This Week in Surgery Centers: Joan Dentler – The Latest ASC Market Trends from Hospital Leaders

Joan Dentler – The Latest ASC Market Trends from Hospital Leaders

Here’s what to expect on this week’s episode. 🎙️

The relationship between ASCs and hospitals is continuously evolving and expanding. With the growing interest in ASCs from payers, physicians, and patients, it’s no surprise that hospitals and health systems have followed suit.

• Is hospital ownership of ASCs accelerating?

• What are the trending ownership dynamics and equity breakouts?

• Do ASC management companies have a seat at the table?

Avanza Healthcare Strategies collected data from hospital CEOs and leaders to better understand these key trends for their 5th Annual Hospital Leadership ASC Survey. Joan Denter joins our host, Nick Latz, to discuss the results. A few highlights:

💸 More than 7 out of 10 hospitals and health systems intend to continue investing in and affiliating with ASCs. Close to 50% of hospital systems now have an ASC footprint.

📈 The trend of hospitals wanting to own 100% of ASCs is rising. Reasons for ASC development include increased surgical capacity, responding to consumer demands for lower costs, and value-based strategies.

🌐 The survey reveals a decline in hospitals using external ASC management companies, dropping from 23% to 12% in five years. Hospitals are now developing in-house ASC divisions, hiring experts from the field.

💡 Noteworthy is the shift in ownership structures, with hospitals negotiating ownership percentages based on the needs of physicians.

🤝 Hospitals recognize ASCs as a vital part of the healthcare landscape, incorporating them into strategic plans.

Read & Download the Full Avanza Intelligence 2023 Hospital Leadership ASC Survey:
https://avanzastrategies.com/intelligence-report/avanza-intelligence-2023-hospital-leadership-asc-survey/

Find the full episode on Apple Podcasts, Spotify, or YouTube to hear all the details.

Episode Transcript

01:41.54
Nick Latz / HST Pathways
Joan welcome to the show. We’re excited to have you back on and I’m I’m excited for this conversation in the topic at hand and looking forward to talking through the Avanza Intelligence Hospital leadership ASC survey Joan understand. This is the fifth time that you’ve done this survey can you tell us a little bit about what’s the methodology who you talk to is is part of the survey and how that’s evolved over the years

02:09.38
Joan Dentler
Sure sure let me just say that the reason we do the survey is having worked in the hospital ASC space for several years pretty much since the founding of the company. We were always looking for data um on hospitals and their relationship with ASCs and couldn’t find it. And so about five years ago we decided well you know if you can’t if you can’t find it I guess you have to build it. So um, we have engaged health leaders media. We feel like they have ah, they’re a great ah resource for hospital leaders and so they conduct. Survey. So. It’s not we aren’t doing it ourselves. Um and we asked them to look for and to um to survey hospital and health system leaders. We go through a list who we just really want csuite or very high level. Operational or clinical clinical leadership. We’ve asked them to try to get as diverse as a segment of the population. So from all areas of the country and we include that in the survey so everybody can see sort of where everybody comes from um and primarily larger hospitals just because we’ve. We do know that smaller hospitals don’t tend to need surgery centers. So um, so it’s largely not for profit hospitals with over two hundred beds

03:26.70
Nick Latz / HST Pathways
Grab.

03:33.10
Nick Latz / HST Pathways
Fantastic. And and one of the key areas the survey hits on is hospital and health system interest and in ASCs and so in terms of the trend. What did this year’s what were kind of key conclusions from this year related to hospital interests in ASCs and how has that changed. Over Sork years

03:52.54
Joan Dentler
Ah, well, it’s not surprising to us having worked in this area but it just keeps growing then percentage or the number of hospital systems owning ASCs keeps rising. Um. It’s now up to close to 50% when we started the survey it was closer to 40 So um, it’s kind of a slow and steady growth. Um, and I think the other thing that we find interesting is that it’s a lot of the hospital health systems that we talk to own more than one ASC and um.

04:08.81
Nick Latz / HST Pathways
Okay.

04:24.33
Joan Dentler
And so that that’s a continuingly continually growing era of phenomena is that it’s not just having oneoff a one ASC to help the have multiple um and then I guess the the biggest takeaway for this year had to do with the fact that we’re seeing more and more that want to own 100% of the ASCs

04:42.34
Nick Latz / HST Pathways
And I want I want to dig into that here in a second in terms of the ownership options before jumping into that though the reasons what reasons are health systems citing for.

04:43.83
Joan Dentler
That they have so. And.

04:58.81
Nick Latz / HST Pathways
Developing or building ASCs

05:01.79
Joan Dentler
Um, well again this this kind of flectuates and we give them lots of choices in the survey to sort of rank order and it looks like the increased surgical capacity. Um overall comes out as one of the top reasons also responding to consumers.

