Latest / Becker’s Healthcare Podcast / The ASC Boom and Direct Contracting Disruption in Healthcare with Alan Condon

Transcript

The ASC Boom and Direct Contracting Disruption in Healthcare with Alan Condon · Becker’s Healthcare Podcast

• 0:00
  This is Scott Becker with the Becker's Healthcare
• 0:02
  Podcast. I'm thrilled today to be joined by
• 0:05
  one of our favorite regular guests. We're joined
• 0:07
  today by Alan Condon, who's an editor in
• 0:09
  chief of Becker's Healthcare.
• 0:11
  He spends a ton of time on the
• 0:13
  business and financial side of health care reporting
• 0:16
  on how health systems are doing. I saw
• 0:18
  a fantastic article from him today,
• 0:21
  literally,
• 0:22
  about how Tennant remade itself into an ambulatory
• 0:25
  surgery center company from a hospital company to
• 0:28
  a primarily the largest operator of surgery centers
• 0:30
  in the country, and and he covers so
• 0:32
  many things so well.
• 0:34
  Alan, talk to us today about what are
• 0:36
  a couple of stories that you're following that
• 0:38
  you find interesting?
• 0:39
  Yeah. Absolutely. I think,
• 0:41
  hot off the press after our annual meeting
• 0:44
  last week, I think fantastic events by by
• 0:46
  all by all metrics. But since you just
• 0:49
  mess touched on it there, Scott, I guess,
• 0:50
  kind of diving right into that tenant story
• 0:52
  we just kinda covered this morning. So,
• 0:55
  again, what huge, huge team that popped up
• 0:58
  for me. I imagine for you and a
• 0:59
  lot of our moderators and speakers,
• 1:01
  at last week's event would have been just
• 1:03
  how much,
• 1:04
  health systems are really accelerating their investment in
• 1:07
  in ASCs, outpatient centers. No doubt this has
• 1:10
  been happening for quite some time, but it
• 1:11
  certainly seems like from now what I got
• 1:13
  are just a real acceleration for its investments
• 1:16
  and building these centers, acquiring some of these
• 1:18
  centers and whatnot.
• 1:19
  And tennis, obviously,
• 1:21
  by far and away,
• 1:23
  the real ASC dominant player, the leader in
• 1:26
  this space,
• 1:28
  for quite some time through its,
• 1:30
  outpatient subsidiary,
• 1:32
  United Surgical Partners
• 1:34
  International. So covered the tenant's recent 2025
• 1:38
  report,
• 1:39
  earnings top, and then just kinda dive deep
• 1:41
  into kind of their growth over the last
• 1:43
  few years. So
• 1:44
  Tenet's
• 1:45
  through USVI now has 533
• 1:49
  ASCs,
• 1:51
  26 surgical hospitals
• 1:53
  across the country,
• 1:55
  really, while at the same time, it's been
• 1:57
  reducing the size of its hospital footprint, really
• 2:00
  turning itself into an ambulatory first focus
• 2:02
  specialty care model.
• 2:04
  It's been pumping about $250,000,000
• 2:08
  a year
• 2:09
  into ASC acquisitions,
• 2:12
  into de novo bills, and and several markets
• 2:15
  across the country, and that showed no sign
• 2:18
  of slowing down either. But VMG helped come
• 2:21
  out with their their annual ASC industry report,
• 2:23
  which is really interesting just to kinda get
• 2:26
  a quick bird's eye view of the big
• 2:28
  dominant players in that ASC space. And like
• 2:31
  I said, at tennis through USPI, the top
• 2:33
  of the tree,
• 2:34
  533
• 2:36
  ASCs there.
• 2:37
  Number two, coming in at second place is
• 2:39
  almost 200 ASCs
• 2:41
  less than what tenant has. So that'll be
• 2:44
  SCA SCA Health, which is, of course, UnitedHealth
• 2:47
  Group, Optum's ASC.
• 2:49
  320
• 2:50
  ASCs for SCA Health. Again, USPI 533.
• 2:54
  So quite a big gap from the number
• 2:56
  one player in the space to the number
• 2:58
  two player in the space there. And then
• 2:59
  we go further down the line. Number three,
• 3:01
  company will be AmSurge.
