Healthcare Venture Professionals — Article Library

All entries for April 2009

Surgery Center Consulting

HVP’s core business is the development and long-term management of ASC’s. HVP also offers a wide range of exceptional ASC Project Consulting Services. With HVP as your consultant, you gain access to years of accumulated experience and expertise related to ASC planning, development and ongoing operations.

Based on HVP’s reputation and experience, you also gain access to a host of nationally-recognized vendors and professionals that may need to be involved in your specific ASC situation. HVP can connect you with the finest Architects, Attorneys, Equipment Planners, Vendors or other professionals. All of these professionals have in-depth experience in dealing specifically with ASC’s and have been involved in literally hundreds of ASC projects across the U.S. Of course, it’s your decision whether you choose to deal with one of these individuals. Or, if you’ve already engaged an experienced professional such as those noted above, HVP is very comfortable in working collaboratively with such persons. Our goal is to provide you with the support and assistance you need and none that you don’t need!

This flexibility is one of the hallmarks of working with HVP. We understand that we work for you, and we’re willing to adapt to your unique situation and to complement other professionals you may already be working with. This team approach is certainly another of HVP’s distinguishing characteristics. Our goal is always to tailor our services to meet the unique needs of you and your ASC.

Please call us at 615-457-1848 to discuss your ASC problems or opportunities. Whether your ASC is in transition, needs management assistance or is still just an idea, HVP can help. You can also learn more about HVP and its consulting capabilities at our website, www.hvpros.com.


Ambulatory Surgery Center Development

Successful development of an ASC requires the right combination of  broad vision for the facility balanced with ASC-specific in depth experience and attention to detail.  Your goal should be to reach the facility opening point with a minimum of duplication of effort, unnecessary work or unexpected surprises along the way.
ASC development is a complex task with hundreds of large and small steps required during the process.  From Architect selection to construction to equipment and systems selection, ASC Owners need to know that they’ve got someone in charge that has the time and experience necessary to avoid the many pitfalls that can arise during this complicated and tedious undertaking.  ASC development is not the time for a “learn as you go” approach unless you’re interested in taking too much time and spending too much money during the process.

HVP can bring the needed experience and resources to your ASC development process.  Whether it’s templates for policies and procedures or thorough preparation for ASC licensure/certification or accreditation, HVP stands ready to assist you in based on the numerous resources and expertise it possesses.  You don’t have to “reinvent the wheel” or worry about who’s looking after your budding investment in the ASC.

As a service to our potential Clients, HVP has created an ASC Development Checklist which contains more than 200 items that need to be considered during the ASC development process.  You can request a free copy of this Checklist at our website, www.hvpros.com.  Or give us a call at 615-457-1848 if you’d like to learn more about ASC development and how HVP can help.


Physician / Hospital Joint Ventures - Myth vs. Reality

Myth: An unfounded or false notion (Source: Merriam-Webster Online Dictionary)

The number of Physician/Hospital ASC Joint Ventures continues to grow.  Like any other increasingly popular trend, the amount and complexity of information, discussion and debate devoted to ASC JV’s is also growing.  As this information flows out into “the field” and reaches the desks of Physicians and Hospital executives across the U.S., it becomes subject to partial analysis, misinterpretation or mistranslation.  Throw into the mix all the Consultants, Management Companies, Attorneys and other players involved in our sector, and you have a recipe for potential misunderstanding (and resultant bad decisions) over key issues.  Thus are “myths” born!   This Article will briefly discuss several “myths” in regard to Physician-Hospital ASC JV’s and attempt to shed some “reality” on the subject.

One key point before we get started: When creating a JV, the need for expert healthcare Legal Counsel is not a “myth”!  The “realities” discussed below are not offered as legal advice nor is any of this discussion intended to be a substitute for Legal Counsel with a proven track record specific to Physician-Hospital JV’s.

Myth # 1: “Field of Dreams” approach, or the building of a new ASC (through a JV) will result in all (or almost all) current Hospital-based outpatient surgery volume moving quickly to the new facility.

Reality: The actual volume one should anticipate for the new ASC can be affected by numerous factors.  For whatever reason, volume projections made by most Physicians are usually overly-optimistic.  While a better basis for projections, current Hospital ambulatory surgery volumes include many cases that, due to complexity, amount of perioperative time, patient condition or other factors, should appropriately remain in a Hospital OR setting.  Physicians (even those who have invested) may also take a “wait and see” or incremental approach to moving their cases while they develop a comfort level with the new facility.

The determination of a “move rate” for current outpatient volumes to the new ASC should be an integral part of any thorough JV Feasibility Analysis.  This “move rate” should be calculated by Specialty and should factor in current Hospital volumes, Physician projections, industry benchmarks, local demographics, anecdotal information and common sense in determining a conservative, realistic projection of volumes for the new ASC JV.  The identification of such “committed volume” is a crucial early step in the Feasibility Study process since it will drive other subsequent pro forma financial and statistical projections.  An appropriate amount of time and resources should be devoted to the Feasibility Analysis (and this portion of it) to ensure that ultimate “go – no go” decisions about the ASC JV project are grounded on solid information.

Myth # 2: Physicians need to own a majority of the JV in order to prevent Hospital domination of the partnership and to control clinical aspects of ASC operations.

