Issue link: https://beckershealthcare.uberflip.com/i/411828
43 Executive Briefing: Growing OR Case Volume Sponsored by T he surgery center market in the U.S. is a mature one. Many surgery centers were developed in the 1980s and 1990s, and strong growth continued throughout the de- cade beginning in 2000. Though this growth was excellent for management companies in a position to develop centers, the new challenge is continu- ing management of mature centers. Many of these experience a problem with lack of enthusiasm after the initial investors gained significant economic benefit from their initial low investment. Now many of the older centers have large accounts receivable and a robust profit. This raises the level of the investment significantly for new physicians who are essential to the continued growth of the center. Strategies for continued growth The challenge for management is to develop growth strategies after the first three to five years. Several areas demand focus when doing this. The first is to develop a new market strategy to differentiate the center from others in the market and make it at- tractive for new investors. Secondly, in developing the market strategy, management must investigate new technologies or services that can be added to the center. For example, many centers launched spine programs and retina programs in an effort to expand services and attract a new group of physicians. Surgery centers are now able to do both these types of procedures in a cost-effective way, and they are being encouraged by payers to reduce the price of these services compared to those charged by hospitals. Thirdly, management must investigate new physicians who come to the community. Center leaders also need to attract and have dialogue with the newer partners of existing physician practices to attract increased volume. As these new physicians come into the surgery center, they replace the patient volume of some of the physicians who have retired or slowed down in their practices. Fourth, surgery centers need to offer services that will benefit the physicians' practices and not just the surgery center. They need to provide "glue" to the surgery center that continues to make par- ticipation in the center very attractive. Many centers extend their group purchasing contract to physician offices. At ASD Manage- ment, we've extended all the contracts that we can for the surgery center to physician partners' practices. We are saving physician practices significant amounts of money on service contracts and supplies. In developing these new market strategies, the current board of managers needs to be very involved with the process. They need to review adding physician specialties that are highly profitable. They need to bond with large medical groups and independent practice associations that can drive new business to the center. They also need to perform a regional market analysis to find "am- bulatory service holes" in the market, such as cardiology, retina or spine. These analyses should be conducted formally every few years, but can also occur 'on the fly' to identify possible new op- portunities. Marketplace shifts Several shifts are occurring in the national marketplace. First, hospitals are now actively joint venturing more often with physi- cians and physician groups. Some desire majority ownership of the surgery center, while others are using a minority share ap- proach as a strategy to bond closer with their inpatient physicians. Secondly, some older partners may contribute less to the center as they wind down their hours and look toward retirement. I have not bought out these partners for various reasons. Younger physicians cannot buy in at an attractive price; we have also seen younger partners leave an established center (and wait out their non-com- pete) to develop their own centers, typically smaller ones with lower overhead but with the capacity to increase cases. The financial play is to add other newer physicians (who buy in at a higher price than the founding physicians) and increase the return to the original partners. Then, two or three years later, the physicians will look to sell all or part of their stake in the center to a health system, further increasing the return on their original investment. Key Management Behaviors That Keep Enhancing the Value of Mature ASC Joint Ventures By Robert J. Zasa, Managing Partner, ASD Management The new challenge is continuing management of mature ambulatory surgery centers. Many experience a problem with lack of enthusiasm after the initial investors gained significant economic benefit from their initial low investment.