Joint venture column leads to flood of e-mails

By Stephen W. Earnhart, MS

President and CEO

Earnhart & Associates

Dallas

I felt it only appropriate to share some of the feedback I received on the recent column about why hospitals want to joint venture their ambulatory surgery with physicians. (For more information, see Same-Day Surgery, January 2000, p. 8.)

This column was in the top 10 in number of responses from readers, and the cross-section of individuals who called, wrote, or e-mailed their thoughts on the column was surprising. I had about the same number of surgical techs respond as I did hospital CEOs (12 each), and RNs as I did MDs (22 each), and then almost as many OB/GYN surgeons as I did anesthesia personnel (9 and 13). There were another dozen ranging from vendors (always the vendors!) and front office staff. I even had an old friend e-mail and tell me it was about time that I wrote something that made sense. (Thanks.)

The vast majority of the comments were from organizations and people already in the process of a joint venture or discussing the idea, or already on the other side of the venture. There were some commonalities between the groups that I think you might appreciate:

From a staff nurse:

We have been told [by senior management] that we are going to build a new surgery center with our physicians across from the hospital and that the physicians are going to run the new center. We were also told that all of our jobs are at risk. Can they do that?

The answer is yes, they can. The facility under discussion is a new limited liability company (LLC) that will be a for-profit, brand new business. Many times these new companies, even though they are doing the same type of work as in the past (for the most part), are going to be investing significant money into the business. Your jobs could be at risk for the simple fact that they may not be able to afford you. Sad as it sounds, that is the reality. Many nurses, techs, orderlies, and other hospital staff have benefit packages and pay rates that a company just starting out — and cutting about 40% in revenue from hospital-based to surgery center-based reimbursement — cannot match. Clearly, there are exceptions, but rare is the facility that can financially afford to bring over "en masse" the same number of employees or the same benefit package as a hospital.

From an anesthetist:

Our hospital organization is joint venturing a surgery center with most of our docs at the hospital. Our group has an exclusive contract with the hospital to provide anesthesia services to the organization. We have been told that we will have to bid on the contract to provide services to the new surgery center venture. This doesn’t make any sense to us, as we will not pick up any new business out of this arrangement.

We just have another center that we will have to cover! Shouldn’t our contract with the hospital — especially since this joint venture is a situation where the hospital is a partner — be covered under our existing contract?

At first glance, you may think you are doing nothing but reallocating your anesthesia staff with nothing new coming in. That may very well be the case; however, the reason your facility is doing this is to decrease turnover time, start cases on time, and become more time-efficient (as well as other issues). That is going to benefit the anesthesia department by getting your cases completed faster and getting your staff out sooner. Further, the new partnership is anticipating bringing in new MDs from competing hospitals into the surgery center, which will increase your business.

If your organization did not do this with the surgeons, someone else would have. Subsequently, because of your exclusive contract with the hospital, you would be unable to provide services to that new surgery center. You stood to lose more than 8,000 anesthesia cases per year!

Next, you do need to submit a proposal if you want to be considered for the contract. This will be a completely separate business from the hospital, and you cannot automatically assume that you will be granted the contract.

From a hospital CEO:

This is the craziest thing we have ever done around here. It took me three months to convince my board that if we did not joint venture with our surgeons, we were going to lose all our outpatient surgery. As it turns out, we will now retain 50% and have a noncompete with our surgeons. Not the best of arrangements, but at least I now know the worst.

That sums it up.

(Editor’s note: Earnhart and Associates is an ambulatory surgery consulting firm specializing in all aspects of surgery center development and management. Earnhart can be reached at 5905 Tree Shadow Place, Suite 1200, Dallas, TX 75252. E-mail: searn hart@earnhart.com. Web site: www.earnhart.com.)