Friends or foes? The evolving ASC, hospital relationship

Hospitals are increasingly looking to ASCs as procedures migrate to the outpatient setting.

Not only is the cost-savings potential substantial, ASCs are also often a more preferable setting for patients and physicians. Patients look to ASCs for the convenience while physicians enjoy the autonomy and financial gains  offered.

For hospitals, ASCs are a key growth strategy in the race to cut costs. Nashville, Tenn.-based Tenet Healthcare is quickly offloading hospitals as its ASC arm, United Surgical Partners International, booms.

“[Hospitals] are either going to be part of that or they’re going to lose in that race,” Jim Freund, managing partner for Physician Transaction Advisors, told Becker’s. “So you see all the big consolidators out there, and even the smaller ones are creating partnerships with healthcare systems, whether it’s an independent or a joint venture group.”

A January survey of health system executives by VMG Health found that 60% of leaders were considering pursuing outpatient surgery joint ventures in 2024, the highest area of interest of any potential specialty partnerships. Additionally, Becker’s reported on 55 hospitals and health systems opening ASCs in 2023.

For many ASCs, this influx has created a symbiotic dynamic between hospitals and ASCs.

“It’s not a ‘them versus us’ mentality anymore,” Karen Reiter, vice president of operations and payer management at Newport Beach, Calif.-based TriasMD and DISC Surgery Centers, told Becker’s. “This ongoing collaboration is a great thing to see and will take us where we want to go.”

The increased range and complexity of services ASCs offer have escalated the synergy between ASCs and hospitals, Ms. Reiter said.

Even for independent ASCs, hospital partnerships can present beneficial spinoffs, such as shared resources. Surgery centers and hospitals can also develop co-ownerships, such as partnerships with private equity or physician groups, Ms. Reiter said.

Many hospitals and ASC chains are looking to joint ventures — Cincinnati-based Bon Secour Mercy Health System, a 48-hospital Catholic system, has teamed up with Raleigh, N.C.-based Compass Surgical Partners to build out more than 30 ASCs. In August, Wilmington, Del.-based ChristianaCare and Phoenix-based surgery center development company Atlas Healthcare Partners partnered to open an ASC network across Delaware, Maryland, New Jersey and Pennsylvania.

Dr. Reiter told Becker’s that this evolving relationship reflects a shift from competition to cooperation, offering opportunities for continued growth and a more integrated healthcare ecosystem.

For other ASCs, however, competitive markets have created a more tense relationship.

“To call it adversarial would be an understatement,” Shakeel Ahmed, MD, CEO of Atlas Surgical Group in St. Louis, told Becker’s. “Competitors, like hospitals, are on edge. They’re in a definite defense position and employ tactics that are oftentimes anti-business, anti-competitive and keep the ASC industry from reaching its full potential.”

This dynamic is most clear when physicians try to open ASCs, Dr. Ahmed said. In many markets this leads to opposition from hospital leaders when trying to obtain a certificate-of-need.

“ASCs are at the short end of the stick for the certificate of need business, because you have to go to the state to apply for one,” he said. “In Illinois, not only do you need to get approval to open an ASC, but you also have to obtain approval for each additional specialty. Oftentimes the hospital will bring in the cavalry to oppose you. The hospitals own all the healthcare enterprises around them, and you will frequently see them show up with 30 to 40 letters of opposition.”

Two key changes could improve this strained relationship: payer reform and a ban on noncompete agreements, Dr. Ahmed told Becker’s.

Insurance contracts, he noted, are often “swayed in favor of the hospitals,” intensifying the tension between ASCs and hospitals. Moreover, noncompete clauses frequently keep physicians tied to hospitals, preventing them from investing in or starting new ventures. A ban on these agreements, Dr. Ahmed said, would free hospital-affiliated physicians and “level the playing field.”

Whether the ASC-hospital dynamic is collaborative or adversarial in a market,one thing is certain: ASCs are here to stay and will continue to thrive.

“ASCs were nonexistent in the ’60s and were barely around in the ’70s. Now, there are more ASCs than hospitals. This tells you that they’re here to stay,” he said. “Nobody roots for Goliath. That rings true in this situation. That rings true in this situation. No matter how strong the opponents, the ASCs are good for healthcare.”