing with concerns whether to permit physician employees to share ownership in the ASC joint venture. Our survey showed that of those hospitals and health systems with joint ventures with physicians, slightly more than half allow employed physicians to invest in the partnership.

Whether to allow physician investors is one of the newest and most debated aspects of joint ventures. Dentler says there is not a single right answer. “At the heart of the debate are executives’ concerns about appropriate physician compensation. Those concerns must be weighed against the benefits of employed physicians having skin in the game, which include an awareness of the importance of controlling costs.”

Most Hospitals Are Considering Adding ASCs

Avanza polled 119 senior executives and clinical leaders at health systems and hospitals across the United States and found that nearly half of those that own or affiliate with an ASC operate more than one. Additionally, three out of four respondents indicated plans to increase their ASC investments, with 44% actively expanding their investments and 30% indicating they'll expand when the opportunity presents itself. Profitability, consumer trends and physician relations top the list of reasons for investing in surgery centers.

Avanza is investing in market intelligence to help you make sound business decisions. Download the 2019 survey findings.

About Avanza Healthcare Strategies

For more than 20 years, Avanza Healthcare Strategies has been a strategic leader in the migration of surgery from hospitals to ambulatory surgery centers. Avanza has helped ASCs, hospitals and health systems in more than 40 states plan for and open surgery centers, develop joint ventures and assess operations of existing ASCs and hospital outpatient surgical departments. Learn more about Avanza at avanzastrategies.com.