• 3:03
  About 250
• 3:04
  ASCs, which we know,
• 3:06
  Ascension,
• 3:07
  big, big nonprofit Catholic system, looking to acquire
• 3:11
  for about $4,000,000,000
• 3:12
  this year. And speaking to a couple of,
• 3:15
  essentials leaders at our annual meeting at their
• 3:17
  CFO,
• 3:18
  chief strategy and growth officer, they expect that
• 3:21
  deal to close
• 3:22
  in the coming months pending just the the
• 3:24
  last few things that get over the line
• 3:25
  in terms of directly hurt regulatory
• 3:27
  hurdles and closing conditions. But
• 3:30
  last last note on tenant, again, really, really
• 3:33
  dominant player in this space. And how it
• 3:35
  got to this place is really true. A
• 3:37
  number of mergers, merging with USPI in 2015,
• 3:40
  acquired surge center development 2021. That is about
• 3:43
  a $1,200,000,000
• 3:44
  acquisition. And, again, it's really looking to pump
• 3:47
  so much money, 250,000,000
• 3:49
  a year plus into acquiring more centers, really
• 3:52
  building more and building out its footprint here.
• 3:55
  But certainly interest to kinda get a a
• 3:57
  lay of the land in terms of health
• 3:58
  system owned ASEs,
• 4:00
  what the big picture looks like at the
• 4:02
  moment, and also certainly very, very interesting to
• 4:03
  see what other systems are doing in terms
• 4:05
  of really accelerating towards,
• 4:08
  building more ASEs, acquiring more ASEs, especially keeping
• 4:11
  an eye on what essential we deal with
• 4:12
  Absaerg as well, Scott.
• 4:15
  It is fascinating because for a long time,
• 4:17
  a lot of the health systems were concerned
• 4:19
  about ASCs because especially once they were freestanding
• 4:22
  ASCs, they got paid at a lower rate.
• 4:25
  Now it seems like a few of the
• 4:26
  large companies' systems are all in on it.
• 4:29
  It is a fascinating evolution, isn't it?
• 4:32
  Absolutely. I think,
• 4:34
  you know, the surgery partners, I know is
• 4:36
  the other big one in the space.
• 4:38
  HCA Surgery Ventures is part of HCA Healthcare.
• 4:42
  Surgery Partners. I know a couple of big
• 4:43
  private equity firms have looked at potentially acquiring
• 4:46
  that at that company over the last couple
• 4:48
  of years. Maybe that could be another another
• 4:50
  ASC chain that might be up for,
• 4:53
  up for sale down the line. So I
• 4:54
  think my big question is,
• 4:56
  once if that essential and I'm sure it's
• 4:58
  deal gets over the line,
• 5:00
  it's surgeries it's surgery partners and the other
• 5:02
  big ASC dominant chains, are they gonna look
• 5:04
  for potential acquisitions,
• 5:06
  as health systems continue to really gain momentum
• 5:09
  and dive deeper and deeper into the space?
• 5:11
  But certainly interest, on both sides of the
• 5:13
  spectrum as we think about independent ASC centers,
• 5:16
  MSOs, operators there, and then what health systems
• 5:19
  are really looking to do through some of
• 5:21
  these acquisitions, joint ventures, and mergers too.
• 5:24
  No. Fantastic. And, Alan, anything else that you're
• 5:27
  watching closely that's top of mind right now
• 5:29
  besides
• 5:30
  Rory McIlroy
• 5:31
  winning the masters again? Is that the number
• 5:33
  one story that you're honestly following? You could
• 5:35
  admit it.
• 5:37
  Yeah. It was a couple of weeks ago.
• 5:38
  You know, I have a big, Shadyari fund
• 5:40
  as well, but we all know how much
• 5:42
  of a terrible day he had on the
• 5:43
  Sunday. It was looking good on Saturday, but,
• 5:46
  he fell away from the pack on the
• 5:47
  Sunday. But,
• 5:48
  fantastic masters again, and hats off to Rory
• 5:51
  McIlroy.
• 5:52
  Oh, you're literally fantastic. Tell us another, if
• 5:55
  you can, another health care story you're following
• 5:56
  too, though I thought the Rory McIlroy thing
• 5:58
  was fantastic
• 5:59
  and,
• 6:00
  fantastic.
• 6:02
  Yeah. Yeah. Absolutely. So, Scott, I guess,
• 6:06
  this is something that I think I thought
• 6:07
  was so fascinating. And I'd actually love to
• 6:09
  kinda get your, your two cents of insight
• 6:11
  in this perspective as well. I I know,
• 6:14
  I had your meeting last week.
• 6:16
  Mark Cuban, big, big story diving into direct
• 6:20
  contracting. Scott, I know you connected with with
• 6:22
  Mark, I believe, at our event last week.
