Latest / Becker’s Healthcare Podcast / Rapid Growth of ASC Joint Ventures and What It Takes to Build Successful, Sustainable Partnerships Between Physicians, Hospitals and Health Systems

Transcript

Rapid Growth of ASC Joint Ventures and What It Takes to Build Successful, Sustainable Partnerships Between Physicians, Hospitals and Health Systems · Becker’s Healthcare Podcast

• 0:00
  Hi everyone. This is Brian Zimmerman with Becker's
• 0:02
  Healthcare. Thank you so much for tuning into
• 0:04
  the Becker's Healthcare podcast series.
• 0:06
  Today, we're going to talk about the rapid
• 0:08
  growth of ASC joint ventures and what it
• 0:10
  takes to build successful, sustainable partnerships between physicians,
• 0:14
  hospitals and health systems. Joining me for today's
• 0:17
  discussion is Jerry Eaves, vice president of ambulatory
• 0:20
  services, medHQ,
• 0:21
  and Wes Batiste, senior advisor of Enza Healthcare
• 0:25
  Strategies. Jerry and Wes, thank you so much
• 0:27
  for being here today.
• 0:28
  Thank you for having us.
• 0:30
  Yes. Thank you very much. Enjoyed to be
• 0:32
  here. Well, let's begin here. Let's, let's hear
• 0:34
  a bit more about each of you.
• 0:37
  I'm gonna tap on each of you to
• 0:38
  sort of briefly introduce yourself and share a
• 0:40
  bit about the work you're doing in health
• 0:41
  care, your professional background.
• 0:44
  Wes, how about we begin with you?
• 0:46
  Sure. So it's Wes Batiste.
• 0:47
  Forty years in health care, anesthesia condition by
• 0:50
  background,
• 0:52
  twenty five years in ASC industry. I've, built,
• 0:55
  developed, owned, operated multiple ASCs of my own.
• 0:57
  First one beginning in 2000.
• 0:59
  I like to, leverage my kind of first
• 1:02
  person experience to provide, you know, advisory work
• 1:04
  to health systems primarily, but also independent physician
• 1:06
  groups, some international health care businesses, and, and
• 1:09
  PE firms as well. We're glad to be
• 1:11
  here. Thanks for having me. Great to have
• 1:13
  you, and we're gonna pull on that, that
• 1:16
  expertise and that experience today for sure. Jerry,
• 1:18
  let's go ahead, meet you a little bit
• 1:20
  more.
• 1:21
  Hi, everyone. I'm Jerry Eaves. I'm the VP
• 1:23
  of ambulatory services for MedHQ,
• 1:26
  and I have worked in ambulatory services for
• 1:29
  over two decades. I am a nurse by
• 1:31
  trade. My background,
• 1:33
  I've worked boots on the ground as an
• 1:35
  administrator
• 1:36
  and,
• 1:37
  in clinical operations.
• 1:38
  I've also helped on the corporate side. I've
• 1:41
  worked,
• 1:42
  as a regional director building de novos
• 1:45
  and also
• 1:46
  doing transmissions,
• 1:48
  from management company to management company. So I
• 1:51
  am excited to be here, and thank you
• 1:52
  for having me.
• 1:54
  Great. Excited to have you. And let's let's
• 1:56
  let's begin here by getting sort of a
• 1:58
  lay of the land in terms of thinking
• 2:00
  about, you know, ASC joint ventures with hospitals
• 2:03
  and health systems is, of course, accelerating. Let's
• 2:05
  let's hear from each of you what you
• 2:07
  make this landscape.
• 2:09
  What do you believe is driving this change,
• 2:10
  this momentum,
• 2:12
  and more specifically, what are hospital health system
• 2:14
  leaders and also ASC leaders ultimately hoping to
• 2:17
  gain from these partnerships?
• 2:19
  Jerry,
• 2:20
  from from where you sit at MedHQ
• 2:22
  or even your your
• 2:24
  background experience, what what's behind this shift and
• 2:26
  what are leaders looking to get?
• 2:29
  So we're
• 2:30
  absolutely seeing an overall shift of cases to
• 2:33
  the outpatient settings. So insurance companies,
• 2:36
  everyone cost is driving cases to the outpatient
• 2:39
  ASC setting.
