Joint ventures between physicians, hospitals, and corporate chains are becoming increasingly commonplace in the ASC industry. ASCs experience several benefits from partnering with a corporate chain or hospital, including better infrastructure, management expertise, and greater leverage with suppliers and payers.
As value-based care momentum continues to accelerate, more corporate chain and hospital leaders are beginning to view ASCs as partners as opposed to competitors. A recent survey revealed that hospitals and health systems looking to increase their investments in ASCs rose from 44 percent to 67 percent from 2019 to 2020. Additionally, 76 percent of larger hospitals reported plans to increase their investments in ASCs in the months and years ahead.
With many stakeholders recognizing the added value that comes with partnering for financial and clinical success, it’s not surprising to see that ASC partnerships are on the rise. However, it’s important to do your due diligence before making the decision to embark on a joint venture. Partnering with a corporate chain or hospital is only as successful as it is strategic, and having a rock-solid plan in place is essential for reaping all the rewards. After all, buyer’s remorse is a feeling you certainly want to avoid.
Many ASC management teams and physician investors have regretted their decision to sell ownership to a corporate or hospital partner once they realized the extent of the unanticipated changes that occurred following the transition. Your ASC’s business culture, operations, performance, and roles could all look drastically different after a change of ownership. Plus, reversing an ownership transaction is easier said than done—especially when large amounts of money are involved.
With that said, you can form a mutually beneficial ambulatory surgery center partnership with the right preparation and approach. Here’s how:
Arm Your Partner with Key Details
Once you’ve identified a potential partner, you need to provide helpful insights to guide the transaction. Arming your corporate partner with detailed information on the ins and outs of your ASC as well as the partnership model you have in mind will help you build credibility with your buyer going into the transaction.
It’s important to make sure both parties are aligned and aware of any expectations in advance. This can help to protect against future conflicts and ensure a smooth transition. Provide detailed information on your goals, key performance indicators (KPIs), budget, timeline, and any other relevant details to give your corporate partner peace of mind as you enter into a partnership agreement.
Do Your Due Diligence
It’s not enough to supply your future partner with detailed information; you also need to do your due diligence by researching the corporate chain or hospital before you enter into an agreement. After all, you want to make a fully informed and strategic decision regarding your ASC to avoid regretting your choice down the road.
To do your due diligence, look into the company’s financial records, operational decisions, leadership structure, and other key details. These newfound insights will enable you to move forward with confidence that your partnership will meet your expectations and achieve the strategic objectives intended to result from the arrangement.
Compare Your Revenue Metrics
Forming a corporate partnership isn’t only about the bottom line, but it goes without saying that the financial elements of the transaction are still an important consideration. To ensure you’re fully informed about the financial benefits of the partnership, perform a benchmarking analysis to compare your ASC’s revenue metrics and financial performance with other facilities as well as the corporate chain or hospital’s own analytics.
Forecasting potential revenue and showcasing the financial advantage of partnering will help you make your case and align on key objectives as you form your ambulatory surgery center partnership. Key revenue metrics to review during this stage include:
- Growth potential
- Payer/specialty mix
- Revenue per case
- Contribution margin
- Supplies/expenses
- Average OR time
- Quality measures
Get Ready to Finalize the Sale
After you’ve identified a potential corporate chain or hospital partner for your ASC, discussed expectations, and exchanged key information and revenue metrics, you can get ready to complete the sale.
Involve both legal teams to draft and review your ambulatory surgery center partnership contract, which should outline equity stakes, financial contributions, responsibilities, risk, and any other relevant details to protect both parties. Be prepared to sell by being equipped with the right details and resources, such as financial reports, existing contracts, potential reimbursement risk, and business valuations, to help make your case and finalize the sale.
Partner with a Corporate Chain or Hospital for Your Success
With the right strategy and steps to prepare, you can form a lucrative ambulatory surgery center partnership that benefits both you and the corporate chain or hospital you enter an agreement with. The result for your center? Decreased costs, increased revenue, better resources and support, and enhanced care quality overall.
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