05:15.90
Nick Latz / HST Pathways
Right.

05:19.52
Joan Dentler
Um, and we’re assuming that a lot of that is the consumer desire for lower cost. Ah when they’re having elective surgery. Um, what’s interesting. We find 1 thing we found really interesting is that ah, there’s some groups that we work with that It’s absolutely payer pressures. The payers are telling him we you know we’re not going to pay for these procedures in hospitals anymore. But that did not come out is in the top like 1 you know, 2 or 3 ah reasons so we’re we’re also seeing that that’s very regional.

05:44.55
Nick Latz / HST Pathways
Yep.

05:54.35
Joan Dentler
Um, some areas payers are really pushing in some areas of the country payers haven’t really jumped on that bandwagon quite as much. Um, but we’re also seeing an increase in the the whole idea of because of a value base strategy if the health system. So if that they have to have an Asc.

06:10.16
Nick Latz / HST Pathways
Right? And and the payer piece is interesting is just kind of a general healthcare consumer like we all are I’m I’m starting to get advertising in the mail for the first time for my health insurance company educating me on the benefits of doing elective procedures in ASC setting.

06:26.81
Joan Dentler
Yeah, yeah.

06:28.46
Nick Latz / HST Pathways
So it so it does seem like the payors are kind of stepping up the the awareness and marketing to consumers.

06:35.31
Joan Dentler
Definitely and we also um, you know we see it sometimes where the pressure is not even on the hospital. It is more pushing the consumer the patient and it’s also putting some pressure on the surgeons. So we’re seeing a lower professional fee. Ah, given to surgeons if they do a procedure in a hospital when it could have been done in an Asc. So. There’s so lot of subtle pressures that the payers are putting um to look obviously to lower the cost of the overall you know, ah the experience of of ah elective surgery.

07:08.91
Nick Latz / HST Pathways
Right? So so roughly 50% of hospitals and health systems um have an ASC footprint or or presence I’m curious about the management side of this what trends are you seeing in terms of.

07:19.40
Joan Dentler
Okay.

07:24.31
Nick Latz / HST Pathways
Hospitals and Health systems using external ASC management companies versus doing self management.

07:30.82
Joan Dentler
Um, well what I again we we look at this every year and the use of outside managers is a question that we’ve asked from the very beginning and the first year we did this survey it was 23% it has ah of the hospitals that we surveyed. Used an outside management company and as we have been doing the survey it continues to drop to where this year it came in at 12% um, and so that’s a pretty big drop in 5 years

07:54.00
Nick Latz / HST Pathways
It Yeah and so that that does surprise me a little bit and and I know you work with with hospital groups all the time that are exploring these strategies. What do you think are the the key considerations.

08:07.99
Joan Dentler
Then.

08:12.90
Nick Latz / HST Pathways
For hospital groups as they go through the decision process of external management versus internal.

08:18.51
Joan Dentler
Right? Well Well first of all, let me just define internal sometimes internal management can mean all kinds of different things. It can mean either the hospital wants to manage it themselves or what we’re seeing now and I think this is a ah real testament to the maturity of the ASC space. Is there a lot of strong um ASC experts out there now people that either worked for management companies or set up the ASCs and have been running them for years and years and so the.

08:36.44
Nick Latz / HST Pathways
Ah.

08:49.88
Joan Dentler
The trend that we are seeing that we are attributing the sort of drop in the dependence on outside third party management companies is that the larger health systems are developing the the competency in-house. They’re creating an ASC division a surgery center division within the health system. Um, they’re going around and they’re hiring the best and the brightest out of the ASC world and so and leaving those people alone um to not they understand the need not to run it like a hospital ah run their ASC platform like a hospital so they build an ASC division. So. Where that was really unheard of probably well for sure when I entered into this space fifteen years ago but um, probably even at the beginning of this survey it was very rare that you would see health systems do that we are seeing more and more health systems if they have multiple ASCs

09:39.13
Nick Latz / HST Pathways
Right.

09:47.88
Joan Dentler
Seeing that it makes sense same way they have a radiology department or ah, you know other departments within the hospital. They’re creating that but they are smart enough most of them ah to create it with people that come directly out of the ASC space and understand. How ass are different than just outpatient hospital surgery.

10:09.60
Nick Latz / HST Pathways
Yeah, and I think it’s a really interesting trend and glad to hear that you know, kind of in general health systems are looking to hire folks what they see. Operating expertise because we’ve talked about in the past that it it is different right? There’s typically different different processes different systems different technology. How do you How do you think in general the hospital systems are doing and creating these kind of ASC Divisions

10:23.77
Joan Dentler
In here.