• 6:24
  So I thought this was a a fascinating
• 6:26
  one in terms
• 6:28
  of Mark Cuban
• 6:29
  basically taking another swing at health care. This
• 6:32
  time, not drugs,
• 6:34
  but it's how providers actually get paid. So,
• 6:37
  I guess the the core argument from some
• 6:40
  of our coverage I didn't get the chance
• 6:41
  to meet him at the event, but fantastic
• 6:43
  coverage by Jacob Emerson, one of my colleagues.
• 6:45
  In terms of Mark Cuban's argument here, I
• 6:47
  guess, that the health care pricing, no secret
• 6:49
  to you, myself, any of our listeners in
• 6:52
  terms of health care pricing really, really opaque,
• 6:55
  big lack of transparency,
• 6:56
  especially on the insurance side there. And that's
• 6:58
  really what's driving so much inefficiency,
• 7:01
  so much cost.
• 7:02
  So it seems like after launching and the
• 7:04
  very success that that Mark Cuban has had
• 7:06
  with cost plus drugs in terms of transparent
• 7:09
  pricing, he's now rolling out cost plus wellness,
• 7:13
  which I guess is essentially is a direct
• 7:15
  contracting platform
• 7:17
  where employers can work straight directly with providers,
• 7:20
  no insurers, no middlemen, kind of fully visible
• 7:23
  transparent contracts.
• 7:25
  I guess the big big twist in this
• 7:28
  is that insurers
• 7:29
  are
• 7:30
  essentially cut out of this model entirely.
• 7:34
  No prior authorization,
• 7:35
  no hitting fees, or providers
• 7:38
  ultimately aim to get paid quickly, I believe
• 7:40
  within about 30 or so. And I think
• 7:44
  arguably, the most provocative thing, Mark Cuban said
• 7:47
  here, is that hospitals
• 7:48
  might actually be losing the most money on
• 7:50
  their biggest commercial payer contracts. Once you factor
• 7:53
  in
• 7:54
  denials,
• 7:55
  delays, clawbacks, essentially arguing that
• 7:58
  volume essentially doesn't equal profitability.
• 8:02
  So a big radical shift maybe in terms
• 8:04
  of the frustration that almost everyone is feeling
• 8:06
  in health care here. Obviously, there's a big
• 8:08
  gap, big opportunity in the market.
• 8:10
  Scott, I kinda love to kinda get your
• 8:12
  2¢ on this as well. Very fresh in
• 8:13
  our minds, and I know you had the
• 8:15
  the chance to speak with Mark next week,
• 8:16
  I believe, or last week.
• 8:18
  Yeah. No. It's a total pleasure. I mean,
• 8:20
  what's fascinating about listening to Mark Cuban is,
• 8:23
  you know, aside from his thoughts on health
• 8:25
  care and direct contracting for pharmacy and cost
• 8:28
  plus pharmacy,
• 8:30
  what what amazes me in some ways is
• 8:32
  his passion and his ability to be all
• 8:35
  in on things,
• 8:36
  and it's incredibly, incredibly impressive.
• 8:40
  The the the to go a step further,
• 8:42
  yes, he's got two different really cost plus
• 8:45
  models at least. One is really direct to
• 8:48
  consumers. One is through hospitals and health systems,
• 8:51
  and he's they're getting growth and getting victories
• 8:54
  in both of those and growth in those.
• 8:56
  And and what they're
• 8:58
  putting forth is very attractive,
• 9:01
  because so many drug costs are all over
• 9:03
  the place. So many go through the PBMs,
• 9:06
  the pharmacy benefit managers.
• 9:08
  They're so expensive,
• 9:10
  and there's so many alternatives in terms of
• 9:12
  generics and other ways to get these to
• 9:14
  market where you don't have nearly the same
• 9:16
  markups to to patients and to to people.
• 9:20
  And so it's, no. It's it's really interesting,
• 9:23
  and I was thrilled to see the growth
• 9:25
  he's having and the movement they're making. I
• 9:28
  mean,
• 9:29
  you you know, we we do have these
• 9:30
  fascinating different ways of doing business in health
• 9:33
  care,
• 9:34
  And it it seems like the more that
• 9:36
  things
• 9:37
  go less through a number of different middle
• 9:40
  people,
• 9:41
  the better off we do. I mean, even
• 9:43
  like this GLP one thing has been fascinating.
• 9:46
  At one time, you couldn't get a GLP
• 9:48
  l one
• 9:49
  unless you went through, you know, through the
• 9:52
  health systems, through the doctors, etcetera, etcetera.
• 9:54
  Now you have direct marketing
• 9:56
  directly from the different companies
• 10:00
  of the world, like the Hims and Hers,
• 10:02
  the Rose Sparks, the the Eli Lilly's,
• 10:04
  etcetera.
