Becker's ASC Review

84 Becker's ASC 21st Annual Meeting – The Business and Operations of ASCs – Call (800) 417-2035 J oint ventures between ambulatory sur- gery centers and hospitals are becoming more common in today's challenging healthcare environment; some are converting from freestanding ASCs to HOPDs while others remain freestanding and are forming a joint ven- ture with or without corporate partners. One of the key reasons physicians who are inde- pendent owners of an ASC decide to enter into a hospital partnership is the potential for rate increases on managed care contracts. If the hos- pital partner presents value to the insurance com- panies and is willing to advocate for the ASC, or can add the ASC to an existing hospital contract, this can have a favorable impact on reimburse- ment rates as compared to a standalone center. However, the ability for an ASC to be added to a hospital's contracts and access their contract rates is highly dependent upon the legal structure of the joint venture. "When considering a hospital JV, find out if the hospital is willing to and able to negotiate on behalf of the ASC, or if the ownership structure enables the ASC to be added to the hospitals con- tracts," says Eveia Health Consulting & Manage- ment's Managing Principal and Founder I. Naya Kehayes. "The hospital partner can be instrumen- tal in assisting the ASC with a successful payer contract negotiation and may present opportuni- ty for the ASC to fall under the hospital's contract depending upon the ownership structure of the JV with the hospital partner." Key questions to discuss when negotiating the joint venture include: • Who is responsible for negotiating payer contracts for the ASC? • Will the hospital be supportive of the ASC in contract negotiations? • Are there any legal restrictions on the hospi- tal's ability to represent the ASC in negotia- tions based upon ownership structure? • Will the ASC contracts be negotiated sepa- rately from the hospital contracts? Consider the hospital's position within the healthcare market; do they represent value to the payers and are they willing to advocate for the ASC? Or is the hospital looking to joint ven- ture with the ASC to bring the surgeons into their health system? Does your center include independent physicians that work with a com- peting hospital? Hospitals often see more value in the joint venture if it will bring in cases from physicians who perform surgery at another hospital. This presents opportunity for the hos- pital partner to realize more business as a result of the relationship with the ASC. Another possible scenario is that the hospital's operating rooms are at capacity and they're look- ing to move outpatient volume into the ASC. Therefore, the hospital is motivated to support movement of cases to the ASC especially if they have higher valued cases that can replace the vol- ume that moves to the ASC. "Is the hospital losing money on certain cases that the ASC would make money on?" says Ms. Kehayes. "Even though the reimbursement is lower in the ASC, moving the surgery to the ASC setting can often result in a positive operating margin. If the hospital is going to move volume to the ASC, the hospital can be effective in com- municating to the payer they want to create op- portunity for cost savings which can be accom- plished via a collaborative partnership with the payer to restructure contracts enabling cases to move out of the hospital." If the hospital has other joint venture ASCs, con- nect with them to see whether the hospital has been a good partner. On the other hand, if the hospital currently does not have other joint ven- ture centers, they may need additional guidance. "Make sure a representative from the ASC works with hospital negotiators so the contracts are negotiated for the services provided at the ASC," says Ms. Kehayes. "The hospital negotiators may not be well versed necessarily in the surgery business and in ASC payment methods because they typically negotiate for a much larger book of business with different reimbursement meth- odologies. Work with the hospital's managed care department so they understand where the ASC's needs are relative to the contract payment methods and terms." Eveia Principal and COO R. Matthew Kilton says there is a risk that the hospital managed care team will put the ASC's contracts as a low priority, but for the ASC it's an extremely high priority. Anoth- er risk is that the hospital may negotiate reduced ASC rates in exchange for higher reimbursement on large inpatient procedures. "The payer might have outpatient centers all across town, but the hospital is the only place with a joint replacement program, so they are willing to cut a deal on the outpatient contract," says Mr. Kilton. "That could be harmful for the ASC." Additionally, if the hospital depends on cases such as orthopedics and spine to generate revenue for their inpatient or outpatient departments, they will be less willing to move these high-value sur- geries into a joint venture ASC. This is especially true if they don't have enough ownership stake in the center. "There won't be enough value there to encour- age the movement to the ASC," says Ms. Kehayes. "Don't assume that when you enter into a joint venture with a hospital you'll automatically move to HOPD reimbursement rates. This is a big assumption people make, and is often not the case." n How to Handle Managed Care Contracts Before Entering a Joint Venture By Laura Dyrda I. Naya Kehayes Matt Kilton

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