Case Study: Hospital Maintains Compliance When Converting Acquired ASC to Surgery Department

Case Study: Hospital Maintains Compliance When Converting Acquired ASC to Surgery Department

Avanza capabilities at work: Strategic Planning, Regulatory Compliance, Due Diligence

"Avanza was very helpful, providing the knowledge and tools necessary to ensure a smooth transition and ensure we were going to meet the regulatory requirements to convert the ASC to an HOPD. Thank you again for your assistance and expertise."


An acute-care hospital in the Southwest, with management and development company and physician ownership, wanted to purchase an ambulatory surgery center (ASC). It intended to convert the facility to a department of the hospital as a Centers for Medicare & Medicaid Services (CMS)-designated provider-based entity, often referred to as a hospital outpatient department (HOPD). The hospital's leadership believed that once it acquired the ASC, the facility would automatically be deemed a provider-based surgery department, and the department could begin to bill Medicare at higher reimbursing HOPD rates.

Following months of negotiations, the ASC's owners agreed to sell the facility to the hospital. About one week prior to when the transaction was to commence, the hospital's leadership learned from legal counsel that converting the ASC to a provider-based surgery department was a much more complex regulatory process, and failure to follow the appropriate rules would result in non-compliance with CMS and the jeopardizing of managed care contracts.


Avanza Healthcare Strategies was brought in by the hospital's leadership, at the suggestion of legal counsel and the management and development company, to educate the ownership parties on the regulatory/compliance requirements for provider-based entities, and then work with leadership to ensure the transaction and conversion was completed successfully and legally.


  • Educated to hospital and ASC leadership on Medicare's requirements for provider-based entities.
  • Developed and implemented a detailed transition plan.
  • Identified required documentation and communication revisions, including changes to regulatory filings, tax documents, marketing materials, and legal correspondence.
  • Oversaw notification of conversion and subsequent amending of contracts with managed care providers.
  • Provided guidance on how to perform proper billing of procedures and collections prior to and immediately after the conversion.
  • Oversaw the revising, approving and incorporating of policies and procedures.
  • Conducted an evaluation of the hospital's and ASC's physician credentialing and privileging. Avanza then worked with leadership to ensure the associated documentation was completed appropriately.
  • Advised leadership on how to effectively and efficiently transition staff-related matters, including payroll, benefits, and employee licenses and security.
  • Worked with leadership and information technology representatives on the transition and conversion of software systems.
  • Assisted in the completion of the provider-based attestation documenting how the facility complied with the provider-based requirements.


The transition and ASC to HOPD conversion was a great success. Avanza's involvement instilled confidence in the owners of the hospital and ASC that the transition would proceed smoothly, which was validated when a post-transition CMS survey found no deficiencies in determining provider-based status.

There was minimal disruption of services during the transition, with few patient complaints. Within 60 days, the HOPD saw a 45% increase in revenue, with no pushback from payers regarding the higher HOPD rates. The transition also minimized duplication of services, delivering instant cost savings.