• 2:40
  Hospitals know that this is coming. They're more
• 2:43
  willing to participate, of course.
• 2:45
  Better managed care rates are also going to
• 2:48
  provide better partnerships with hospitals,
• 2:51
  going to,
• 2:52
  also add to the value of having cases
• 2:55
  in an ambulatory surgery center.
• 2:57
  So ASCs are non providing
• 2:59
  for providing a lower cost of care, faster
• 3:01
  throughput,
• 3:03
  higher patient satisfaction scores, and then also payer
• 3:05
  incentives.
• 3:06
  So all of that's going to continue to
• 3:09
  drive cases more and more to the outpatient
• 3:11
  and ASC setting.
• 3:12
  For sure. There's there's that that shift there,
• 3:15
  that trend that is pushing things there. What
• 3:17
  specifically when you think about sort of these
• 3:20
  joint ventures,
• 3:21
  what are ASCs looking to get out of
• 3:22
  their those relationships, Jerry, and what are what
• 3:24
  are perhaps health systems looking to do? Just,
• 3:27
  obviously, capitalize on that market shift, but but
• 3:29
  can you share some more details there?
• 3:32
  Yeah. Absolutely.
• 3:33
  So the hospitals are definitely gonna continue to
• 3:35
  see a benefit from cases
• 3:38
  being in the ambulatory setting because they can
• 3:40
  shift some of their easier cases outpatient to
• 3:43
  ASCs and they can focus more on having
• 3:45
  the more complicated cases in the hospital.
• 3:49
  Physician ownership is going to be something that
• 3:51
  they're gonna also see. The physicians want to
• 3:54
  have ownership. They they wanna have employment with
• 3:56
  the hospitals, but they also wanna have ownership.
• 3:59
  So that's gonna be something that the hospitals
• 4:01
  are gonna be able to capitalize on as
• 4:02
  well.
• 4:04
  Wes, what would you add here? What would
• 4:06
  you,
• 4:07
  would bring to bring to this conversation in
• 4:09
  terms of what leaders are looking to gain
• 4:11
  from these these,
• 4:12
  these partnerships and what's fueling it beyond sort
• 4:15
  of the we're doubling down, but beyond sort
• 4:17
  of the migration to outpatient.
• 4:20
  Yeah, Brian. And I echo everything that, Jerry
• 4:23
  had to say, and I would say that
• 4:24
  the the key drivers of this trend and
• 4:26
  and, you know, the trend to,
• 4:28
  ambulatory surgery as this preferred site of service
• 4:31
  has been solidified. You know, this
• 4:33
  ASCs are definitely the the role have identified
• 4:35
  their self as their as their role provider
• 4:37
  of being,
• 4:38
  quality low cost care.
• 4:40
  But we're seeing the health systems and the
• 4:42
  joint ventures with with physician groups as as
• 4:44
  the probably the most common trend that I
• 4:46
  deal with every day. And the key drivers
• 4:48
  of this trend are identified really well on
• 4:50
  the Avanza Hospital Leadership Survey, which last year
• 4:53
  revealed that the the number of hospital ASC
• 4:55
  JVs has doubled in the last five years.
• 4:57
  Five years ago, it was about forty percent
• 4:59
  of hospitals had an a ASC JV, now
• 5:01
  eighty percent.
• 5:02
  And the survey also showed that 90% of
• 5:04
  health systems plan to expand their ASC portfolio.
• 5:07
  So we're definitely seeing that trend and and
• 5:09
  the wise, you know, the hospitals,
• 5:12
  you know, they recognize increased outpatient capacity. They
• 5:15
  and most importantly, they enhance their physician relations
• 5:18
  and, and the recruitment opportunities.
• 5:20
  There's also payer pressures that are that they
• 5:22
  know with lower acuity cases are are being
• 5:25
  are being, either encouraged or forced out of
• 5:28
  the, hospital HOPDs.
• 5:30
  So so they have lots of reasons to
• 5:32
  to seek these JVs. The physicians,
• 5:34
  obviously, there there's capital involved. There's managed care
• 5:37
  rates. The hospitals can can leverage much more
• 5:39
  so the independent groups.
