By Stephen W. Earnhart, MS
Earnhart & Associates
One of the most popular features in this column is bringing examples of what we are seeing at the 30,000-foot level across 49 states where we have clients. (Come on, Hawaii. Where are you?)
Our approach to issues our clients are facing is sometimes controversial, sometimes right, and sometimes so-so, but it does spawn lots of questions and interesting situations.
Here are a few client issues from the past couple of months that might benefit others.
• Hospital and ambulatory surgery center in one location.
Situation: We are a hospital system that is looking to push a large amount of low-risk, high-volume surgery out of our crowded operating rooms to a freestanding ambulatory surgery center in the area. We do not seek equity but are looking for a way to maintain our identity and have our employee surgeons perform their cases in an environment that meets our high standards.
Advice: This scenario was interesting. The healthcare system also wanted to negotiate a fixed fee for its patients for various procedures. We were able to provide them an existing surgery center, with physical expansion space. The leaders were receptive to the idea. After many meetings and conversations with senior level management on both sides, we agreed on terms.
We are ending up with an immediate accommodation for the hospital surgeons, the hospital itself, their patients, and the for-profit surgery center. We agreed to build out a portion of the facility that will have its own entrance, its own logo, and its own identity.
Furthermore, we had the space for the hospital’s own waiting room and reception area. Once the patients entered the surgical area, they had their own procedure rooms and recovery area, but they still were part of the “back of the house” surgery center managed by the ASC and its staff. They are not receiving any facility fee reimbursement.
There were lots of moving parts to negotiate and accommodate, but it was approved by attorneys and well worth the effort.
• Private labeling of the surgical procedure.
Situation: We were approached by and accepted clients who wanted to franchise a certain surgical procedure technique outside their successful model. The leaders wanted to build a chain of surgery centers around that concept that has made them successful, but they wanted to expand into other parts of the United States.
Advice: After many (and I do mean many) marketing meetings, demographic analyses, site visits, and new demographic studies, we found our new target location 1,500 miles away from the parent ASC to begin the franchise.
We have finished negotiations on the new space for the first of six new ASCs in the Midwest, and now we are looking for the second and third locations.
• Selling the ASC after 18 months of operations.
Situation: Anyone who develops surgery centers knows that there is a significant exit strategy for a properly developed facility. While we do not endorse an approach of “build it, and they will come,” we do preach to our clients that there is a market for your surgery center, perhaps sooner than you think.
Advice: After a run of only 18 months, the owners have several entities offering multiples of earning of up to eight times to buy 80% of the ASC. Again, this situation highlights the benefits of a well-designed ASC that is built to be sold eventually.
• Multiple ASC ventures by a hospital system.
Situation: We were engaged by leaders at a well-known New England-based hospital system who were looking for an ambulatory surgery center solution to their growing patient base, but they still wanted to maintain their market share of outpatient surgery.
Advice: After just a few months of working with the client, the leaders now have opportunities for a majority interest in one de novo surgery center at the other end of the state and the conversion of an existing off-site surgical outpatient facility to a freestanding ASC with a large new base of surgeons. They essentially are widening their market share while partnering with new surgeons and specialties.
While some of the above situations may have little to do with your particular facility, it is important to understand how dynamic outpatient surgery is becoming in the changing face of healthcare reform. Never discount anything your surgeons or department heads suggest. Who knows? You may be next! [Earnhart & Associates is a consulting firm specializing in all aspects of outpatient surgery development and management. Earnhart & Associates can be reached at 5114 Balcones Woods Drive, Suite 307-203, Austin, TX 78759. Phone: (512) 297-7575. Fax: (512) 233-2979. Email: firstname.lastname@example.org. Web: www.earnhart.com.]