10:38.12
Joan Dentler
Um, for the most part, the ones that that we interact with they’ve brought in some really strong good people and um, so you know it seems to be working really well it keeps it kind of all in-house. Um, they may go out and outsource of. Some of the other services like Rcm or ah hr or some of those things as part of this but the groups that they have running their departments are really you know they know who the good providers of those services are.

10:59.77
Nick Latz / HST Pathways
Ah.

11:11.75
Joan Dentler
Um, and I think what what I’ve seen um we’re working with the health system right now who’s doing this and what I’ve seen is the physicians really if they’re physician partners in ah in the ASC they really like it because it’s not a third. Um. Institutional partner like or second institutional partner so you’ve got the hospital and the doctors as partners and if you have a management company. You have to make room for most of those that require they require equity so you have to have some equity come out of either the hospital or the doctors of. Parcels for the management company and I think they like the fact that it leaves more equity on the table. Um I will say just to make sure everybody’s real clear on this is you know hospitals can’t provide any type of management services for free to an Asc. Um, that’s owned by physicians. So there is a there there has to be a fee for some of these things but it just really depends on the extent that the hospital department is actually hands on managing versus just sort of keeping an eye on the hospital’s investment.

12:20.38
Nick Latz / HST Pathways
Yeah, it’s ah it’s an an interesting trend and I think for for the from the standpoint of the hospital. There’s an economic incentive or reason right? which probably you get to to capture that fee revenues you just mentioned versus paying that to someone else.

12:24.96
Joan Dentler
Is.

12:37.60
Nick Latz / HST Pathways
Um, is there also an advantage just around controlling case volume and in having more access to where case volume goes within the overall Health network.

12:46.25
Joan Dentler
Yeah I don’t see that you know being much different again like I said a lot of these hospitals are doing this if they if they they know if they’re going to do it. They need to you know, be hands off. And let it run so it’s the the actual running of the ASC is not really that different. It’s really more like I said not having this a third party come in. Um I will say that there’s still room for some management companies. But what you’re what you’ll see I think in the hospital space at least with asess. Is the management companies really have to be able to ah explain the value proposition that they offer and so that’s I think a little different when I first started management companies could just say we’ll take care of this for you. But now that there’s so much talent out there and there’s so much.

13:22.70
Nick Latz / HST Pathways
Chair.

13:36.33
Joan Dentler
Tech available to ASCs and other vendors. Um, you really have to show what are you going to bring um and how is that different from if we just hire a really strong administrator and hire a really good rcm company and get a really good tech platform. What else are you bringing. And so I think it’s putting a little pressure of that The management companies you’re going to see the cream rice to the top I guess is what I’m saying is you’re going to see the people that the management companies that really have strong either payer relationships or ah or.

14:01.90
Nick Latz / HST Pathways
Okay.

14:09.50
Joan Dentler
Or so you know supplier relationships that where they can really bring a strong value to the ASC those those ah management companies will still have a place in the space. But I think just the blanket. Well we need a management company is now being questioned a little. Little tighter. Obviously the data shows that going from 23% to 12 so you know that that I think like I said I think you’ll see the cream rise to the top when it comes to management companies in the ASC space.

14:28.47
Nick Latz / HST Pathways
Right.

14:38.60
Nick Latz / HST Pathways
Got it. Okay and I want to go back to you mentioned the reasons hospitals hospitals are interested in having an ASC presence you mentioned capacity consumers payers. What about the physician side of this because I read in your report that I think one of the benefits at least from a health system is hey we’re we’re able to offer our physicians the equity piece of ASC ownership and kind of give them that you know overall benefit within the health system environment.

15:11.58
Joan Dentler
Right? right? And um, I’ll I’ll tell you that that is becoming more and more a not a nice to have but a must have for physician recruitment. Um, we had ah a re client who recently told us they were trying to. Recruit a spine surgeon and the the um the health system was in the process of developing an ASC but it was about 2 years down the road and the spine surgeon basically decided to go with another opportunity because they didn’t want to wait two years for an Asc. So um, it’s.

15:45.27
Nick Latz / HST Pathways
Ah.

15:46.71
Joan Dentler
It’s almost something that if you want to recruit a busy ah you know, high quality outpatient surgeons. You’re going to have to have an ASC and um, you’re going to have to be able to provide them equity in that because they want that other revenue stream. Even if they’re employed or if they’re independent. It really doesn’t matter they they really want that that revenue stream.

16:12.40
Nick Latz / HST Pathways
Got it and then and so talking about that overall ownership structure for these ass within a health system. Yeah I think I read in your survey that was that the average is something like that the hospital or group owns 50% Did I did I get that right? or is it a little bit different.

