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Hospital / Physician Joint Ventures
The marriage between a hospital and group of physicians in a surgery center
joint venture can be adventurous. Expectations, philosophy, past experience,
levels of trust, and expected outcomes are different for both. There are
significant issues related to control, cash, ownership percent, compliance,
credibility, contracting, etc. that immediately become problematic. These issues
will surface at the very start of the process and, depending upon how they are
handled, could tear the proposed partnership apart before it has a chance to
even begin. When surgeons start taking cash out of their pockets and hospitals
start sharing outpatient surgery that they assume is theirs, the stage is set
for skilled, experienced guidance and negotiations. No one in the industry has
greater experience in dealing with these issues and advising the steering
committee through these and many other matters.
Earnhart & Associates are very familiar with this process. We put together our
first not-for-profit hospital / physician joint ventured surgery center 17 years
ago! We lead the country in the number of joint ventures between hospitals and
physicians. We feel that once the group gets past the above, both have common
reasons to work together: cost control, managed care contracting, market share,
and CONs are just the beginning. The effort is worth it and the return can be
great.
The greatest fear among the equity seeking corporate surgery center chains is
that hospitals will fight to recoup outpatient surgery cases and partner with
the physicians who control them! Hospitals continue to lose market share in the
outpatient surgery business. With declining revenues, a changing reimbursement
format, and the competition from other ASCs, most hospitals feel they need a
lower cost alternative to in-house surgery. They are eager to joint venture
with the surgeons who control the patients. Like the hospital, physician
margins have dropped. The surgeons are working longer and harder than ever
before and are demanding the efficiencies and profitability that a surgery
center can bring them. Our research has shown that the majority of surgeons
would rather partner with the local hospital on surgery centers – if they can
make it work! Problems arise when communications break down between the
parties. Earnhart & Associates can serve as the conduit to bridge the two
entities.
With declining reimbursement and trying to accommodate the large number of
surgeons who want equity in an ASC, we do not think it makes sense for a ASC
partnership to joint venture with an outside corporate entity. They typically
want to own the majority of the center, control it, and still charge fees to
manage the facility! Equity is very easy to sell – but very difficult to
retrieve. A passive investor is almost impossible to eliminate in a surgery
center. Why risk 51% or greater to an "outsider!" Significant value from the
outside entity must be added to the partnership to justify such an arrangement.
Earnhart & Associates offer an alternative to such a relationship. We are
fee-based only and require no equity to develop and/or manage your center
surgery center.
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