• 5:41
  There's some management services, and there's obviously just
• 5:44
  referrals as well. So, again, that whole alignment
• 5:46
  and I I always bring it back to
• 5:48
  the four p's, I call it, what's driving
• 5:51
  all this. Payers are driving this. Physicians are
• 5:53
  driving it. Patients are driving it. They're patients
• 5:56
  are becoming more cost savvy
• 5:58
  and politics. I mean, we're seeing CONs being
• 6:00
  being relinquished. We're seeing site neutrality and payment
• 6:03
  system, and we're seeing the inpatient only list
• 6:05
  being divested. It's going away in three years.
• 6:07
  So so lots of tailwinds, but also lots
• 6:10
  of synergy with hospitals and physicians joint venturing,
• 6:12
  and and that's being recognized.
• 6:14
  Yeah. There's driving it, patients driving it, physicians
• 6:17
  driving it, politics driving it, the four p's.
• 6:19
  That's an easy way to to to conceptualize
• 6:21
  this.
• 6:22
  But, of course, despite all these these areas
• 6:25
  of potential alignment,
• 6:27
  not every ASC joint venture is successful or
• 6:30
  or as successful as it could be. So
• 6:32
  curious, and and, Wes, we can begin with
• 6:34
  you from your perspective.
• 6:36
  What decisions and governance models really separate those
• 6:39
  successful ASC joint ventures from from the rest
• 6:42
  of the pack? Any any specifics you can
• 6:44
  share there, pull on to, would be great.
• 6:46
  Yeah. For sure. It it really starts very
• 6:49
  early in the, in the game. And that
• 6:51
  and that's where sometimes,
• 6:53
  the first failure is set up is that,
• 6:56
  either party using the health system will will
• 6:58
  determine
• 6:59
  the government structure. They'll determine
• 7:02
  the wheres, the whos, the equipment planning. They'll
• 7:05
  they'll make all these determinations, and that's that's
• 7:07
  a setup for failure. What we really like
• 7:09
  to see is very early in the game,
• 7:10
  we have position engagement. We oftentimes like to
• 7:12
  see a physician steering committee
• 7:14
  engaged very early. The the physicians then have
• 7:17
  their input, and their input is acted on
• 7:20
  by the health system. Even though normally you
• 7:22
  see a fifty one forty nine or or
• 7:24
  type of ownership structure just so that we
• 7:27
  can leverage the hospital rates both in managed
• 7:29
  care, GPOs, etcetera.
• 7:31
  But the physicians, you know, especially from their
• 7:34
  clinical standpoint, they they they need their input.
• 7:36
  They they need input into the rules and
• 7:37
  regs,
• 7:38
  the medical by staff bylaws, you know, the
• 7:40
  allowable cases, the equipment planning, the service lines
• 7:43
  that are gonna be involved. And and it
• 7:45
  that's first and foremost, we always like to
• 7:48
  make sure that it's fifty one forty nine.
• 7:50
  There's a majority owner, but everyone feels like
• 7:52
  they have
• 7:54
  a
• 7:54
  very equitable share in the development, and it
• 7:57
  creates sense of, of ownership.
• 7:59
  One way of of doing that also we
• 8:01
  find is is to use third party services.
• 8:03
  So you you take away the bias and
• 8:05
  that from a legal standpoint, we, you know,
• 8:08
  we use we use third party legal services,
• 8:10
  third party evaluation services,
• 8:12
  and even third party advisory work. So that,
• 8:15
  again, everyone feels like this is a level
• 8:17
  playing field and,
• 8:18
  that avoids a lot a lot of the
• 8:20
  pitfalls in in the planning, development, and even
• 8:22
  operations of of of a of a JV.
• 8:25
  Yeah. I wanna wanna wanna get to maybe
• 8:27
  some of the possible tensions here that are
• 8:28
  set up in these these partnerships. But, Jerry,
• 8:31
  turning to you now to see if you
• 8:32
  have anything to add here. If even if
• 8:35
  you could call out, I guess, the most
• 8:36
  common missteps that derail a joint venture,
• 8:39
  how can organizations avoid those, Jerry?
