For a surgeon considering the development of a de novo ASC, there are 3 primary management options to consider.
1. Self-manage the partnership/facility – The obvious benefit to this option is the economics. The equity in an ASC is 100% physician-owned, and there is no additional ‘fee’ for management. There are some very successful centers that are managed by the physicians.
Successfully managing and growing a practice can be a full-time job. Adding the demands of managing an ASC can be distracting to the practice and draining to the surgeon. I also have plenty of examples of surgeons who have tried to do this on their own and then called me back asking for help after they found it unsatisfactory. This is the most time-consuming option for a surgeon.
Key Distinctions: financial and operational risks, less time in surgery, potential economic upside
2. Hire a consultant – Most consultants charge a fee and/or a percentage of collections for their services while not investing in the ASC partnership. There are truly outstanding consultants in the ASC industry, BUT there are also drawbacks to hiring a consultant. Primarily, a consultant is not aligned with the surgeons.
The alignment of the partnership is important to ensure everyone is focused on the revenue AND the expenses of the center, but a consultant is paid a fee whether the partnership is profitable or not. Additionally, most consultants only have one or two employees, so there are limited resources to support your center when emergencies occur.
Key Distinctions: capacity and alignment risks, potential economic upside
3. Partner with an experienced ASC management firm –A professional ASC management company brings significant experience to your project, enhancing your center’s ability to avoid missteps and produce better performance (clinically and financially). Additionally, a management company oversees all aspects of the ASC so the surgeon can show-up, perform cases, and go home. A surgeon owner can have input into center operations but won’t lose time managing the minutiae of the day-to-day.
The key consideration when partnering with an ASC management firm is the economics. Most firms require equity in the ASC partnership and charge a management fee to oversee the daily operations. Some surgeons worry this will diminish their ASC investment, but a true partner can contribute capital, guaranty debt, oversee the revenue cycle, negotiate with commercial payers, align on net income, and provide partnership guidance to avoid poor financial decisions. All of that will increase ASC investment value.
Key Distinctions: low operational risk, experienced partner, low economic risk, potentially high economic upside
Overall, there is no “right” answer on how to manage your ASC.
If the surgeons in an ASC partnership have a strong sense of business and experience operating within an outpatient setting, they may elect to self-manage their facility. The “cost” to this is time away from their practice and other priorities. If time and/or expertise are needed to ensure a successful project clinically and financially, surgeons will want to pursue an ASC management firm or a consultant.
Do your homework to fully understand a potential partner’s experience and niche within the ASC industry to best understand the value a management firm brings to your partnership. There are very different economic and governance structures, minority versus majority equity, for example, which we’ll dig into in the next post.
Selecting the appropriate management structure for your center may be the first of many decisions that will drive the ASC to success or failure.
Our mission is to create high-value partnerships that provide exceptional surgical services to the local communities and provide a positive return on investment to each partner.