16:31.67
Joan Dentler
Um, you know I think the it what we’re seeing is that the hospitals are starting to um, really negotiate that you know up or down depending on the need for the for the ah needs of the physicians. What we are seeing is more and more hospitals who are owning 100 % that um, so basically saying that they don’t ah, they aren’t doing this kind of kicking and streaming screaming.

16:50.60
Nick Latz / HST Pathways
The.

16:59.79
Joan Dentler
They are building ascs because they know that that’s the right thing to do. But yeah as far as ownership goes, we’re seeing it ah the I and I apologize I don’t have the exact number in front of me but we’re seeing it stay right around that 50% Mark but not necessarily. More than 50% which is how we began in the hospital space where hospitals wanted to own all of it or at least a large portion of it but there are issues around being able to have the hospital negotiate contracts and things like that where the.

17:25.32
Nick Latz / HST Pathways
Um.

17:35.80
Joan Dentler
Hospital owning closer to 50 to 50 One percent could be advantageous for the surgeons as well.

17:39.50
Nick Latz / HST Pathways
Got it got it. So so it sounds like we’re seeing health systems typically own at least 50% sometimes it’s 50 sometimes it’s a hundred and and and probably some different options in between when the health system doesn’t own 100% who who typically owns the the other. Yeah, the other percentage you mentioned the physicians um does that make up the difference or are there other groups in there as well.

18:06.77
Joan Dentler
The other groups that we’re starting to see moving into the hospital ASC space or besides management companies that have been there for a while is private equity and um, getting involved. Ah it you know they are obviously very into the ASC space in all kinds of ways. And then we’re also seeing Payers payers who want to get into the ASC space as Well. So um, that we need to make room for all of these different players as we are moving forward in the in the like I said this continuing maturing of the ase Market I think.

18:24.71
Nick Latz / HST Pathways
Oh.

18:43.51
Joan Dentler
All of these things I’m talking about the management the ownership whatever are really because everybody you know people weren’t really sure how long ASCs were going to stick around I think it’s very clear now that ASCs are a part of the us Healthcare Landscape international as well. But they’re definitely part of the ushealth care landscape and CMS in in their recent release of the ASC of ah payer schedule or the schedule for ASC cases we saw more and more things going in. You know towards the Asc. So I think it’s so.

19:14.14
Nick Latz / HST Pathways
Right.

19:18.74
Joan Dentler
Ah, clear sign that Ascs aren’t going away.

19:19.73
Nick Latz / HST Pathways
Right? Got it? Okay, what Joan any other trends that that popped out for you in the report that we haven’t talked about yet.

19:31.97
Joan Dentler
Um, no I mean I know I’ve mentioned it kind of tangentially a couple times. But this idea they of the hospitals owning 100% I think like I said I think what that speaks to is um. As you know hospitals got involved in ascs a lot because the doctors threatened to pull their cases then they got involved. You know, continued to be involved with them because they were buying physician practices and as part of that transaction they threw in the Asc.

19:57.12
Nick Latz / HST Pathways
Strip.

19:59.97
Joan Dentler
Now we’re starting to see hospitals voluntarily saying we must have an ASC which is um like I said further confirmation that they are going to be a part of the fundamental health care landscape. So that’s a big and we saw that more. Hundred percent ownership by hospitals we saw more this year than than any year in the past.

20:22.67
Nick Latz / HST Pathways
It’s interesting. It seems like it’s more part of the health system strategic plan at this point versus kind of a react shit reactive something that’s happened like you articulated before.

20:32.15
Joan Dentler
Definitely definitely and and we’re seeing Hospitals calling us about you know, help us with a system-wide strategy so not having just these one-off Ascs that they happen to buy or a group of physicians pressured them to to set up. They they now want to set up a. Ah, true strategy and we’re seeing the C on laws around ASCs starting to be challenged in so many more states. So I think it’s really just going to start. It’s going to be a ah landslide of more and more hospitals getting into this space.

21:01.61
Nick Latz / HST Pathways
Got it file question for you Joan and we do this every week with our guests. What is 1 thing our listeners can do this week to improve their surgery centers.

21:13.89
Joan Dentler
Um, I would say thank their staff and by that I mean you know everybody talks to us about their biggest issue being staffing and you know recruiting new staff is much harder than retaining your current staff so I would say going out of your way. Um, to thank your staff even just ah, you know, just a verbal. Thank you is great. But even you know all the way to somehow you know sharing and in some sort of profit sharing plan. But you know if you’ve got good staff. Having this surgeons. Thank them having the owners you know whoever the owners are know their names all of that it just goes so far So I would just say realizing how valuable and your staff is and we just deal with too many people are trying to find staff. So if you’ve got them keep them. And and thank them exactly. Okay, Thank you so much.

22:08.23
Nick Latz / HST Pathways
It’s all about all about the people that’s good advice. So Joan. Thanks! Thanks! So much for joining us again this week