• 8:42
  Yeah. Absolutely. And, again, just everything that Wes
• 8:46
  is saying is absolutely,
• 8:48
  you know, I agree with as well. You
• 8:49
  know, some of the missteps is, again, just
• 8:52
  putting these partnerships together. It's a JV, you
• 8:55
  know, it's a joint venture. You do wanna
• 8:57
  work together.
• 8:59
  When these partnerships start out, if you're not
• 9:01
  working together and you don't have a cohesive
• 9:03
  group, then you're gonna have a lot more
• 9:05
  trouble and you're gonna struggle to actually be,
• 9:08
  profitable and successful.
• 9:09
  So just working together,
• 9:12
  respecting each other and what each other brings
• 9:15
  to the table. So whether you're the physician
• 9:17
  group or you're the hospital side, you need
• 9:19
  to understand what they bring and and what
• 9:21
  they bring to the table and what, you
• 9:22
  know,
• 9:23
  how they can make the project successful.
• 9:26
  So not respecting each other is is probably
• 9:28
  one of the biggest things that, you know,
• 9:29
  you're gonna have a problem with if that
• 9:31
  doesn't start out well.
• 9:33
  Everyone's gotta have a a voice at the
• 9:35
  table and that voice has to be respected.
• 9:37
  So you
• 9:38
  and what you're getting at here is really
• 9:40
  that
• 9:41
  there is this component here where ASCs want
• 9:44
  to maintain some level of independence,
• 9:47
  but that hospital influence also has to play
• 9:50
  a part.
• 9:51
  I guess when you think about this from
• 9:53
  an operations, cultural, clinical standpoint,
• 9:56
  how would you counsel leaders on striking a
• 9:58
  balance
• 9:59
  and why is it being that balance right
• 10:02
  so foundational to long term success, Jerry?
• 10:05
  So I think the challenge is aligning strategically
• 10:08
  without turning an ASC into a mini hospital.
• 10:10
  So
• 10:11
  helping the leadership
• 10:13
  understand
• 10:14
  how to operationally
• 10:16
  work together with all the parties.
• 10:19
  Your hospital's
• 10:20
  got strategy, not operations.
• 10:23
  You know, our ASCs,
• 10:25
  we're we're fast, we're physician led and we're
• 10:27
  efficient. So let them let the ASCs work
• 10:30
  the way they work. And so teaching the
• 10:32
  leaders and the leadership teams
• 10:35
  how to navigate those waters and how to
• 10:37
  make sure that we're we're keeping everybody where
• 10:39
  they need to be and where their value
• 10:41
  lies is what's most important.
• 10:43
  Role should be clear as to what the
• 10:45
  hospital can provide and what the ASC or
• 10:47
  the the physician side can provide.
• 10:50
  And,
• 10:51
  physicians having buy in, it it drives culture,
• 10:53
  it drives results. You know, they they really
• 10:56
  want a seat at the table as we
• 10:58
  said and they want to they wanna drive
• 11:00
  that culture. I've seen a lot of physicians
• 11:02
  that are, you know, they're very active in
• 11:05
  committees, they're very active in your boards and,
• 11:08
  you know, they want they want to be
• 11:10
  able to help drive the culture and and
• 11:12
  the results of the surgery center. It's beneficial
• 11:14
  to everyone that that they're in there and
• 11:16
  that they have a buy in. So I
• 11:17
  think that's most important when you're when you're
• 11:20
  talking with your leaders and you're training them
• 11:22
  and teaching them.
• 11:23
  I mean, the positions be real drivers of
• 11:25
  the culture.
• 11:26
  Wes, what would you add here?
• 11:28
  You know, I think I think Jerry covered
• 11:30
  it very well. The government structure is just
• 11:32
  so important. That board selection, you want you
• 11:34
  want key stakeholders. You you know, you want
• 11:36
  position champions
• 11:37
  that are going to drive that culture, that
• 11:39
  are gonna keep the focus,
• 11:41
  very clinically oriented.
