Red flags in ASC-hospital partnerships

Hospital and ASC partnerships have been on the rise in 2024, but these joint ventures are not always an ideal match for ASCs looking to grow while maintaining autonomy in competitive markets.

Several leaders joined Becker’s during panels on Oct. 31 and Nov. 1 at the 30th annual Business and Operations of ASCs Meeting in Chicago to discuss red flags in ASC-hospital partnerships.

1. Lack of alignment with existing physicians. When exploring a partnership with hospitals, ASCs consider the level of buy-in among its employed physicians.

Marco Araujo, an anesthesiologist at Advanced Pain Management in Green Bay, Wis., shared his experience in partnering APM with a hospital in the state whereby other physician groups employed by the hospital did not share the same interest in the partnership as the executives forming the venture.

“The CFO was motivated, the chief medical officer was motivated, but the motivation did not trickle all the way down to the physician groups,” he said. “In fact, even some physician groups saw us as competitors.”

As a result, those physicians did not want to refer to APM for procedures, leading to lower case loads and an unbalanced relationship

“So if you ever go to do a partnership with a hospital, make sure that the physicians in that hospital are benefiting from it, otherwise you’re not going to get referrals,” he said.

2. Money isn’t being put back into the ASC. ASCs should be wary of hospital partnerships in which the intentions are less about the growth of the ASC itself, but more focused on the ASC as a supportive revenue stream for the hospital instead.

“The bigger fish always wants to be in control and they want to control the revenue stream,” said Kenneth Candido, MD, professor of surgery and anesthesiology at the University of Illinois College of Medicine in Chicago. “They want to control the facility fees.”

While these relationships may still overall be beneficial for the ASCs, “[hospitals] also want to make sure that their protocols, their policies, their strategies, their patient safety initiatives are always those which trickle down from the main institution to your surgery center,” Dr. Candido said.

“And that’s what I have found. … [T]hey take the facility fees back to the main institution and they utilize them not to improve your processes per se, but to improve their processes and to pay for all their big expenses. Even nonprofits are taking huge fees from smaller surgery centers just to manage their costs and try to offset and defray their costs,” he added.

3. Hospitals blocking ASC expenditures. The ASC-hospital relationship can suffer if the hospital begins reducing “needed” expenditures by the ASC, said Jeffrey Dottl, principal of Woodland, Calif.-based Physicians Surgery Center.

“We’ve seen a health system get in the way of the surgery center making needed capital expenditures where they [the system] didn’t want to do it,” he said. “[The system] consolidated our balance sheet into theirs and they didn’t like the financial ratios that were going to show up on their balance sheet.”

This can disrupt the ASC in recruiting new physicians and ultimately cut into the autonomy many ASCs seek to preserve in hospital partnerships.