February 6, 2023
Physicians: Should you self-manage your ambulatory surgery center, hire an ASC management consultant, or partner with an ASC development and management company?
You might think I am biased towards partnering with a professional firm. (I may know a guy.) But my answer may surprise you.
Physicians looking to develop and manage a de novo ASC have three management options to consider.
Key Distinctions: Financial and operational risks, less time for surgery, potential economic upside.
In this scenario, ASC equity is 100% physician-owned, and there is no additional ‘fee’ for management. Short-term economics is an obvious benefit, and there are some very successful ASCs that are managed by physicians.
But over the long term, this option may have a high opportunity cost. Without specialized expertise in ASC-focused payer, supply chain, and staffing strategies, your ASC could end up with a smaller profit margin than an ASC management company could achieve on your behalf.
ASC self-management is the most time-consuming option for physicians. Coupled with the demands of managing and growing a practice, you could end up spending far less time at the operating table than you want to. I have had lots of calls over the years from surgeons who have tried self-management and who have called me for help because they find this option personally draining and distracting to the practice.
Key Distinctions: Capacity and alignment risks, potential economic upside.
There are truly outstanding consultants in the ASC industry. Their expertise and experience launching and operating other centers means that they bring tried-and-true best practices to your center. They can help you avoid missteps that could hamstring your success.
Most consultants charge a fee and/or a percentage of collections for their services. Because consultants don’t typically invest in the ASCs, they are not true financial stakeholders, which can mean their goals are not aligned with the physician partners’ goals for the ASC.
A consultant is paid a fee whether the partnership is profitable or not. As a result, a consultant may not be as focused on expenses, revenue, and ASC profitability as you would like them to be.
Another potential drawback: Many consultants have only one or two employees, so there are limited resources to support your ASC when emergencies arise.
Key Distinctions: Low operational risk, experienced partner, low economic risk, potentially high economic upside.
Economics is a key consideration when partnering with an ASC management firm. Most firms require equity in the ASC partnership and charge a management fee to run daily operations.
Some surgeons worry that an equity partner will diminish returns on their ASC investment, but there are upsides to choosing a development and management partner with “skin in the game.” If the ASC succeeds, the management partner succeeds as well.
A true ASC management partner can contribute capital, guarantee debt, drive the revenue cycle, negotiate with commercial payers, align on net income, and provide the experienced guidance you need to avoid poor financial decisions that could hurt your center’s profitability. All of this will increase the value of your ASC investment.
When a physician-centric ASC management partner is involved, surgeon owners have ‘big picture’ input into center operations, but don’t lose time managing the day-to-day minutiae. On surgery days, surgeon partners show up, perform cases in their well-run center, and go home. The ASC is an optimal place for surgeon partners to work because they have collaborated with the management partner on clinical and financial strategies and tactics.
There is no ‘one-size-fits all’ answer on how to manage your ASC. If surgeon partners have strong business acumen, experience, and interest in running all aspects of an outpatient surgical facility, they may elect to self-manage their ASC.
The “cost” of this option is time away from their practice, the procedure room, and other priorities. If surgeon partners lack the expertise and time needed to ensure the ASC succeeds clinically and financially, they will want to engage an ASC management consultant or equity partner.
If you want to explore the equity partner option, do your homework to fully understand a potential partner’s experience and niche within the ASC industry and what the economic and governance structures will look like for the center you are planning. Selecting the appropriate management structure for your center is the first of many decisions that will drive the success or failure of the ASC you aspire to launch.
For further details, or if you’re interested in developing a new ASC but don’t know if it’s financially feasible, request a customized proforma here.
