The ambulatory surgery center (ASC) space is vibrant, dynamic, and rife with opportunity. It’s also unpredictable, with federal and state regulations in a state of perpetual flux and health system and private equity (PE) investments changing the calculus of ASC ownership.
But if there’s one takeaway from the Becker’s Healthcare 29th Annual Meeting: The Business & Operations of ASCs, it’s that ASCs remain poised for continuing growth. This year’s conference, which took place October 25–28 in Chicago, brought together more than 1,000 attendees and 270-plus speakers for conversations about innovation, disruption, and the future of ASCs in the healthcare ecosystem.
Here are three themes from this year's event.
1. Growing Role of PE in the ASC Space
ECG partner Jared Langus joined a panel of ASC leaders and financial experts to discuss the continuing flow of PE dollars into the ASC space. They agreed that the fragmentation of the ASC market is what makes it so attractive to PE investors. PE firms see opportunities to standardize processes, create economies of scale, and consolidate smaller practices to create lower-cost networks of care. Many independent ASCs and small groups, meanwhile, are seeking funding to fuel growth stemming from surgery migrating from the hospital to the ASC setting.
But deciding when—or even whether—to sell or otherwise partner with a PE firm is a conundrum for many ASC owners. The panel offered several suggestions for ASC stakeholders who are contemplating a transaction:
- Determine your goals. What do the next five years look like? Are you considering retirement? Recruiting new physicians? Are you handing over the business at the right inflection point? Understanding your objectives and knowing how long you want to be involved in the ASC going forward will guide your decision-making.
- Know what you’re getting into. Picking the right partner is critical for any transaction. Trust your gut, and make sure you (and everyone else involved) understand what your role will be once the deal closes.
- Clearly define physician ownership. Outline the parameters of post-transaction physician ownership. Know who will have a say in governance and decision-making. What will you retain—equity? Governance? A combination of the two? PE firms can be flexible, so these are effective negotiating points.
Above: ECG partner Jared Langus (far left) joins a panel discussing private equity investment in ASCs.
2. Need for a Long-Term ASC Strategy
A sense of urgency permeated the conference. Health system leaders and ASC owners are jostling for position in an environment marked by accelerating surgery migration, staffing shortages, and declining reimbursement. Everyone wants to make decisions today that will ensure the ensure the sustainability of their organizations tomorrow.
But rushing an enterprise-defining decision has its perils. In session after session, speakers emphasized the need for a long-term ASC strategy.
- Naya Kehayes, an ECG partner and leader of the firm’s ASC practice, warned during an executive roundtable that not thinking enough about your future ASC strategy can challenge future partnerships and expansion opportunities.
- In the same session, Jared Langus cautioned against locking your organization into a limiting transaction by not thinking in terms of a broader ASC plan. Just because other health systems in your region are bidding on an ASC that’s for sale doesn’t necessarily mean you need to be in on it too. Does it fit with your overall strategy? Can it accommodate your growth plans? Answering such questions is more important than rushing into a deal.
Above, L-R: ECG's Bryce Miller, Naya Kehayes, and Jared Langus
Other takeaways:
- Ensure you have the case volume. Are you in a position where your hospital ORs are full and you can backfill cases? If not, Naya explained, decanting procedure volume to an ASC could cripple your organization.
- Involve key physician leaders in governance. Naya also emphasized the need to gain physicians’ trust by involving them in governance. When physicians can elect a leader who will have a seat at the table, they know they’ll have a voice in future decisions.
3. Payer Pain
Not a single session seemed to go by without a few comments about the challenges of working with payers. Attendees and speakers alike lamented relationships that had become contentious and processes that had become opaque. Several people noted that with many payers now using online portals for communication, just getting in touch with an actual human being at a health plan has become a feat unto itself.
Above, L-R: ECG's Amy Coletti, Kevin Dowdy, and Matt Kilton
But that doesn’t mean that negotiations between ASCs and payers can’t be productive. Several members of ECG’s ASC team—Matt Kilton, Amy Coletti, and Kevin Dowdy—led a discussion on managed care strategy and succeeding in contracting in ASCs. Several of their suggestions stood out:
- Arm yourself with data. Health plans are very data focused, and the best way to negotiate with them is to come to the table with your own data. Bring data on the procedures conducted at your ASC. Bring any regional data you have that demonstrates the value your ASC provides. And be prepared to educate the health plan, as necessary, on the story the data tells.
- Everything is relationship-driven. Kevin Dowdy remarked that if you don’t know the name of your local payer rep, that’s your first mistake. Amy Coletti noted that establishing a rapport with payer reps can make for an easier conversation. A good relationship alone won’t necessarily translate to better rates, but it can give you insights into the nuances of a negotiation.
- Don’t let contracts sit. Kevin urged attendees to renegotiate a contract every time it comes up for renewal. Even nominal rate increases will add up. If several renewal cycles go by without the contract being touched, the payer won’t make up for lost time by offering significant rate increases.
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Published November 5, 2023
