Becker's ASC Review

40 Executive Briefing Sponsored by: F or decades, ASCs have been the high value setting for elective surgeries and procedures across the U.S. In recent years, technology advancements made it possible to perform more complex procedures in the ASC, and the pandemic accelerated this outpatient migration. Since 2004, Brentwood, Tenn.-based Surgery Partners has provided investment and management services to surgical facilities nationwide. The company is among the fastest growing in the industry with more than 180 surgical facilities including ASCs, surgical hospitals and physician practice locations in 30 states. The company is affiliated with 4,000 physicians and realized 10 percent same- facility growth in the past five years. It has also seen an uptick in calls from health systems interested in partnering with physicians on ASCs or refining their own ambulatory strategy during the pandemic. Several factors collided in 2020 to make the environment particularly ripe for joint venture ASCs. CMS added total knee replacements to the ASC payable list, making it possible for physicians to perform total knees on appropriately selected Medicare beneficiaries in the ASC this year; the agency proposed adding total hips in 2021. CMS has also placed increasingly complex spinal surgeries and heart procedures on the ASC payable list, encouraging physicians to transition these high acuity, high reimbursement procedures into the outpatient setting. For hospitals to continue capturing a portion of this revenue, many see partnerships with ASCs as a valuable aspect of their business strategy in the future. When the pandemic hit and elective surgery bans surged across the U.S., many hospitals needed a safe place to send patients who couldn't wait for surgery. ASCs stepped in as a safe site of care for orthopedic surgeries in particular and providers quickly built an infrastructure that allowed patients to return home within 24 hours of surgery with remote monitoring, physical therapy and home care. Over the past few years, Surgery Partners has invested significant resources to transition more high acuity orthopedic and spine cases to the ASC. The company's musculoskeletal service line represented nearly 44 percent of procedures in the second quarter of 2020 and remains resilient. For the first half of this year, the number of orthopedic cases at Surgery Partners centers increased 18 percent year-over-year and adjusted revenue per case was up 21 percent as well. The company's pipeline remains heavily focused on orthopedics, cardiology and other key specialties, CEO Eric Evans said during the company's second quarter earnings call on Aug. 5. There are abundant opportunities for hospitals, ASC companies and other investors to align with surgery centers; currently, around 72 percent of ASCs are independent and the market remains largely fragmented, according to the 2020 VMG Health Healthcare M&A Report. Surgery Partners is the largest independent surgical services company in the U.S., which gives it clear advantages as a partner large enough to bring value and nimble enough to customize services. Here, Surgery Partners Chief Administrative and Development Officer Jennifer Baldock outlines the key trends and concepts for joint venture partnerships between hospitals and ASCs today. Question: How has Surgery Partners' strategy for hospital partnerships changed over the past few years? Jennifer Baldock: For years, we have had great partnerships with health systems like Vanderbilt University Medical Center in Nashville, Baptist Health System in Memphis and UCLA in Southern California. We are very proud of these partnerships. I would say that our partnership strategy has not so much changed as grown in the past few years. We're now to a size and scale that our company comes into conversations with health systems more and more often. We are the largest ASC company that is independent of a provider or payer parent company and that has really helped us become involved in more health system partnership conversations. Q: What factors drive successful hospital partnerships with ASCs? JB: There are many factors that drive successful partnerships with ASCs. Regardless of who the partner is, whether it's a hospital or corporate partner or both, the partnership has to be based on common goals. In this case, we would expect the goal to be providing superior quality care in a cost-effective environment for our patients and for the healthcare system broadly. Once we're all aligned around that goal, the other factors fall in line. Partnering hospitals and ASCs have to work together to provide the The driving force behind prosperous ASC-hospital partnerships: Q&A with Surgery Partners EVP, Chief Administrative and Development Officer Jennifer Baldock

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