ASC ownership has undergone dramatic changes in recent years, shifting from predominantly physician-owned models to increasingly complex arrangements involving hospitals, private equity and corporate stakeholders.
Six ASC leaders joined Becker’s to discuss the evolution of ASC ownership models.
Question: How have ASC ownership models evolved in recent years, and what shifts do you anticipate in the next five?
Editor’s note: These responses have been edited lightly for clarity and length.
Jack Bert, MD. Adjunct Clinical Professor at the University of Minnesota School of Medicine (Woodbury): ASC ownership models have evolved from 100% ownership by the physician group, to “cafeteria style” ownership where a company will charge for specific projects in order to set up the ASC and then just charge a management fee, which in my opinion is the fairest and most financially advantageous technique for a group that lacks the business acumen to initiate the project on their own. There are also several instances where employed physicians have been able to become part owners of a large health care system’s ASC to supplement their income.This type of “good faith” arrangement with the employed physician is very rare. Large ASC corporations have made billions by becoming majority owners after constructing and managing ASCs around the country and subsequently really serve no major purpose that can’t be done by the group internally after the initial set up. The ASC work is done solely by the surgeon owners and the ASC companies benefit from the profits of their labor. Contracts with self insured employers can be made directly using appropriate negotiating techniques and reasonably priced bundled payment platforms for MSK care through 3rd party administrators. I have been consulting with a group that has been involved with this type of direct to employer contracting for over seven years and have watched this concept flourish but it has to be managed properly.
Bonnie Greenblatt. Director of Ambulatory Surgical Services at Michigan Institute of Urology (Utica): There have been significant changes over the last few years. Private equity, hospital and health systems, consolidation and platform alliances, along with the traditional model of physician ownership are all examples of current ownership models. As more private practices are purchased by private equity groups and more physicians become hospital employees, I think the changes coming our way are more hybridized and joint venture models that will begin to take hold over the traditional physician or practice owned facilities. As payers push for more and more cases to be done at the ASC versus the hospital setting, hospital and health systems will look toward partnering with large private equity owners and larger platform alliances to create mega-ASC platforms.
Marc Greenberg, MD. Orthopedist at John Hopkins Orthopedics (Baltimore): ASC ownership is increasingly being seen as not just an additional revenue stream for physicians, but an essential one as payers and patients look to move outpatient for their care both for cost savings and improved experiences. To do this, there has been a rise in employed physicians being given access to equity in ASCs that their employer may own. One such example of this is MedStar in D.C., or Tennessee Bone and Joint in Nashville. Private practices obviously are very ASC-dependent and the goal for many is to not only increase the efficiency of their current ASCs, but to also build new ones either with capital calls or by leveraging equity in existing real estate or ASCs. I anticipate that there will be consolidation in this space as private practices continue to merge, health systems begin buying private ASC companies and insurers also begin getting into the game (i.e. Optum).
Charles Hummer, MD. Orthopedic Surgeon at Premier Orthopaedics and Secretary, The Orthopaedic PAC of AAOS (Concordville, Pa.): The fundamental driver of ownership models for ASCs at this time is the overall pursuit of value-based care. There is no doubt that patients do best in an outpatient setting if social and clinical factors allow care delivery as an outpatient. Surgical site reimbursement neutrality would incentivize care delivery in the outpatient setting, without compromising care for those whose social demands or medical complexity demand inpatient care. The overall pursuit of cost effective, value based decision making in healthcare will mandate true collaboration between independent practitioners and hospitals in ASCs (not HOPD’s) that will likely be joint ventures among large physician practices and hospital/ healthcare systems.
Patrick McEneaney, DPM. Owner and CEO of Northern Illinois Foot & Ankle Specialists (Crystal Lake): There is a push from insurance companies to shift surgeries from hospitals to ASCs in an effort to save money. The hospitals are well aware of this and they do not want to miss out on the revenue. Because of this, I think you are going to see more hospitals look to open ASCs or purchase ASCs, even if it is only a partial interest in them.
Jane Whinnery. Chief Operating Officer and Administrator of Wellbridge Surgical (Indianapolis, Ind.): In my experience, the last 5-10 years have seen ASC ownership migrate away from physician ownership. Not that physician ownership has gone away. It hasn’t. But I see less completely independent surgery centers and more hospital weighted ownership in the hospital-physician joint venture surgery centers. As overall reimbursement fails to keep up with inflation, hospitals are looking to capitalize on the outpatient surgery push by payers. In addition, private equity firms and national surgery center companies are pressured to maintain ROI.
This results in higher costs for the patient and payer because historically lower priced independent ASCs are less prevalent in the market. In addition, surgeons looking to supplement their decreasing professional fee reimbursement find less opportunity to do so.
WellBridge Surgical’s position is that the ASC industry is in desperate need of MORE innovation and entrepreneurship and LESS consolidation. Free-market surgical centers such as WBS and Surgery Center of Oklahoma are the only solution that offer to lower the cost of outpatient surgical care while keeping surgeon professional fees sustainable. WBS can offer a surgery at about 50% of market price while paying the surgeon twice the amount he or she would receive by a commercial carrier.
We expect more free-market ASCs to enter the market and spread in their reach in offering higher quality care for a lower cost. This is the alternative to government mandates, which would also theoretically lower costs, but with the consequence of lower quality.
As insurance companies, self-funded businesses and patients become increasingly educated on their healthcare options and the potential for enormous cost savings, the future is rooted in true price transparency. Models such as WellBridge Surgical are leading the way in driving market competition and the need to protect patients from overpaying for their healthcare.
This innovative paradigm shift also supports the CMS rule adopted January 1, 2021, which calls for price transparency by hospitals so healthcare consumers, third parties and clinicians can make informed decisions. Though this has been incredibly challenging for hospitals to conform to such transparency, WellBridge Surgical and Surgery Center of Oklahoma are leading the way.
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