7 Unforgettable Lessons

…from the Healthiest Hospital Physician ASC Partnerships

By Robert Zasa, MSHHA, FACMPE

Lesson 1.
The foundation of a healthy partnership is trust and respect.

Crucial

  • Hospital acknowledges they don’t know ASC business
  • Demonstrate what ASC experts can provide

Orient hospital management to:

  • ASC trends
  • Differences in processes, streamlining and efficiency
  • Safety protocols

Orient hospital management to differences in

  • Staffing
  • Salaries
  • Purchased services
  • Contracts
  • Policies
  • Payer contracts and reimbursement
  • Business office operations

Orient hospital and physicians on the front end. Allows ASC experts to work

  • Efficiently and quickly
  • For best results

Lesson 2.
Come to clear agreement.

  • Reasons for project
  • Goals & objectives
  • Timeline

Hospital and physicians may want different things.

Physicians want

  • Efficient place to work
  • Revenue
  • Patient satisfaction

Hospitals want

  • Lower cost to be attractive to payers
  • Bonding vehicle with doctors
  • Means of freeing up the OR
  • More net profit

Impediment to success: Hospital bottom line drives the venture rather than true partnership.

Lesson 3.
Set clear understanding of timing.

  • Medicare
  • Licensing
  • Accreditation

Impact of Medicare timing

  • Paperwork > inspection > final > billing
  • Finalizing payer contracts

Medicare timing: Set realistic expectations

  • Plan for cash flow
  • Healthy credit line
  • Build into financial projections
  • Get all partners on board

Lesson 4.
Set clear understanding of financial management.

  • Accounting
  • Cash
  • Banking relationships
  • Financial processes

Beware of differences in financial cultures

  • Physicians want maximum distributions
  • Hospitals may want more cash in reserve

Typical ASC distributions

  • Within first 16 months
  • First 12 months, 2-3 months of expenses in reserve, depending on cash flow
  • 1 month of cash in reserve after first year
  • Equipment paid from cash or equipment line
  • Dependent on financial size and volume of cases

Lesson 5.
Review assumptions on budget and debt.

  • Debt and use of equity for first 2 years
  • Financial loss during ramp up

 

Get physicians accustomed to accrual accounting. Make financial reports in

  • Cash format
  • Accrual format to sync with hospital

Lesson 6.
Spell out differences of ownership and control.

(Majority shareholder and control of operations.)

Hospital owns 51% Minority owners (physicians) retain control on

  • Future partners
  • No additional debt without consent
  • Consent to change or move business

Hospital needs specific nonprofit controls

  • Accounting to protect status
  • Charity care
  • Medical and Medicare
  • Care to the underserved while maintaining profit

ASC operating agreement articulates

  • Ownership and control differences
  • Rights of minority and majority shareholders
  • Ownership eligibility
  • Partner buy-out and buy-in
  • Legal and ethical manner of riding partners

Lesson 7.
Make agreements on physician recruitment and adding services.

Beware of conflicts with hospital strategic plans and goals. (E.g., disallowing employed physicians to protect bottom line.)

Hospital must agree on moving appropriate services to ASC

  • Attractive to payers
  • Reduces patient out-of-pocket
  • Gives patient more satisfying experience

Finally, 6 Traits of a Successful Joint Venture:

  1. Patience In aligning goals and reasons for the joint venture.
  2. Dedication to working out issues. Frank and candid mechanisms for resolving conflicts.
  3. Patience with processes of development and opening.
  4. Clearly understand financial aspects, especially cash flow of a new center.
  5. Work together to keep relationships fresh and add new services (for mature ASCs [5 years old]).
  6. Innovative with pricing strategies, coordinated payer contracts. Avoids conflict and unfair advantage. Hospital can extend its contract reimbursement to the ASC.
Robert Zasa is President and founder of Ambulatory Systems Development.
Contact: RZasa@asd-asc.com or 626.840.4248.