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What are the Benefits of an Ambulatory Surgery Center Joint Venture for Physicians and Health Systems?

By ASC Development 2 Comments

Joint ventures have become the most common path to developing an ASC. Numerous factors should be considered in preparation for such an undertaking. While it’s important for physicians and health systems to determine if a joint venture is the best option for their market, let’s consider the benefits associated with a joint venture.

Reasons for a Health System to be Involved in a Joint Venture

There are a variety of strategic and economic reasons for a health system to participate in a joint ventured ASC. From a strategic standpoint, health systems may view a joint venture as an opportunity to increase physician loyalty and reduce the risk of physician defection. A well-planned and executed joint venture may create a halo effect thereby improving the relationship with the participating physicians across the entire health system and promoting it as physician friendly.

Another benefit is increased physician satisfaction as surgeons experience the efficiencies of an ASC versus what they may perceive occurs in other environments. A freestanding joint ventured ASC also greatly aids the health system’s ability to recruit new physicians both to, and beyond, the joint venture. While the ASC itself can be used as a recruiting tool for new physicians, the hospital OR time freed up by the removal of the cases to the new ASC can release resources for new physicians or service lines whose access may have been limited in the past due to time or equipment constraints.

Incentive alignment becomes a byproduct of the joint venture. When a health system joint ventures with physicians, there are clear benefits to both parties for alignment in many areas including, but not limited to, service expansion, marketing, and cost reduction.

Beyond the strategic reasons, there are simple economic reasons for a health system to develop a joint ventured ASC. The potential to attract new physicians to the system allows for the opportunity to create referral relationships beyond the joint venture. Freeing up the hospital ORs for more acute cases, without losing 100% of the revenue associated with the less acute cases that have been transferred to the joint ventured ASC, can greatly improve finances for the health system. Operating efficiency is improved by the strategic incentive alignment described above. The efficiencies and cost savings experienced in the joint venture – now familiar to the physicians – allow the health care system an opportunity to monetize them in their own sites of service.

The excellent patient satisfaction scores and comments we receive about our joint ventured ASCs can improve both a system’s reputation and market share in their community. This has become increasingly important with the move toward a more consumer driven health care market.

Reasons for a Physician to be Involved in a Joint Venture

The most prominent strategic reasons for physicians to participate in a joint venture are to secure a strong market advantage, align incentives, and, potentially capitalize on a smoother process to obtaining a certificate of need (CON) where needed.

By partnering with a health system, physicians may gain access to a new patient network or payor which can create an opportunity to increase case volume and revenue. The health system may also have access to a location for the ASC that is advantageous but not otherwise available to the physicians.

Areas where incentive alignments can occur with hospitals are pay-for-performance, allowing surgeons employed by the health system to participate in or use the ASC, bundled payment programs, and participation with risk contracts.

When it comes to obtaining a CON for a surgery center, physicians may have a far easier time working with a health system in a joint venture than going it alone. CON boards may view the working relationship between the health system and the physicians as a positive step toward improving access, quality, and value to the community. Having the system as an advocate rather than a potential adversary is a plus.

From an economic standpoint, the physician’s burden to raise capital and financial risk can be greatly reduced working with a health system in a joint venture. From the credit worthiness of the project to simply spreading the risk across a greater number of participants, having the system as a partner may be advantageous. There may also be means for the health system to help reduce the cost of the overall project through its purchasing relationships with vendors.

The most sought after economic value to the joint venture relationship is in the potential for the health system to improve the managed care contracts or access of the facility versus what it could obtain on its own. While in the past this was more of a given, it has become less of a guarantee over the last few years and needs to be thoroughly vetted as an actual value.


The numerous strategic and economic advantages for both health systems and physicians have led to joint ventures being the most common approach for new surgery center development. While it is important to thoroughly evaluate the merits of this structure within the context of individual markets, it behooves health systems and physicians interested in developing a new outpatient surgery center to explore joint venture opportunities within their community network.

