Issue link: https://beckershealthcare.uberflip.com/i/463939
12 Transactions and Joint Venture 3. Large capital event. How much equity ASC owners want to take off the table is often the first consideration when exploring a joint venture. If physician partners are looking for a large, one-time payoff, a majority sale is the logical choice. "A mi- nority investment is a smaller multiple of earnings. The equity would be valued a bit more for a major- ity stake sale," says Mr. Taparia. Potential disadvantages 1. Loss of autonomy. How invested a hospital majority partner will be in its ASC partner's day- to-day operations varies, but hospitals will have the power to influence how the center runs. "The problem, at a minimum, is you will need to explain all operations to a partner that by definition isn't really focused on ASC activity," says Mr. Newman. "It's two different cultural worlds coming together. You need a healthy dialogue about strategic vision before you close or the partners will continually trip over one another." A hospital may take a hands-off approach and allow an ASC to run unimpeded, as it did prior to the joint venture, while others may take on an active role. Majority hospital partners can de- mand to use particular anesthesia services, switch employees to its health plan or even on-board its own staff. Physicians' clinical operations and the center's staff can be greatly affected. Ensure each of these issues is addressed, agreed upon and in- cluded in the operating agreement before inking a deal that is not easily undone. 2. Limited investment options. Hospital ma- jority ownership affords existing owners a greater initial capital event, but it can have a negative impact on the center's future prospects. "There is a defined equity pool for each facility. The more the hospital takes, the less of the pie there is to grow through additional physician investment," says Mr. Newman. Rather than accept the fate of dwindling investment and potential legacy strug- gles, work with the hospital. "Point out to the hospital they will be working against their own interests if they hold too large a majority share in a facility," says Mr. Newman. "The hospital is coming to the table because they are interested in working with physicians, and there is a rich history of hospitals being receptive to reformulated deals if they are pre- sented with a well-prepared message." A hospi- tal can still be a majority stakeholder without completely stifling the opportunity for future physician investment. n 8 Observations on Healthcare Spending Over the Next 5 Years By Laura Dyrda T he National Health Expenditure Projections 2012-2022 show healthcare spending growth over the next several years, ac- cording to a Yahoo News report. Here are key observations on healthcare spending from the report: 1. Spending on hospital care is expected to reach $973 million this year. 2. Hospital care spending will be a trillion-dollar subsidy in the United States by 2015. 3. If current spending trends continue, healthcare spending will be 19.3 percent of the gross domestic product in 2023. 4. Healthcare spending only rose 3.5 percent during the third quarter of 2014 over the same period last year, well below the 10 percent pro- jections. The projected growth took into consideration 10 million new people gaining health insurance this past year. 5. Despite the spending slow-down, many for-profit companies like HCA and Universal Health Services beat expectations for the third quarter. 6. Falling oil prices could have an impact as major healthcare operators could negotiate better pricing on supplies derived from oil, such as petrochemicals and plastics. 7. Inpatient admissions declined across all age groups and service lines by around 5 percent to 8 percent, most notably in lines where "effec- tive" outpatient care options are available, including interventional cardiology. 8. Prescription drug prices were up around 12 percent this year com- pared to last year, leading to rising inflation for medical care commod- ities while medical equipment and supplies went up 0.3 percent in the third quarter of 2014 compared to the same period of 2015. n Outpatient Centers to Give Hospitals a Run for Their Money in 2015 By Nick Gaudio A business analyst with one of Britain's largest banking institutions said he expects outpatient centers to continue their upward trend in 2015, Benzinga reports. Barclays' Joshua Raskin said 2014 experienced one of the biggest moves in health- care "since the creation of Medicare and Medicaid in 1965," because last year, more and more sick patients headed to outpatient facilities instead of hospitals. Mr. Raskin said he expects that trend to keep accelerating, in light of more healthcare reform. As far as investments in the healthcare industry go, Raskin said he prefers surgery center operators because they are "further along in developing an outpatient strategy that can retain potential out-migration from their acute care facilities." n 13th Annual Spine, Orthopedic and Pain Management-Driven ASC Conference + The Future of Spine June 11-13, 2015 Westin Michigan Avenue Hotel • Chicago, IL 90+ Surgeons Speaking & 108 Sessions Key Note Speakers: Deion Sanders, Billy Beane and Bill Walton For more information, visit www.beckersspine.com or call (800) 417-2035.