• 11:43
  You know, some of that goes back to
• 11:45
  how the operating agreement is established, you know,
• 11:47
  what as a minority partner, what what veto
• 11:49
  rights do they have? What what are the
• 11:51
  what are the key points? You know, what
• 11:52
  are the sticking points for them? And identifying
• 11:54
  those and and carving those out,
• 11:57
  so that the governance truly is,
• 11:59
  their voice is not just a a voice,
• 12:01
  but it actually is meaningful and impactful and
• 12:03
  becomes an action.
• 12:05
  Excellent. And and and I'll ask this now
• 12:08
  too. I think there,
• 12:10
  the whole podcast could be summed up as
• 12:12
  sort of advice or knowledge, right, that people
• 12:14
  should have as they as they consider these
• 12:16
  joint ventures. But I guess if you had
• 12:18
  to prioritize one capability
• 12:20
  or something they really need to focus on
• 12:22
  right now, whether it's an ASC leader or
• 12:24
  health system leader,
• 12:25
  what would that be? What would you call
• 12:27
  out for for for listeners?
• 12:29
  Wes, let let's begin with you.
• 12:31
  Well, Brian, I'm a I'm gonna always go
• 12:34
  to my clinical background and just say,
• 12:37
  the way the way I phrase it this
• 12:38
  way,
• 12:39
  keep your eye on the prize.
• 12:41
  And, in this case, our prize, our product
• 12:44
  is taking really good care of patients having
• 12:47
  outpatient surgery just like we would our mother,
• 12:48
  father, brother, sister.
• 12:50
  And so,
• 12:51
  to not lose sight of that, that we
• 12:53
  we we start to talk about margins and
• 12:55
  EBITDA. We start to talk about
• 12:57
  case mix and k and payer rates, and
• 13:00
  all those are so important that they they
• 13:02
  drive our business. But our business is still
• 13:03
  taking care of
• 13:05
  of moms and dads and brothers and sisters.
• 13:07
  And so I I
• 13:09
  I go back to just
• 13:11
  leaders don't don't lose sight of that because
• 13:14
  I in a simple business model, if we
• 13:16
  develop the best product out there, we're gonna
• 13:17
  be successful and that just don't lose sight
• 13:19
  of the product.
• 13:20
  Carrie, what would you say?
• 13:22
  Yeah. I can't say it any better. I
• 13:24
  think that's great. Our goal is to take
• 13:26
  care of the patients and take care of
• 13:28
  people and
• 13:29
  we do it in a very good way
• 13:31
  and surgery centers are
• 13:33
  leading the pack and I think we just
• 13:35
  need to continue that.
• 13:38
  Excellent. And one final question for each of
• 13:40
  you. If there was one thing you wish
• 13:41
  more physicians and health system leaders understood
• 13:44
  about ASC joint ventures, what would that be?
• 13:46
  Gerri, go first.
• 13:48
  I think ultimately that the model itself is
• 13:51
  very successful.
• 13:52
  We provide amazing patient care as we just
• 13:54
  said,
• 13:55
  and it requires a partnership from all sides.
• 13:58
  And it's it's very simple to say everyone
• 14:00
  needs to have skin in the game, but
• 14:02
  it does drive that profitability and that culture.
• 14:05
  And I think when you wanna be successful,
• 14:08
  everyone has to work together. So it's a
• 14:10
  partnership,
• 14:11
  and just remember that. That's fine. Wes, what
• 14:13
  do you have here to close this out?
• 14:15
  Yes, sir. They,
• 14:17
  I think they both need to recognize that
• 14:19
  they are better together.
• 14:20
  That the the two together are better than
• 14:22
  each individually and that they each have meaningful
• 14:24
  contributions
• 14:25
  to the partnership,
• 14:27
  and there's a synergy. It's a really, really
• 14:29
  good model.
• 14:30
  Absolutely.
• 14:31
  Well well, Jerry, Wes, we'll leave it there.
• 14:33
  Thank you so much for coming on the
• 14:35
  podcast today.
• 14:36
  Thanks, Brian. Thank you.
• 14:38
  We also wanna thank our podcast sponsor, medHQ.
• 14:41
  You can tune in to more podcasts from
• 14:43
  Becker's Healthcare by visiting our podcast page at
• 14:45
  beckershospitalreview.com.