Reality: Not so.  There are ways (beside majority ownership) to structure the JV deal and ongoing ASC operations to make sure that involved Physicians have the degree of control and influence desired.  At the deal structure level, well thought out and constructed language dealing with “reserve powers” and “super majority issues” can provide assurances to Physicians that certain actions can not take place without Physician approval regardless of which partner actually owns a majority of the JV.

At the operating level, several approaches can be used to provide similar assurances to Physicians.  This may be as simple as defining that a “quorum” required for any action by the JV Board must include a minimum number of Physician Board Members present and voting.  Another common mechanism is to clearly establish and define the role of a Physician-driven standing committee of the Board (the “Clinical Affairs”, “Medical Executive” or some other similarly-titled committee).  This Committee is assigned primary responsibility and given broad latitude (still subject to ultimate Board approvals) for all clinical aspects of ASC operations to include credentialing, scheduling, quality improvement, selection of clinical equipment and systems and other areas of clinical / professional ASC activities.

Myth # 3: The Hospital must own at least 51% of the JV in order to protect its not-for-profit status.

Reality: Like # 2, this is not necessarily the case.  The Hospital owning 51% and having majority Board control is the safest, most conservative approach to ensure that not-for-profit status is not threatened.  There are, however, other ways to provide protection to the Hospital and its tax-exempt status.  For example, the percentage of governance/Board control does not have to equal the percentage of equity ownership.  In such situations, the key is to make sure that the Hospital’s exempt or charitable “purpose” is supported by the JV and that the Hospital has clearly defined control over matters that could impact directly on such “purpose”.  This would include “community benefit” (such as amount of charity care provided by the JV) or other matters that have the potential to prevent the Hospital from meeting its overall charitable purpose.  Again, through proper use of approaches like “reserve powers” or “super majority”, as well as in other provisions contained in the Operating Agreement or Articles of Incorporation, the JV can be  structured to provide the Hospital the needed control over matters that might affect its exempt status even if it does not own a majority of the JV itself.

Myth #4: Failure to structure the JV in such a way as to meet “safe harbors” (pertaining to the Anti-Kickback Statutes) is illegal.

Reality: Not true.  The “safe harbors” related to ASC’s, much of which relates to Physician ownership, are not laws.  Rather, they are Federal guidelines or a suggestion about ASC JV’s which, if followed, are supposed to result in less scrutiny by the OIG and less likelihood of prosecution under the Anti-Kickback Statutes.  Failure to implement the “safe harbors” does not mean that there is any illegality in place.  On the other hand, following the “safe harbors” may be the most prudent approach from a legal perspective.

There are a number of suggested “safe harbors” which should be taken into account if the goal of the ASC Owners is to comply with the “safe harbors” for ASC JV’s.  The most talked about are the “Income Test” (Single Specialty ASC’s) and “Practice Test” (applied with the Income Test for Multi Specialty ASC’s) also referred to as the “1/3 – 1/3 Tests”.

There may also be other business reasons to take this approach.  For example, the inclusion of the “safe harbor” requirements (such as the “1/3 – 1/3 Tests”) in the JV’s Bylaws / Operating Agreement and in the ASC Credentialing process is one way to legitimately work toward appropriate levels of utilization of the ASC by involved Surgeons.  If this approach is taken, however, it is important that these requirements are enforced routinely and consistently for all Physician utilizers of the ASC.

Again, the need for expert Legal Counsel with specific experience with ASC’s and both Stark and Anti-Kickback Statutes cannot be overemphasized.

Myth # 5: “We’re (either the Hospital or Physicians) better off doing it (i.e., building an ASC) ourselves”.

Reality: Maybe, but be careful!  Let’s start out by saying that Healthcare Venture Professionals (HVP) has an admitted bias toward the collaborative or Joint Venture form of ASC ownership.  As such, we believe that the JV approach can or should be the preferred model in most markets.  We must admit, however, that we’ve seen and worked with a number of market situations that were not conducive to collaboration between the Hospital and its Medical Staff.

Having said that, we still believe that an ASC JV can be structured to formally identify and ultimately meet the majority of needs of both the Hospital and involved Physicians.  This doesn’t mean that 100% of these needs will be met, but that’s the nature of a true partnership where both parties recognize up front that looking out for each other entails some legitimate “give and take” in order to make it work!

There are numerous legitimate business reasons to justify this collaborative approach.  A successful ASC partnership should strengthen the traditional relationship between the Hospital and its Physicians.  It should also create a stronger foundation for other future collaborative endeavors.  It sends an extremely positive message to the Community about the ability of the Partners to work together vs. a continuation of what the public typically sees as the trend toward more and competition between the Hospital and its Doctors.  The ASC JV does, in fact, avoid this enhanced level of competition which is the normal outcome of a unilateral ASC ownership model.  If structured and managed properly, the ASC JV should lead to an increased outpatient surgical market share for all participating owners.  All of these (and a number of others not mentioned here) are great business reasons to strongly consider a collaborative ownership model when discussions begin about the creation of a new or refurbished clinical service such as ambulatory surgery.

In summary, we would encourage both Physicians and Hospitals to “explode the myths” and deal with business and market realities when contemplating the development of a new ASC.  Experienced external professional consulting support and Legal Counsel can be of tremendous assistance in achieving an objective assessment of whether your specific situation merits serious consideration of the ASC JV model.  If you can do this objectively, you may see that the potential benefits of a collaborative ownership approach for your ASC will far outweigh the benefits entailed in taking a unilateral ownership approach.


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