The face of ASC independence is different from market to market.
Orthopedic ASC leaders discussed their perspective on independence at Becker’s 22nd Annual Spine, Orthopedic and Pain Management-Driven ASC + The Future of Spine Conference.
Note: This conversation was lightly edited for clarity and length.
Question: How do you define true independence as an ASC today?
Sev Hrywnak, MD. Owner and CEO. Advanced Ambulatory Surgical Center (Chicago): After 25 years of being in the business, independence in today’s surgery center landscape requires nuance to consider especially with the rising prevalence of partnerships with health systems and private equity.
As far as independence was concerned, every private equity group or hedge fund has approached [us] to discuss [selling]. Looking at it objectively I like being independent knowing that someday I will sell for my price. I don’t sell for EBITDA; I sell for opportunity costs. I don’t believe in using EBITDA as the definition or as a financial rule in being a healthcare economist. One thing about being independent by definition is we have operational autonomy. I don’t have a hospital system telling me what to do … Financial independence, I don’t share with anybody. There’s no profit. At one time I did have physicians buy in, sold them shares points and if I wanted to buy an anesthesia machine they’d say “Would we rather have our dividend check before an anesthesia machine?” I bought them back out. I don’t need to deal with that. I need partners. I don’t need people who are just anxious for their check.
Clinical autonomy is another big aspect. I pick the staff, I know who I want. Our staff’s been with me on the average of 22 years. We don’t lose anybody. We keep everybody cross-trained. Again, independence does have a lot to speak for itself and down the road if there is going to be a lack of independence, and if I do get into a hybrid arrangement, my percentage will always be at least 0.1 higher than theirs. Being independent has its advantages. Again, if there’s a cashflow problem or if you’re being gobbled up by all the big healthcare corporations in the hospitals in your area, you might have to do something different.
Christopher Nanson, MD. Regenerative Orthopedic Center (Portland): Our situation is different. We have 15 physician partners. We were 90% physician owned and 10% partnered with Regent. We did the EBITDA-based sellout, but we were careful with that. Regent is not a health system, and they are not a private equity group. So we were careful with that, and I feel like we have a good partnership there. Our independence is not necessarily that we own the majority of the shares in the center. We operationally built that so that physician decision points are required … and we also partnered with a company who’s vested in our success. And so independence is really that operational independence and really true clinical independence where those clinical decision points can be made by the people that understand the clinical decision points.
The 15 committee situation is intolerable in the hospital and that’s why they mess everything up. We have two major health systems, but realistically probably four health systems in our area. We’ve been fortunate that they’ve done what a lot of health systems do and they’ve kind of stepped on their own toes in multiple ways and we’ve been there to bail them out. That’s allowed us to gain contracts with them as they’ve fired their anesthesiologists in the middle of the worst anesthesia shortage in the history of healthcare. That was a solid move, but it made operating room availability paramount for their insurance products. So the hospitals were fighting us to get into the market, but the insurance side of the health system was inviting us into the market with those types of things. Being able to stay independent of those major market players for us has been more of a measure of independence than anything else because we can kind of play in everybody’s pond.
Sean Gipson, MBA, Division Chief Executive Officer and President, Remedy Surgery Centers (Dallas): It’s very similar really. I mean, I guess the stance of the market is really we’re independent and so everybody looks at us. How are you making it? How are you getting along? It’s really not too hard. The payers are coming to us with contracts, and the card that I have in the game is that I was an executive at a hospital system in Texas. I knew what those points were and I played on both sides. I played that on the payer side. I also played on the vendor side, and the truth is they always say we can’t give you the hospital pricing, but it’s not true. You just got to push them. We have the ability to really move things a lot faster than hospital systems … I think that will always be an advantage of an ASC.
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