7 keys to successful physician hospital joint ventures · successful physician hospital joint ... a...
TRANSCRIPT
7KeystoSuccessfulPhysicianHospitalJointVentures
EdHetrick,PresidentandCEOFacilityDevelopmentandManagement
ChristianEllison,VicePresidentHealthInventures
Agenda
• Historyofphysician‐hospitaljointventures• Futureofphysician‐hospitaljointventures• Stakeholders’motivationforpartnering
• Processforputtingtogetherajointventure• 7keystosuccessfulphysicianhospitaljointventures
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History
• Physiciandrivenindustry– Seekingcontrol– Operationalefficiency– Incrementalincome
• Hospitalshavebeenonthesidelineuntilrecently– Lostmarketshare
– Erodingmedicalstaffrelations– Newmarketcompetitors
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APhysicianDrivenIndustry
Source: InforMed Healthcare Media, LLC 2007
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Future
• HospitalsmoreactiveseekingASCpartnershipswithphysicians– UsuallythroughacquisitionofexistingphysicianownedASCs
• PhysiciansmoreactivelyseekingouthospitalsaspartnersinASCsthanhistorically
• WilllikelybethemostprevalentownershipstructurefordenovoASCdevelopmentgoingforward
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PhysicianMotivationDeNovoDevelopment
• CertificateofNeed(whereapplicable)
• Sharecapitalcostandrisk
• Don’tnegativelyimpacthospital(mostlyrelevantinsmallermarkets)• Accesstohospitalpayorcontracts
• Avoidcompetingwiththehospital
SaleofExistingASC
• Liquidatesomeoftheirassetswhilevaluationsarehighandcapitalgainstaxratesarelow
• Eliminateacompetitor• Accesstohospitalpayorcontracts
• Abilitytoattractmorephysicianinvestorsovertime
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HospitalMotivationDeNovoDevelopment
• Increasemarketshare(newphysicians,newmarket,splitters)
• Retainmarketshare
• Sharecapitalcostandrisk• Improvephysicianrelations
• Physicianrecruitmentandretention
• Keepnewcompetitorsoutofthemarket
PurchaseanExistingASC
• Eliminateacompetitor• Increasemarketshare
• Regainmarketshare
• GainneededORcapacityatmorereasonablecost
• Improvephysicianrelations
• Physicianrecruitmentandretention• Keepnewcompetitorsoutofthemarket 7
MotivationforAll
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Physicians • More control over day-to-day
operations • Efficient/productive surgical
environment • Recruitment tool • Incremental Income
Patients • More convenient
Easier scheduling Better locations No “bumped procedures”
• Improved outcomes • Less institutional environment • Less expensive than acute care hospitals
Payers • Better patient outcomes • Less expensive than acute care hospitals
Hospital/Health System • Solidify/improve physician relationships • Retain/gain market share • Recruitment tool • New services delivery component
JointVentureFormationProcess
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• Determinephysicianinterestlevelandobjectives
• Developpreliminarybusinessplanandfinancialprojections,includinghospitalimpactanalysis
• Assesslegal,reimbursementregulatoryandtaxrequirements
• Formphysician/hospitalsteeringcommitteetoagreeonlegalstructureandbusinessterms
• Prepareandrefinetermsheet
• Planforcorporateandregulatoryapprovals
• Obtainnecessaryvaluationsofhospitalcontributedassets
• Finalizeprojectionsandfinancingoptions
• Draftdefinitiveagreements(OperatingAgreement,Lease,AssetPurchaseAgreement,ManagementAgreement)
• PreparePrivatePlacementMemorandum(PPM)andplanforphysicianoffering
• Completeoffering;organizeinitialownerandboardmeetingsandcloseontransactionagreements
• Acceptphysiciansubscriptions
1-2 months 1-2 months 2-3 months
7KeystoSuccess• Good,thorough,up‐frontplanning
• Workwithanexperiencedoutsideprofessionalswhohavedonethisbefore– ASCmanagementcompany
– Independentlegalcounsel– Valuationfirm,wherenecessary
• Strongphysicianleadership• Active,committedhospitalpartner
• Openandhonestcommunication
• Dealstructurethatbestaccommodatesstakeholderneedsandanticipatesfutureevents
• Makedecisionsforthelong‐term,notshort‐termgain
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Planning
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Planning• Nothingdrivesastrongjointventuremorethansuccess
• Effectiveplanningsignificantlyenhancesthelikelihoodoffuturesuccess
• Planningshouldbeledbyasteeringcommitteeofkeyphysicianleadersandhospitalexecutives
• UtilizinganASCmanagementcompanywillenhancethelikelihoodthatyourassumptionsaresound
• Yourfeasibilityassessmentshouldaddress:– Physicianandhospitalobjectives– Volumeandcasemixbasedonlocalpracticepatterns,notjust“demographics”
– Right‐sizedfacilityforprojectedvolumesandlocation
– Organization/ownershipoptions,includinglegalriskandreimbursementanalysis
• NotallASCsarefeasible,don’tbeafraidtowalkaway
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Planning:KeyConsiderations• Choiceofpartners
– Attractexpandedphysiciannetwork;donotneedtotakeeveryone– Securekeyconstituentstobesteeringcommitteemembers– Identifyandselectthemanageroftheventure
• Locationandservicesmix;realestateissues– Knowthemarket;locatetocapturemarketgain– Physicianconvenienceiscritical
• Capitalrequirementsandfinancingoptions– Secureearlyreturns,quickrampupwithoutexcessoverhead
• Financialimpacttohospital• Timelineforimplementation
– Createspeedtomarket:securejoint‐ventureownershipassoonasstrategyisdeveloped
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EngageExperiencedProfessionals(Ringmasters)
• Independent,unbiased,leadershipfortheproject– What’sinthebestinterestofthenewventure?
