Hospitals Beg To Be Aligned By Physicians!

Over the past decade or so, hospitals have spent countless hundreds of millions of dollars “aligning” physicians.

This so-called alignment has included acquiring physician practices, employing physicians in states without corporate practice of medicine restrictions, and, in states where hospitals can’t directly employ, employment through captive medical groups or foundations.

Hospitals claim that the idea is to “coordinate care.” But the actual goal is to control cash.

More recently, though, there’s been an increasing tide of procedures flowing out of the hospital to outpatient facilities, chiefly to ambulatory surgery centers (ASCs). [If you haven’t already read my book The Impending Death of Hospitals, you should pick up a copy. You can get in on Amazon or you can download a PDF version for free on my website at]

The notion is that as technology advances and as the safety of procedures in the ASC setting increases, more and more procedures are being added to Medicare’s list of approved outpatient surgery center procedures.

Because many if not all private payers follow Medicare’s lead on this, private payers, too, are pushing procedures out to ASCs because reimbursement is much lower and because outcomes are much greater: less chance of infection, more efficiency, happier patients paying lower copays and having much better patient care experiences.

And now we’re seeing something very interesting. In connection with my ASC work – my physician clients forming physician-owned ASCs – we’re seeing hospitals chasing those physician deals, asking, and sometimes begging, to be included as investors in the deal: They want physicians to “align” the hospital!

Hospitals understand that soon they will no longer be able to compete for many procedures that had been done on an inpatient basis and now and forevermore will be done on outpatient basis. They can no longer compete on the basis of having those cases performed in hospital outpatient departments (HOPDs) because reimbursement for the same procedure is up to 80% higher in HOPDs than in ASCs.

As a result, hospitals want to burrow their way into your ASC deal. But why would you want them to align with you? They’re simply after the control, and the profit, that they’re losing on the “hospital” side.

Many would answer that with, “Well, I want money from the hospital to help seed the ASC.”

But the bottom line is that if you vet the decision and the numbers in connection with whether it makes sense to form an ASC – and it does – why do you need even a million dollars from a hospital when in a year or two you could potentially be pumping out two million a year in facility fee profits without them?

Yes, it might be a short-term gain. But “hospital as co-owner” is usually long-term pain.

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

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