Case Study: Hospital-Surgeon Partnership for New ASC Development

Case Study: Hospital-Surgeon Partnership for New ASC Development


SITUATION

A large orthopedic group wanted to develop and manage its own ambulatory surgery center, but do so without alienating the local not-for-profit hospital, with whom the orthopedists had a long relationship. The hospital’s chief of staff was a member of the group, and the hospital had just made significant capital investments in state-of-the-art orthopedic equipment at the group’s request. The group didn’t want the hospital involved in running the surgery center, but it recognized the hospital’s tremendous clout with payors and the respect it received from local primary care physicians, who were significant referral sources for the orthopedic group.


ENGAGEMENT

Avanza Healthcare Strategies (formerly ASC Strategies) was brought in to help the orthopedic group and hospital administration develop a strategy and partnership structure that worked for both organizations. The orthopedic group wanted to ensure it would retain control of the surgery center issues it identified as critical, and the hospital wanted to ensure its partnership in the project would not jeopardize its not-for-profit status.


HOW WE HELPED:

  • Developed a business plan that outlined the size and scope of the project, projected case volumes, startup costs, revenue and expense projections, share price, projected returns, regulatory risks and physician preferences in both investment and utilization.
  • Facilitated meetings with physician and hospital representatives and legal counsel to draft partnership and management-structure agreements.
  • Oversaw facility opening and licensure, working with the governing board to design the facility, procure equipment, recruit staff, negotiate a surgeon-friendly contract with anesthesia providers and prepare for a state license, CMS provider number and third-party accreditation.
  • Provided documentation to the partnership and staff, including policies, procedures, training and guidance needed to pass accreditation and state surveys, and operate efficiently and competitively.
  • Remained involved for the first three years of operations, providing operational oversight and administrator mentoring, as well as training and evaluation of the staff, advising of the governing board on partnership issues, and establishing performance goals and benchmarks, with an eventual goal of educating ASC staff and board to have the skills needed manage without outside management.


OUTCOME

The partnership created a successful, self-managed, profitable and competitive surgery center. The center passed all of its initial surveys with no deficiencies, secured strong third-party payor contracts, and paid out a distribution to all investors and bonuses to staff after just six quarters of full operations. Avanza helped recruit physicians from other specialties to use the facility, thereby reducing overhead expenses without compromising the orthopedic focus of the facility.

Surgeons are extremely satisfied with patient outcomes and efficiency at the center, and the relationship between the hospital and the physicians is at an all-time high. The hospital experienced an expected shift of outpatient cases to the surgery center, thereby creating opportunities to recruit surgeons and their inpatient cases from a competing hospital. As a result, inpatient surgical revenue increased by 10 percent.

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