• Don’trecreatethewheel– Shortentheprojecttimeline– Learnfromtheirpositiveandnegativeexperienceselsewhere
• Ensuretheyareagoodculturalfitandshareyourvaluesystem
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StrongPhysicianLeadership• Steeringcommitteeshouldhavephysicianswhoareleadersamongtheirpeersandcanrepresenttheinterestofyourtargetphysicians
• Physicianshavetobecommittedtothisventure– Appropriatenon‐competeshavetobeinplace– Meaningfulinvestmentrequirement
• Vestedphysiciansarethebestsalespeopleamongtheirpeers• Theentity’soperationsmustbephysicianledinordertomaximizetheASC’sperformanceandmeetthephysicians’efficiencygoals
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CommittedHospitalPartner• Hospitalshouldbeactiveingovernancebutleavetheoperationalmanagementtothemanagementcompanyandphysicians
• Hospitalshouldacknowledgephysicianleadership• Hospitalrepresentativesonthesteeringcommittee/Boardmustbekeyleaderswhoareempoweredtomakedecisionsforthehospital
– Showscommitmenttotheventurebythehospital– Bestrelationshipbuildingopportunitywithkeyphysicians
• Hospitalneedstoshowcommitmenttothesuccessoftheventureanddemonstratethatitisinthisfortherightreasons
• HospitalneedstodowhatitcantofacilitatetheASC’ssuccess– Payorcontractingsupport– Vendorrelationships– Marketing– Physicianrecruitment
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OpenandHonestCommunication• Dealwiththetoughissuesupfront,workingthroughthemcreatessignificanttrustamongthepartners
• Lookforwardratherthandwellingonthepast
• Therecanneverbeenoughcommunication
• Thisisaboutbuildingsuccessfulpartnerships
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OpenandHonestCommunication• Ensureaclearunderstandingoftheexpectationsofeachpartyandthevalueeachpartybringstothetable
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Physicians • Clinical Skills & Knowledge • Surgical Volume • Existing Medical Relationships • Entrepreneurial Spirit • Investment
Hospital • Community Presence • Brand Name • PCP/ Payer network • Long-term Commitment • Financial Strength
Management Company • ASC Operations
Experience & Expertise • ASC Culture • Joint Venture Experience • History of Successful
Businesses • Industry Knowledge
EffectiveDealStructure• Hastoaccommodatethestakeholders’objectives,workwithinthelegalandregulatoryframework,andeffectivelyaccommodatefutureeventsaffectingthepartnership
• Documentwillrarelybereferencedifyouhaveastrongpartnershipcreatedthroughdealingwiththeissuesthroughtheventureformationprocess
• Keyissuesthatneedtobeaddressedinclude:– Ownershipandcontrol
• Hospitaltaxexemptissues• Anti‐trustrelatedtopayorcontracting• Physiciangoals/expectations
– FraudandAbuseandStarkLawconsiderations– Capitalstructure– Eligibleinvestors– Non‐competeprovisions– Unittransfer(buyin/buyout)– Redemptionterms– Capitalcalls 19
ManagingtheBusinessLifecycle
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ASCChallenges
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Year: 1 2 3 4 5 6 7 8 9 10
$0
Net Revenue
< 20% of ASC’s will have steady growth
@ 50 % will experience slow decline
@ 25 % will lose significant physicians
@ 20 % will have significant reimbursement impact
ASC Performance
Source: Value Management Group
Long‐termDecisionMaking• Decisionshavetobemadeinthebestinterestofthelong‐termviabilityofthebusinessratherthanshort‐termneedsoftheindividualstakeholders
• Challengeswillbedifferentthroughouttheventure’slifecycleandhavingacommunitybasedpartnership,suchasaphysician‐hospitaljointventure,helptofocusthestakeholdersonmaintainingaviablecommunityasset
• Trustbuiltamongstakeholdersintheup‐frontprocessfacilitatesconstructivedecisionmakingthroughouttheventure’slifecycle
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“It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.”
-- Charles Darwin
7KeystoSuccess• Good,thorough,up‐frontplanning
• Workwithanexperiencedoutsideprofessionalswhohavedonethisbefore– ASCmanagementcompany
– Independentlegalcounsel– Valuationfirm,wherenecessary
• Strongphysicianleadership• Active,committedhospitalpartner
• Openandhonestcommunication
• Dealstructurethatbestaccommodatesstakeholderneedsandanticipatesfutureevents
• Makedecisionsforthelong‐term,notshort‐termgain
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Questions?
ContactInformation
• EdwardP.Hetrick President/CEO FacilitiesDevelopmentandManagement DD:(845)770‐1883ext.153
• ChristianEllison VicePresident HealthInventures DD:(720)304‐8948M:(720)273‐7449
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