What is the difference between ambulatory surgery center syndication and surgeon recruitment?

So What is the difference between ASC syndication and surgeon recruitment and outpatient surgery centers? Physician recruitment is the process by which we recruit physicians and surgeons that will do procedures in our outpatient surgery centers. When we refer to physician recruitment we are not recruiting that physician to invest in the surgery center -at least not until we have established a substantial relationship with them-we want them to use the surgical center for their cases. Syndication simply refers to a private securities offering of ownership interest in a healthcare company. You run across this term most often in the selling ownership interest in the surgery center business, but you can syndicate just about any kind of healthcare company: surgery center, medical office building, medical equipment company, and so on. Syndication typically takes the form of a sale of limited liability company units or limited partnership interest, although they can also involve the sale of shares in a corporation. Recruiting surgeons in terms of a surgery center is always part of the surgical center syndication process, but syndication is not always part of physician...

How do you prepare to recruit new physicians to your syndication?

The preparation all depends on what stage of the life cycle that the surgery center is in, but a good bit of the process is the same. Let’s start the discussion from the pure recruiting physician’s angle around an existing and operational center cycle. In the physician recruitment area, one of the first steps is to evaluate the ambulatory surgical center to see if and why any of the current physicians are not bringing all of their qualified cases to the ASC and then what the barriers are to them bringing their cases. Meet with each of the physicians and ask the question: “What can we do differently that will make you more comfortable in bringing all your appropriate cases to the outpatient surgical center?” One of the first steps is to understand where the shortfalls are occurring. The reason that this step is very important is because going forward, ASC operational inefficiencies will strongly affect recruitment and retention of cases and recruiting new doctors to your ambulatory surgery center. How do you prepare to recruit new physicians to your syndication? Some of the typical responses Preferences with equipment or instruments not available at the ASC Investments in another surgery center or a procedure suite at their office Hospital politics/pressures Confusion around out-of-network vs. in-network contracting at the ASC Confusion with the surgery center facility cost for cash pay patients Staff or scheduler non-compliance Lack of adherence to start times Lack of familiarity/comfort with ASC staff Lack of transparency – both financially and with executive decisions Third party payer contracts Lack of background research on /compatibility with providers Lack of partner enthusiasm / partner frustration It is imperative that leadership understands that their top priority is to remove as many barriers as possible so that it is easy for the surgeons/physician to perform all of their qualified cases in this center. Create pro formas that can quantify the financial benefits adding only a few more cases per month. ASC surgeon-owners must clearly see how incremental case volume growth leads directly to higher margins (given that overhead costs are largely fixed when centers are at breakeven). This helps make the case that the investment of their time in the recruitment process is very profitable. Evaluate each surgeon’s block times – some surgeons may be able to or open to being flexible with their scheduling in order to accommodate new physicians. Define the kind of physician you want and can support ,or how you would support physicians that are not married to another ASC. For example, a natural fit for a spine surgery center center is to add pain or other orthopaedic and podiatry. While we at one time could pick and choose what...

When should an ASC recruit physicians, undergo syndication or engage in resyndication of the surgery center?

Ambulatory surgery centers sometimes look at physician recruitment as a one-time “event,” carried out at some stage in the development, which can later be forgotten about during the center’s day-to-day operation. The most successful surgery centers understand and make surgeon recruitment an ongoing process. For some centers, this will be a paradigm shift and one that they will need to make. The market is changing, and centers that do not adapt will not survive. If you are not at 100% utilization and your goal is to grow the center, you should always be recruiting. Each dollar of revenue once you are at breakeven point can add up to between $.65 and $.80 of profit to the bottom line.  Successful recruitment campaigns are as, if not more, important to the success of your ASC than strong payor contracts and business best practices. The most successful surgery centers have owners that have adopted a physician recruitment mindset. A large part of your administrator’s job needs to be on going physician recruitment. At least 20% of their time needs to be in the field meeting and recruiting new physicians. Physician partners should be recruiting as well. There should not be anything going on as far as what doc is doing their cases where in the market that the administrator does not know about. Nothing! That takes a commitment and lots of work. Remember that each additional dollar of revenue can add up to between $.65 and $0.80 of profit to the bottom line once an ASC achieves breakeven financial status. Each partner needs to keep that in mind when considering how physician recruitment results in increased patient volume and profitability … their ultimate conclusion will be that case load recruiting is a highly profitable investment of their time. Syndication can primarily take on one of two forms: (1) syndication of a “de novo” or start-up ASC; or (2) selling interests in an existing ASC to physician utilizers or potential utilizers. The sale of ownership interests to physicians who bring cases to the ASC is an important factor in determining an ASC’s success. Selling equity interests in the ASC to physicians who regularly use the facility strengthens their relationship to the surgery center. Also, physician ownership is often a prerequisite to consummating a sale of the surgery center. Leading up to a sale of the surgery center is another optimal time to syndicate. Adding 100 cases a month of pain to your orthopaedic ASC could help you receive double digit multiple of trailing EBITDA as we have pointed out in the...