By Robert J. Carrera – President and CEO

Why Did My Accounts Receivable Days Go Up?

By Revenue Cycle Management No Comments

Accounts Receivable (A/R) days rise and fall for numerous reasons including:

  • An increase or decrease in case volume
  • An increase or decrease in net revenue
  • An increase or decrease in collections
  • An increase or decrease in write-offs to bad debt
  • An increase or decrease in types of cases performed (specialty) or payor mix
  • The number of refunds cleared and posted

For example, a rise in case volume resulting in an increase in net revenue of $100,000 along with a decrease in collections of $50,000 creates a $150,000 swing. This will greatly impact your A/R days. Another example is a decrease in collections of $50,000 due to lower case volume. This would cancel out the decrease in net revenue due to the lower case volume. The impact on A/R days would likely be minimal.

Below are three different explanations of causes for an increase in A/R days.

  • A/R days rose due to an increase in case volume of 20 additional cases – a good “problem” to have – producing additional net revenue of $98,000. There was an additional rise in A/R due to $17,000 in refunds clearing the bank. The resultant A/R swing of $115,000 resulted in a rise in A/R days.
  • There was a dramatic increase in A/R days from 30.34 to 39.56. An increased case volume of 10 cases resulted in a rise in net revenue of $80,000. Collections simultaneously decreased by $61,000. The combination of these two items – a swing of $141,000 – increased A/R days by 9.22.
  • A/R days rose slightly to 49.38. Case volume was down by six cases or 4%, but the net revenue rose by $126,000, an increase of 126%. The $90,000 increase in outstanding accounts receivable was not explained by either the case volume by specialty or by the payor mix. The next area to explore is the acuity of the cases performed to determine if that caused the rise in net revenue.

Combining one or more of the above scenarios can create more significant swings in your A/R and A/R days. A/R days are all about timing. While an important statistic to monitor, the statistic most investors focus on is cash receipts. After all, cash is king!

By Carol Ciluffo – Vice President of Revenue Cycle Management

We are very excited to welcome you to our new blog/content gallery!

By Uncategorized No Comments

If you are a health care professional in the ambulatory surgery center arena, we hope this blog serves as a valuable resource for you. Our mission at Pinnacle III is to help your surgery center thrive. The heart of everything we do is solving ASC problems. Whether you are involved in developing a new surgery center, managing one, or handling revenue cycle management, our goal is to provide helpful information. As we build on the content in this blog, we hope you will obtain answers to your most important questions optimizing your surgery center efforts as a result.

You already know the health care industry encompasses a rapidly changing landscape. Now more than ever, health care executives are required to be flexible in their efforts to evolve while simultaneously maintaining their organization’s profitability. ASCs are not immune to these changes. The way you operate your facility, recruit physicians, and engage your patients in increasingly competitive communities requires you to be proactive in thinking about new ways to operate if you want to stay ahead of the curve. Revenue cycle management is a more daunting task than ever before with the arrival of ICD-10 and increased financial responsibility being borne by patients.

We understand all of that. We have been working in the ASC industry for over 20 years and have seen every trend imaginable. We help outpatient surgery centers stay flexible, forward-thinking, focused in the face of turmoil, and successful no matter what the health care marketplace brings. Now, we want to take our help to the next level. It’s not enough to have productive conversations with you. It’s not enough to shake your hand at a conference and give you advice. It’s not enough to tackle your questions as you ask them. Rather, we aim to be an ongoing resource for you. We need to capture those conversations, that advice, those key moments when your knowledge was enhanced, and provide it in a way you can easily access and refer back to. We want to be your go-to resource on all things ASC.

Through it all, your surgery center excellence is why we exist, why we do what we do. In the spirit of being your guide in this ever-changing health care world, we give you this blog. In time, we hope answers to all your questions will be found in our gallery of ASC content. We will start with some of your most common questions and build from there. We hope you receive a lot out of this resource. We hope to solve your problems and help you prosper greatly. Welcome to Pinnacle III’s new blog – enjoy!