At the 19th Annual Ambulatory Surgery Centers Conference in Chicago on Oct. 26, 2012, a panel of experts discussed healthcare real estate and opportunities for properties in the future. The group also discussed the role of real estate in healthcare deal making. The panel included Senior Vice President and Director — Business Development at Lend Lease Healthcare Development Gordon A. Soderlund, Vice President of Siemens Financial Services Ken E. Seip and CEO and President of Physician's Capital Investments Pedro J. Vergne.
Consolidation within the industry
"There is a huge shift from inpatient to outpatient," said Mr. Soderlund. "Hospitals need to deliver care in a less expensive setting and the outpatient arena is perfect for that. There is a lot of consolidation going on with hospitals, but they are consolidating into a single setting for convenience."
Current trends show hospitals are acquiring more physician practices and surgery centers than in the past, and now almost two-thirds of physicians are employed or under co-management agreements, according to Mr. Soderlnd. He predicted the hospitals of the future will be smaller and super-regional due to increased merger and acquisition activity across the country.
"There is a lot of mergers and acquisitions going on, creating more competition because they are trying to drive and aggregation strategy," said Mr. Soderlund. "Aggregation is a strategy that fulfills the ACO drive that is taking place as well. There is a lot of competition and integration with physicians becoming employed, and I am bullish for ASCs partnering with hospitals. I think the long term survival of the industry will be one form of integration."
However, becoming a hospital employee isn't always the optimal situation and sometimes surgeons decide to end their contracts and move back into private practice. "We are seeing multiple practices come together for an ASC, even if they were former competitors in the market," says Mr. Vergne. "When employed physicians are moving out of hospital employment, non-competes are an impediment. They must wait to invest until the non-compete is fully expired."
Accountable care organizations
Accountable care organizations are focused on population health management, cost reduction and quality. They can streamline care to patients and drive up quality while driving down costs with the right incentives. Since surgery centers are often the high quality, low cost provider in the community, ACOs are an opportunity to shine.
"I think ASC owners should focus on alignment," says Mr. Soderlund. "Hospitals are trying to get physicians to align with them to focus on healthcare and quality. Data is king and hospitals and companies are gathering data about outcomes and working more closely together to figure out how to deliver care together."
Hospitals are also aligning with primary care physicians, which could threaten referral sources to independent ASCs. In this case, if hospitals purchase ASCs or partner with ASC physicians, they may be more willing to drive patient volume and relieve hospital ORs of low-acuity cases for more complex — and expensive — procedures.
"Ten to 15 years ago there were not a lot of hospital partners in the ASC industry," says Mr. Seip. "Now a majority of the ASCs we are seeing involve a hospital. From a credit standpoint, most often the ASC is a borrowing entity and not externally rated. That's a key difference between a hospital-based real estate transaction and a physician-based transaction. You have to have an expertise and understand the ASC model."
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Consolidation within the industry
"There is a huge shift from inpatient to outpatient," said Mr. Soderlund. "Hospitals need to deliver care in a less expensive setting and the outpatient arena is perfect for that. There is a lot of consolidation going on with hospitals, but they are consolidating into a single setting for convenience."
Current trends show hospitals are acquiring more physician practices and surgery centers than in the past, and now almost two-thirds of physicians are employed or under co-management agreements, according to Mr. Soderlnd. He predicted the hospitals of the future will be smaller and super-regional due to increased merger and acquisition activity across the country.
"There is a lot of mergers and acquisitions going on, creating more competition because they are trying to drive and aggregation strategy," said Mr. Soderlund. "Aggregation is a strategy that fulfills the ACO drive that is taking place as well. There is a lot of competition and integration with physicians becoming employed, and I am bullish for ASCs partnering with hospitals. I think the long term survival of the industry will be one form of integration."
However, becoming a hospital employee isn't always the optimal situation and sometimes surgeons decide to end their contracts and move back into private practice. "We are seeing multiple practices come together for an ASC, even if they were former competitors in the market," says Mr. Vergne. "When employed physicians are moving out of hospital employment, non-competes are an impediment. They must wait to invest until the non-compete is fully expired."
Accountable care organizations
Accountable care organizations are focused on population health management, cost reduction and quality. They can streamline care to patients and drive up quality while driving down costs with the right incentives. Since surgery centers are often the high quality, low cost provider in the community, ACOs are an opportunity to shine.
"I think ASC owners should focus on alignment," says Mr. Soderlund. "Hospitals are trying to get physicians to align with them to focus on healthcare and quality. Data is king and hospitals and companies are gathering data about outcomes and working more closely together to figure out how to deliver care together."
Hospitals are also aligning with primary care physicians, which could threaten referral sources to independent ASCs. In this case, if hospitals purchase ASCs or partner with ASC physicians, they may be more willing to drive patient volume and relieve hospital ORs of low-acuity cases for more complex — and expensive — procedures.
"Ten to 15 years ago there were not a lot of hospital partners in the ASC industry," says Mr. Seip. "Now a majority of the ASCs we are seeing involve a hospital. From a credit standpoint, most often the ASC is a borrowing entity and not externally rated. That's a key difference between a hospital-based real estate transaction and a physician-based transaction. You have to have an expertise and understand the ASC model."
Related Articles on Coding, Billing and Collections:
10 Strategies for Effective Payor Negotiations
What Are the Major Disputes With Out of Network Payors?
7 Best Practices to Reevaluate the Revenue Cycle