What are some strategies ASCs might utilize in recruiting new physician users for syndication?

Recruiting new physician users to a surgery center, especially in this mature market is a stressful and strategic process. Approach recruitment and retention as one and the same. You need to be recruiting your current doc in order to retain them because if you are not, someone else is. Additionally, when you are recruiting new doctors you need to approach it with retention in mind. In other words, you need to make sure that everyone understands that this is a partnership and that you will be hopefully be working together for a long time to come. Thus work hard to ensure that everyone is treated as special. We have a two avenue approach to this process. 1) We work with existing partners and physicians that utilize the center to develop an ongoing target list, gleaned from their knowledge of available physicians (or knowledge of physicians that will know who should be on our radar, such as anesthesiologists, they seem to be in the know and are great resources), and 2) We will create a mass list of all the potential physicians and surgeons that are seeing patients in the center’s market area. We will market all identified physicians through the avenues discussed above. One of the greatest assets in recruiting new physicians is the mindset and commitment of the current physician base. This support can take form in a variety of ways, including speaking with new recruits, giving tours, attending new recruit open houses, going on physician visits, attending recruitment dinners, making phones calls, and/or agreeing to be part of a letter-writing campaign.  The role of current individual owners will depend on their personalities and comfort level, but nonetheless all owners should accept – as part of their ownership mindset – the responsibility to be part of the recruitment process. The role can range from sharing names of potential new recruits to being the champion recruiter. An agenda item at almost every board meeting should be: recruit surgeons to surgery center. During discussion of this item, physicians should identify which physicians the ASC should be reaching out to. Ask physician-owners to come prepared to put forth a few names of physicians and a little background — if known — so that the designee responsible for recruitment can pursue that physician in coordination with the physician partners. Part of the ASC’s plan should be to have a continually updated target list of physicians in the community that should be contacted and a list of physicians coming into the community for future consideration. All owners and staff should be walking billboards for the center to their practice partners and other colleagues, as well as keeping an eye out for surgeons who...

What are some of the regulatory risks associated with physician recruitment and syndications?

Note that we aren’t lawyers, thus you need to work with your lawyer on this. This is from the perspective of an SEC registered and FINRA Licensed Investment Banker as well as a Securities Principle responsible for the supervision of Investment Bankers and their activities. You need to be aware that syndication involves the sale of securities-whether you are selling shares, or LLC Units or limited partnership units. Federal and state securities laws determine the manner in which the offering and sale of ownership interest must be conducted. Additionally securities laws control who can affect the sale of securities and how. There is a white paper and a few articles around this very important but not well understood law that are posted on the Ambulatory Alliances website. To ensure compliance with the securities laws, syndication almost always involve some form of disclosure documents, whether an offering memorandum, purchase agreement or similar instrument. The primary purpose of such a document is to fulfill the disclosure requirements of the Securities Act, while serving as a shield against any future charges of violating the antifraud provision of the securities laws. The documents will serve as an outline of the transaction and a tool for marketing the offering. The gist of the documents is to ensure you have an educated buyer, educated in the sense that they know what they are getting into. With secondary offerings, even though one physician is selling some of their shares to another physician you need to make sure that the second physician is fully informed by giving them copies of all of the original documents and updated documents such as current ownership percentages, updated financials including any debt instruments, updated disclosure documents etc. Additionally, we have seen some doctors trade these securities often. The securities laws as well as all of the transaction documents mimic the laws and state something along the lines of- you acknowledge that the purchase of the securities is for the investment intent and not for resale. The securities must come to rest in the hands of the investor. Different states have different interpretations or safe harbors so to speak as to how long a physician must own the security before they can resell it. That is why when we do a resyndication, before executing an exit strategy we make sure the securities have come to rest and we are very careful. In some cases around the above we have advised clients in certain situations that warrant it that they can write the state securities administrators and ask for a “no action letter”, which is a letter to the state securities administrator or SEC for that matter explaining the action asking if the staff...