Hello, everyone. This is Erica Spicer Mason with
Becker's Healthcare. Thank you so much for tuning
into the Becker's Healthcare podcast series.
Today, we're going to talk about breaking barriers
and health system ASC development.
And to talk us through this, we have
two managing directors from VMG Health joining us.
We have Aaron Mirsky and Cordell Mack. Aaron,
Cordell, so thrilled to have you join Becker's
today. Thank you so much for making the
time.
Yeah. I'm very glad to be here. Thank
you. Thanks for having us, Erica.
Yeah. So happy to have you both on
the line. And before we get into the
conversation on ASC development, I wanted to give
you both the opportunity just to share a
little bit more about yourselves and your work
in health care.
Cordell, would you mind getting us started?
Yeah. Happy to.
So I've been a a managing director. I've
been in the consulting space for approaching twenty
three years at this point, Erica.
So I've seen, you know, a lot of
trends, a lot of kind of future predictions,
and, you know, probably batting about fifty fifty
in terms of,
what that may mean, you know, evidenced a
little bit by what we're gonna talk about
with some of the future on ASC development.
My my former background is actually as a
physical therapist,
and so it's been interesting just to see
some of the care model evolution in ASCs
and, you know, how that is impacting,
like, how our health system clients are kinda
positioning
for their future and, you know, their kind
of subsequent investments inside of this sector.
Yeah. Cordell, it's great to have your twenty
three years of consulting experience here with us
today, but also love that you have that
background. As a physical therapist. You have that
on the ground experience and,
from a from a facilities perspective and patient
perspective. So excited to learn more. Aaron, would
you mind telling us about yourself next?
Yeah. Great.
I'm I'm a managing director that, sits in
VMG's
valuation transaction advisory services group, and I've been
here
for about twenty years now.
I work typically with health systems operators,
investors,
and their advisers, so sort of a motley
crew
across many of the health care verticals,
in
services
and insurance risk businesses.
And a lot of my work focuses in
business and asset valuation and consulting related to
transactions,
as well as intellectual property data and other
novel kind of assets as that comes up.
A lot of it's driven by, you know,
just the regulatory compliance needs, but also transaction
planning, accounting, and and strategy.
So the ASC space is, you know, a
very busy, very active market in a number
of respects
and its, you know, role over time. The
the place that ASCs fit continues to
evolve. And so it it just has made,
so I've seen a lot of ASC transactions
over time just by virtue of the fact
it's a pretty pretty active,
busy, and vibrant market. So
Yeah. Erin, so great to have you with
us. And, again, twenty years of experience, I
I know you're going to add so much
to this conversation.
And I appreciate also how you teed up
really where we're headed with this discussion, which
is some of these trends that we're seeing
in the ASC space. You noted it's a
market that is growing quite rapidly,
and we are seeing ASCs emerge
really as a central pillar in many health
systems'
long term growth strategies.
So I'd love to hear from both of
you on what you see is driving this
trend
as well as the key barriers that systems
are facing in developing ASCs that will actually
deliver sustainable revenue and also expand access to
care.
Eric, I'm happy to happy to start.
I think as as I kind of evaluate
that question,
certainly, it's probably,
if not the number one, but maybe the
number two, kinda inquiries that are kinda coming
into our firm from health systems as they're
trying to think through kind of their ambulatory
strategy and what do they do with ASCs.
And, you know, kinda your your question is
why. Like like, what are the things that
are driving towards that?
You know, certainly,
there's a, a technology
and a comfort that has, you know, I
think, really accelerated since COVID occurred where,
you know, we are seeing probably patients that
are a little higher acuity
that previously were, you know, only only had
surgeries inside, like, a hospital outpatient department.
That's transcending to where now people are becoming
more comfortable doing that care in maybe even
off campus or on campus, you know, ASCs.
And so that's, you know, you know, kinda
driving,
your health systems to have to kinda revisit,
you know, some of this.
From a policy perspective,
like, we're in a totally different space. Right?
We have
policy is is continually
pushing, you know, more cases outside of the
hospital to ESCs. We've had the inpatient only
rule. We've had,
you know, kinda like, you know, pending site
neutrality legislation, you know, that's out there.
And it and it's all kinda pointing us,
you know, you know, solely towards this one
direction where we're gonna see kinda more more
care outside the four walls of of of
a hospital itself.
Some payers in some markets have gotten
more active and, like, in their preauthorization
process of, you know, lower acuity work. You
maybe think of, like, you know, colonoscopies or
endoscopies
where they're really kinda pushing that pre auth
work for that that care to be delivered
in ASCs only.
And then I'd say, like, the last, like,
kind of policy kinda directed maybe issue is
we've seen some states, you know, Tennessee, North
Carolina, South Carolina,
where there's actually been, like, a relaxation of
some of the state health plans or the
certificate of need.
