1. There are several different partnership options, and they won’t all be right for you. There are several different ways orthopedic surgeons, practices and surgery centers can partner with hospitals through financial or non-financial agreement. They can form a strategic alignment or co-management arrangement, joint venture on a surgical suite or surgery center and paid leadership agreements. Hospitals and surgeons can also work together to bring new technology to their community by having the hospital purchase the expensive equipment and the surgeon train on how to use it. All partnerships can be beneficial if they are executed correctly, and orthopedic surgeons can position themselves to potentially collaborate in an accountable care organization with the hospital in the future. However, not all partnerships are the best for every situation, and you should make sure you choose the right one to prevent a failed agreement that wastes time and money for both parties.
2. You won’t change the system over night. Hospitals are racked with bureaucracy, and even the most optimistic orthopedic surgeons aren’t going to immediately change the system through an alignment or joint venture. “A lot of surgeons believe you can implement changes quickly and hospitals should do something differently beginning tomorrow. The surgeon has to know the system and work through it,” says Neel Anand, MD, director of orthopedic spine surgery for the Spine Center at Cedars-Sinai Medical Center in Los Angeles. Throughout these meetings and negotiations, it is particularly important that orthopedic surgeons help administrators understand their point-of-view through the lens of financial gain because most administrators don’t have a medical background and may not understand medical implications driving a decision.
3. If you are partnering on a surgery center, there might be decreased profitability. Surprisingly, higher reimbursement and increased referrals does not necessarily mean increased profitability. Jon Vick, president of ASCs Inc., says hospital-partnered ASCs are generally less profitable than their freestanding or company-managed counterparts. “Hospitals tend to want a majority interest in a surgery center, and tend to run [the center] like a hospital,” he says. “Hospitals have more overhead and lower profit expectations, and they tend to diminish the profitability of the center through less efficient and less economical operation.” He says while hospitals have high overhead and profit margins of less than 10 percent, ASCs have low overhead and profit margins of more than 30 percent. This means that when a hospital introduces management to run your ASC, you may see decreased efficiency and higher costs simply because of the change in perspective.
Obviously, decreased profitability is a problem for the center’s investors. “As profitability goes down, distributions tend to also decrease,” he says. “Doctors want to enjoy the cash flow from the center, and the merger is dis-advantageous if profitability drops and they receive less cash flow after the merger than they did before.”
4. A third party might be necessary to bridge the gap between orthopedic surgeons and hospitals. An impartial third party can bridge the gap between orthopedic surgeons and hospitals. In the event of an existing adversarial relationship, the third party can help the other two peaceably collaborate. The third party can smooth out technical differences between the hospital and orthopedists, such as cross pollinating the two billing process. The use of electronic medical records between the groups can also cause problems. Orthopedic Specialty Group and their hospital partner use two different electronic medical record systems, which are incompatible with each other. “[Third party members] come from a background with expertise in both systems,” says Steve Fiore, CEO for Orthopedic Specialty Group, PC, in Fairfield, Conn. “Those of us in the practice management world have to recognize we don’t have all the answers. Our job is to find the subject matter experts who can make the collaboration happen.”
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