Becker's ASC Review

49 Executive Briefing: Executive Briefing: Optimizing Your ASC Investment Sponsored by: Y ou have run the regulatory gauntlet and obtained the nec- essary approvals to operate an ambulatory surgery center (ASC). You have hired a qualified clinical staff and involved surgeons committed to quality to provide care to your patients. You know that you provide a higher level of quality and outcomes for your patients while at the same time acting as a cost-effective venue for surgery. You have done all this, but if you do not address the many contractual issues that surround operation of a surgery center, you may not be able to optimize your operations or fi- nancial return. Even worse, you may be positioned so as not to have long-term viability. A review of your organizational docu- ments and other contracts and proactively addressing some important issues is essential to position yourself as a success- ful enterprise. First and foremost, you need to look carefully at your owner- ship structure, governance and terms governing investment in the facility. These terms are typically set forth in your Operat- ing Agreement if you are an LLC or in your certificate of in- corporation, bylaws and shareholder agreements if you are a corporate entity. In either case, some of the important issues are the same. 3 Crucial Questions about Your Operating Agreements Central to the success of any ASC is the selection of the right ros- ter of participating physicians. Your Operating Agreements need to address these important issues: • How do your documents address physician eligibility? • Do they provide clear standards for evaluating physicians? • Are there mechanisms to deal with physicians not meeting their obligations to the facility? At the same time, you need to work with experienced counsel, as myriad federal and state laws affect the manner in which you can deal with these topics. Failure to clearly address these issues invites confusion, the potential for litigation and disruptions to or- derly operations. Do Your Operating Agreements Agree on an Exit Strategy? At the outset of every business undertaking, you should identify what the exit terms for the initiative might be. You need to establish a path for the redemption of retiring or non- productive members, as well as for the re- cruitment and introduction of new members. Failure to pay atten- tion to these issues or structuring arrangements that are at odds with a center's financial realities can spell the demise of an ASC. Will You Be Poised for Investment — or Disagreement? You also want to think about the structure of your ownership and gov- ernance arrangements so as to best position the facility for possible investment downstream. A facility with a successful track record AND a sound legal organization can be an attractive investment target for management companies or hospitals. You need to address the structural issues in the organization of the ASC as well as its financial performance before entering into any sale discussions. Finally, any good set of documents will try to define governance and operational roles so as to clearly lay out leadership roles and mini- mize disputes. If issues do arise, you need to have a clear roadmap for their resolution so as to avoid confusion, delay and expense. 4 Savings Strategies for Your Vendor and Supply Arrangements One set of issues often not carefully addressed operationally by ASCs involves dealings with suppliers and vendors. This is im- portant from both the perspective of compliance and for financial management purposes. You should have good arrangements in place with management oversight of expenses. • Expenses can be benchmarked to evaluate opportunities for savings. • Group purchasing, or GPO, arrangements can result in sig- nificant cost savings for facilities. Unlocking the Contractual Keys to Success By John Newman, Senior Vice President and General Counsel, Constitution Surgery Centers Constitution Surgery Centers John Newman

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