And so
ASC development is, you know, more on the
forefront that we're seeing in health systems that
weren't in this space,
and maybe they had some quasi protection because
of the state health plan rules.
Now you'll kind of being focused in in
in getting into that.
And then just, you know, the last part
of it is just maybe the actually at
the physician or the patient level
in that you know, there's a preference. Right?
If you can if you can get your
care, you know, maybe outside the four walls
of of a hospital setting
where, you know, you know, parking is is
is potentially
easier and better,
You know, the the actual you know, the
the peri op experience of kinda getting in,
getting out, getting home, getting discharged is is
potentially easier.
And so there's just there's a lot of
factors that are kinda driving, you know, why
patients or why physicians
also wanna kinda access care in ASC setting
itself.
Mhmm. Aaron, I'm I'm super interested in kinda,
like, like, like, what you're seeing with your
clients and and what's driving this emergence.
Yeah. Yeah. No. I I I check all
that up. That external environment, Cordell, is is
really, I think, the big
the big heading.
And maybe it speaks to a little bit
to the the last part of the question,
Eric, around barriers. But, certainly, there's a you
know, for for for a health system specifically,
there's a lot of inertia and momentum in
the external environment.
So whether that be federal as Medicare
kinda changes
state based
sort of relaxation, as Cordell mentioned, of of
of things that provided some sort of barriers
to
to really having an ASC strategy,
you know, run. I would also add to
that, though, the
who's who's involving themselves in the ASC space.
And we continue to see
private equity sponsored
platforms,
you know, of various sizes, shapes, and contours
get into the ASC space, and
the management company operators,
you know, are still,
very active and and pursuing their strategies. And
so that you know, those you know, as
the as the competitive landscape continues to evolve,
I think it's it's
reaching more of a fever pitch maybe,
you know, more recently in
needing to have a,
a really viable ASC strategy.
You know? And then and then probably lastly,
their physician alignment.
Sitting in one place and looking at how
things evolve just over time. You know, there's
this sort of ebb and flow of, you
know, every five to ten years, you you
sort of see both ASC life cycles as
they sort of work their way through their
the physician's
practice life cycle.
And then and then the the external market,
it sort of follows some ebb and flow.
And and this is certainly a period of
time where where it's it's flowing more to
the benefit of, you know, ASCs in general.
But that physician alignment factor is really key.
You know, the ASC models in general are
really good at aligning interests of payers, patients,
health systems, and physicians. So all the stakeholders,
really win in the ASC environment, and and
we're just seeing that play out.
Mhmm. Yeah.
It it's so interesting to hear the number
the sheer number of factors that are shaping
this trend. In just this short response, we've
touched on policy changes, certificate of needs, patient
preference, you know, what's going on in private
equity sponsored platforms,
competition, physician alignment.
It's certainly a dynamic space, that ASCs are
operating in right now.
And so I'm sure it's something that is
difficult for for those health systems that are
just starting to consider or navigate an ASC
strategy. I'm sure getting started is quite challenging.
So for those leaders who are just starting
this journey, what guidance would you offer around
evaluating and structuring strategic joint ventures, acquisitions, or
even partnerships?
Aaron, I'll kick it to you first.
Yeah. Great. You know, I'd say number one,
it's it's understanding
you know, it's it's just getting back to
the fundamentals of objectives
and and sort of
the size, shape, contours of of what
the ASC strategy is going to accomplish.
Meaning, is the opportunity
around one, two, or three ASCs, or is
it a a more dynamic market
where,
you know, a health system
may be trying to set up a a
structure that can accommodate or respond to, you
know, working with different parties and operators and
and cover multiple states? And so I think,
you know, just getting
getting those things
defined and some clarity around them is a
really good first step
to figuring out exactly what you need and
what structure
and what strategy would really support
that the, you know, that vision, that that
sort of objective.
You know, you could you could not contemplate
an ASC strategy needing to make acquisitions.
And so that would sort of lead you,
you know, to to sort of prioritize maybe
certain other structural aspects
versus having you know, knowing that you'll need
to sort of have a a structure that
can accommodate acquisitions and just different things. And
so you really wanna have a design that
supports the
the initiative.
And and I think a lack of clarity
around that is it just as a first
step often
maybe it makes it introduces some friction and
and makes things take a little bit longer
because there's sort of a, you know, inability
to articulate exactly what all might happen
or what the needs of the strategy,
might require. I don't know. Cordell, what do
you think? You know, when we start this,
I tend to like, you know, systems or
hospitals
to, you know, kinda take a step back
and really look at their entire kind of
book of their ambulatory surgery business or their
procedural business,
you know, work with their clinicians, you know,
really try to identify, like, those cases that
have, like, a, you know, like, a low
anesthesia
kinda ranking
or, you know, the the cases that really
are likely in a site kinda new, you
know, neutral environment to be potentially pushed outside
the four walls of a hospital,
they really kinda know what that universe is.
