Hospitals Actively Pursuing Surgery Centers to Lower Costs

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Joint Ventures With Physicians Remain Preferred Model for ASCs, Annual Avanza Healthcare Strategies Survey Reveals.

Avanza Healthcare Strategies
The cost-benefit of outside management and the development of in-house expertise may explain why hospitals and health systems are turning away from equity-based partnerships and long-term contracts with third-party management companies. Both are signs of a maturing marketplace.

Hospitals and health systems continue to invest heavily in ambulatory surgery centers (ASCs), according to a second annual national survey of senior executives and clinical leaders at health systems and hospitals. They are pursuing these investments as a mechanism to reduce costs, enhance physician relationships, cater to evolving consumer and payer demands and achieve other objectives essential to strengthening their outpatient surgical strategy.

The survey, sponsored by Avanza Healthcare Strategies, a leading source of expertise and data on ASCs and outpatient services, explores hospital-ASC trends. It found that fewer hospitals and health systems are partnering with third-party investors to own and operate ASCs. Equity-based partnerships with third-party investors dropped 9% in 2019.

The survey also found that most ASCs (77%) are internally managed without the help of an external management company. Contracts with third-party management companies are down 21% in 2019. According to Joan Dentler, president and CEO of Avanza, "The cost-benefit of outside management and the development of in-house expertise may explain why hospitals and health systems are turning away from equity-based partnerships and long-term contracts with third-party management companies. Both are signs of a maturing marketplace."

As in 2018, joint ventures with physicians remain hospitals' and health systems' preferred ownership model for ASCs. Forty-one percent of organizations own or are affiliated with a freestanding ASC, and nearly three-quarters of those are joint ventures with physicians. Of those joint ventures, slightly more than half allow employed physicians to invest in the partnership. Whether to allow physician investors is one of the newest and most debated aspects of joint ventures. Dentler says there is not a single right answer. "At the heart of the debate are executives' concerns about appropriate physician compensation. Those concerns must be weighed against the benefits of employed physicians having skin in the game, which include an awareness of the importance of controlling costs."

Avanza contracted with HealthLeaders Media to conduct the survey in 2019 as part of its Avanza Intelligence service line for executive decision-makers. Avanza polled 119 senior healthcare executives and clinical leaders at health systems and hospitals across the United States and found that nearly half of those that own or affiliate with an ASC operate more than one. Additionally, three out of four respondents indicated plans to increase their ASC investments, with 44% actively expanding their investments and 30% indicating they'll expand when the opportunity presents itself.

Download the "Avanza Intelligence: 2019 ASC Joint Venture Survey" infographic at AvanzaStrategies.com.

About Avanza Healthcare Strategies
For more than 20 years, Avanza Healthcare Strategies has been a strategic leader in the migration of surgery from hospitals to ambulatory surgery centers. Avanza has helped ASCs, hospitals and health systems in more than 40 states plan for and open surgery centers, develop joint ventures and assess operations of existing ASCs and hospital outpatient surgical departments. Learn more about Avanza at AvanzaStrategies.com.

For More Information:
Media Contact: Joan Dentler
Phone: 512.573.4344
Email: jdentler@avanzastrategies.com
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Joan Dentler
@avanzastrat
since: 11/2013
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