• 10:06
  And what it has done
• 10:08
  is it's made the cost
• 10:10
  more affordable.
• 10:11
  So, like, you you can get the Eli
• 10:13
  Lilly drugs for 4 to 500 a month.
• 10:16
  You can get the other semiglutides
• 10:18
  through
• 10:19
  the compounders
• 10:20
  for 200 a month, and the cost has
• 10:23
  just gone down dramatically
• 10:25
  as we take middle people out of some
• 10:27
  of these things. When you've got a system
• 10:29
  built around other people's money and around middle
• 10:32
  people,
• 10:33
  it just leads to more and more higher
• 10:35
  cost. And what Mark Cuban is is
• 10:38
  developing,
• 10:39
  executing on is this concept of, you know,
• 10:42
  cost plus the cost of the drug plus
• 10:43
  a markup of 15%.
• 10:45
  I forget the exact number.
• 10:47
  But the more
• 10:49
  that the business models change towards something like
• 10:52
  that, the more that we'll bring down it'll
• 10:54
  be another piece that brings down health care
• 10:56
  costs on. So I I
• 10:57
  I am you know, I you know, he's
• 10:59
  he's fighting a large establishment
• 11:01
  in a large way of doing it, but
• 11:03
  but I think making progress just like the
• 11:05
  real sparks and the hims and hers and
• 11:07
  the other sort of telehealth providers or digital
• 11:10
  providers are making progress.
• 11:12
  Every bit of that that's done through direct
• 11:13
  consumers. When you have a direct consumer paying
• 11:15
  for their own drugs, they're much more price
• 11:18
  sensitive. They're much more interested in the price,
• 11:20
  and they don't just throw their hands up
• 11:21
  that it's going through their insurer, and they're
• 11:24
  gonna have whatever common payment they have. So
• 11:26
  I I think it's a I think it's
• 11:27
  a really healthy thing, and we hope that
• 11:29
  there's more and more of it. You know?
• 11:31
  And I see more and more of these
• 11:32
  things. They also take a lot of stress
• 11:33
  off the health system. As we see more
• 11:35
  and more of these things go direct
• 11:38
  to
• 11:39
  through consumers,
• 11:41
  companies and consumers,
• 11:43
  the more ability you have for health systems
• 11:45
  to focus on the higher acuity patients and
• 11:47
  things they have to to to to focus
• 11:49
  on.
• 11:50
  I do think, currently,
• 11:52
  if we,
• 11:53
  if all the GLP ones were going through
• 11:54
  primary care physicians with how many are going
• 11:57
  out today,
• 11:58
  we would be, you know, saturating the system.
• 12:00
  We we'd be we'd be crushing the system
• 12:03
  with the doctors going back and forth if
• 12:05
  every one of those required a real in
• 12:07
  person visit like the old days. I mean,
• 12:09
  so many things about this take pressure off
• 12:11
  the system, whether it's in the GLP one
• 12:13
  side, whether it's what Mark Cuban's doing. I
• 12:15
  think there's so many benefits to it economically
• 12:17
  and also in terms of taking some of
• 12:18
  the stress off the system. So I think
• 12:20
  it's fantastic.
• 12:21
  Yeah. And and just what we're talking about,
• 12:23
  Scott, in terms of ASCs earlier or tenants
• 12:26
  ASC, we know kind of it's particularly in
• 12:28
  the spine and the orthopedic area. These massive
• 12:30
  centers of excellence have had kinda, you know,
• 12:32
  big success in terms of direct contracting with
• 12:35
  the likes of Walmart, these big employers and
• 12:37
  whatnot as well. I think, really, really interesting
• 12:40
  move, and it'd be interesting to see the
• 12:41
  appetite from health systems to to kinda work
• 12:43
  with Costwell as well as what we where
• 12:45
  we are a couple years down the line
• 12:46
  here.
• 12:47
  A 100%. Just fascinating. Ewan, as always, I
• 12:50
  wanna thank you. I I know you are,
• 12:53
  a huge Rory McIlroy fan like Laura Dirda
• 12:56
  is a huge Chicago White Sox fan. I
• 12:59
  I I
• 13:00
  give you, congratulations
• 13:02
  on the victory in the masters.
• 13:03
  I know that's a different subject than us
• 13:06
  talking about,
• 13:07
  the White Sox struggling or more importantly, health
• 13:09
  care and bringing cost of health care down.
• 13:11
  But and and what's going on in the
• 13:13
  surgery center world with with these big hospital
• 13:15
  operators becoming surgery center operators? Absolutely fascinating. Thank
• 13:18
  you for joining us.
• 13:20
  Always a pleasure. Thank you so so much.