From 2019 to 2020, hospitals and health systems planning to increase their investments in ambulatory surgery centers (ASCs) rose from 44% to 67%, a 23% change, according to a recent survey.1
The third annual 2020 ASC Survey of healthcare executives and clinical leaders also revealed 76% of larger hospitals have increased their investment into ASCs, and close to the same proportion already have opened more than one ambulatory surgery center.
“Payer pressures and other market forces have softened hospitals’ historically defensive posture toward ASCs, paving the way for overall growth, lower operating costs, and heightened patient satisfaction,” Joan Dentler, president and CEO of Avanza Healthcare Strategies (which led the survey), said in a statement.2
These trends strike home for some surgery center leaders who are experiencing growth and increasing interest from health systems. For example, there is a physician group working with a hospital partner with a minority ownership of a surgery center in Rockford, IL. The same physician group is in the process of planning a new surgery center in Beloit, WI, a few miles north of the Rockford center, says Don Schreiner, MBA, chief executive officer of OrthoIllinois.
“The Beloit surgery center will be an expansion of the same services currently being offered in Rockford,” Schreiner adds.
Surgery center shareholders want their facility to be a good value to payers and to set up fair contracts. “We’re not looking for out-of-network gouging,” Schreiner says.
Surgery center physicians and others often prefer to own a majority share in their surgery centers, according to Schreiner. “Hospitals might want to be in the surgery center and have 51% ownership. They want to have control,” Schreiner says. “We fully intend to be at 75% or more owned by doctors.”
In the 2020 ASC Survey, 58% of hospitals and health systems with ASCs report they are party to at least one ASC joint venture, which is down from previous surveys. Seventy-nine percent of hospital respondents indicated they prefer to own more than half of a joint ASC venture. The bigger the facility, the more likely that is to be the case.
As hospitals and health systems continue going into the ASC business for themselves without third-party equity, outside contracted management, or other individual investors, leaders of some existing freestanding ASCs might need to start thinking about what is next. This could include trying to partner with hospitals and systems still willing to take that route.
“Surgery centers are growing into bigger practices and starting to consolidate. Private equity also is getting involved, putting up the dollars,” Schreiner says. “Hospitals are appealing [because] they will put up a lot of capital to build the facility, which doctors may not want to do. Usually, it’s a big dollar amount of investment up front, so this is a safe bet for them. Hospitals can do contracting better than [physicians] could do on their own.”
For established surgery centers that are strong financially, there is far less incentive to accept a hospital’s majority ownership offer.
“We’re fiercely independent and will never go with private equity because we want to remain independent,” Schreiner says. “We will not work for a hospital or private equity company.”
- Avanza Healthcare Strategies. 2020 ASC Survey. October 2020.
- Avanza Healthcare Strategies. Majority of hospitals increasing investments in surgery centers. Oct. 14, 2020.