Becker's ASC Review

30 Transactions & Valuation In 1979 the Steelers won the Super Bowl. Saturday Night Fever was the album of the year. And AAAHC began accrediting ambulatory health care organizations. If you would like to know more about AAAHC accreditation, call us at 847-853-6060. Or email us at info@aaahc.org. Or you can visit our web site at www.aaahc.org. Improving Health Care Quality through Accreditation We've been raising the bar on ambulatory care through accreditation for 35 years. The secret of our success? Our peer review. AAAHC surveyors are physicians, nurses, anesthesiologists, medical directors and administrators. Which is why organizations routinely heap praise on us for our consultative and educational survey process. And why we are the leader in ambulatory accreditation. YEARS STRONG • Physician ownership dilution. A joint venture operating agreement may dictate a hospital's ownership, whether majority or minority, at a set point. This leaves the responsibility of tempering shares to physicians, or a management company partner. • Hospital ownership dilution. Though not overly common, a hospital may set aside a percentage of shares for new physician owners. • Split dilution. Frequently, dilution will be shared pro rata amongst all owners, hospital and physician alike. "However, in most cases, a minimum ownership threshold is required by the hospital in order to maintain a controlling interest to allow for managed care contract negotiations on behalf of the ASC," says Mr. Spencer. 2. Hospital participation. Regardless of how shares are rationed and por- tioned out, hospitals can lend a hand in the recruitment process. "Hospitals participate by identifying new physicians entering the market who might be attractive partners to pursue both for their operation as well as for the joint venture," says Mr. Spencer. "As ASCs continue to represent a way to provide outstanding care at a lower cost, hospitals may also look within their existing physician ranks to help with recruiting as well." Hospitals may also engage physician partners and a management company, if the ASC has not done so already. The unique market knowledge and expertise these partners have can be critical in attracting and securing new investments. 3. Joint venture appeal. Aside from active participation in recruitment, a joint venture ASC itself can attract investment. Benefits of a joint venture that draw in new investment include: • Operational advantage. "Everything from strategic stability of being an important component of a larger healthcare system, to managed care contracting benefits, to achieving purchasing efficiencies and partici- pating in quality initiatives all make a joint venture center a terrific way for physicians and hospitals to work together," says Mr. Spencer. • Brand affiliation. "Joining a partnership with an existing hospital gives physicians the chance to affiliate with a known entity, potentially in- crease their referral base from similarly affiliated surgeons and primary care physicians and often benefit from the overall hospital visibility in the community," he says. Joint ventures are also perfectly positioned to promote provider alignment in the age of clinical integration and ac- countable care organizations. 4. Community disruption. There are two sides to every story. "Affiliation with a joint venture center can be a double-edged sword," says Mr. Spencer. "It may change perceptions of loyalty — or neutrality." The disruption of traditional referral patterns may deter some physicians from investing. "While this can sometimes be an uncomfortable position to be in for the short term, the many benefits of the buy-in at a successful JV center tend to outweigh the challenge of potentially upsetting some of the existing referral base." n New Physician Buy-In: 4 Trends for JV ASCs (continued from cover) "Affiliation with a joint venture center can be a double-edged sword. It may change perceptions of loyalty — or neutrality." – Phil Spencer, Executive Vice President of Business Development at United Surgical Partners International

• Cover