I think it's a good way to just
kind of immediately kinda put up a a
framing
around that.
And then, Aaron, I agree with you in
you
when you're evaluating,
there's a myriad of options.
And the myriad of options and and how
do you kinda get started, how do you
get to first base,
you know, how do you kinda overcome some
inertia? But if you can if you can
understand
what carrier you're already delivering
and what part of that carrier delivery potentially
could migrate to an,
it gives you at least a a kind
of a rudder in the water.
Yeah. But then most, you know, most health
systems and most hospitals, I mean, they tend
to run, like, a, you know, joint commission
or kind of a, you know, kinda highly
regulated,
you know, kind of business entity.
And, you know, there needs to be a
recognition that as you look at, like, your
competencies,
being being successful in the inventory
surgical environment, it it requires some things that
are a little bit different. Right? It requires
a viewpoint that maybe is, you know, enterprise
wide. And so you're you're getting you're using
the ASC in, an opportunity to maybe go
into noncore markets that you you don't otherwise
have,
your inpatient, you know, and and bed capacity
already in. Or it requires you to think
about, you know, competencies
in terms of, like, you know, how do
we make decisions, how responsive can we be,
can we be really a good, you know,
active partner with, you know, other stakeholders and
shareholders, you know, in type of this type
of, you know, kind of, you know, your
business model.
And then, you know, it it was said
earlier,
and and agree a 100%, you know, with
with Aaron in that
so much of our provider and our physician
workforce is already in employment.
And it is a great ASCs can be
a great physician alignment, you know, opportunity.
But but because so many health systems employ
so many doctors, including, you know, surgeons and
proceduralists,
you also really have to think your way
through
what is what is, you know, ASC development
really mean in context to the fact that
I already have a financial relationship through employment
or a contract relationship with with this group
of doctors.
And so I think, you know, kind of
taking a step back,
you know, organizing all the deck chairs to
really, really kind of know your market,
understand,
you know, the volumes that are at play,
understand the growth opportunities that are out there,
and then being really honest with yourself about
what competencies do you have or don't have,
I think then you'll start to inform the
way in which you would start to think
about, you know, partnerships or
joint ventures or, you know, the need for
a strategic partner to, you know, kind of
fill your development.
Yeah. I appreciate the advice from you both.
From what I can tell, it sounds like
there's really, in those initial steps, a a
great need for clarity in general, whether that's,
you know, I think what goes into that,
it sounds like is assessing the current state,
getting honest,
with yourselves as Cordell, as you mentioned,
whether that's assessing the market services, competencies,
business opportunities,
really helpful first steps.
And I'm curious if you both think about
whether we're talking about ASC development strategy in
general, or even taking those first first steps
toward that.
It does an example of a health system
come to mind who really got this right?
And if so, what do you think contributed
most to their success?
Yeah. I can I can take a crack
at that one, Erica? I think I won't
I won't
call I won't name any names or call
anyone out, but I think it's it's along
the lines of what what we've said in
terms of
prioritization
and
understanding
that, you know, to Cordell's point,
in in their core
for a for a small,
smaller regional
health system presence,
you have sort of, you know,
an employed physician group with a compensation
model and and and operating rooms that have,
you know, set surgery schedules.
And and so that that's one part of
an ASC opportunity is is sort of impacting
or disrupting that flow.
But the priority really was and and over
time, certainly, with all the external factors, sir,
you know, that would be,
you know, part of the strategy is impacting
sort of, you know, the core core market.
But as the
health system expanded,
their ASC strategy really led with or prioritized
new and getting into, you know, sort of
adjacent
geographies,
such that it was minimally disruptive to the
core legacy,
you know, operations and really provided a way
to move into markets,
align with physicians,
and,
demonstrate some the model,
and and really stand it up effectively.
Because
while the ASC strategy really affected all of
their markets
over time,
Getting some some wins and starting these new
businesses,
was really important in building trust with the
physicians. And so when it came time to,
you know, discuss with, you know, the employed
physicians and sort of more entrenched legacy operations.
There was some good trust built.
There were already physicians in the community that
had good things to say.
And so, really, I'd say, you know, getting
it right is goes into that that planning
and and that clarity and honesty about where
the where the friction might be and and
where the opportunity really might sit and just
prioritizing accordingly
to,
to to you know, it's all sort of
gonna get there,
but in, you know, in what order,
is is critically important.
Yeah. Aaron, thanks so much for the example.
It's really helpful to hear how this is
working for other systems,
on the ground.
I just wanna check-in with you, Cordell. Before
we get to closing thoughts, anything that you'd
add there?
I would just say, like, you know, health
care remains local. Right? I think ASC
distribution
or, you know, ASC
development, it is very uneven.
You know, what works potentially in in one
market is not potentially gonna be successful in
another market. Maybe it's because of,
you know, state level issues.
Maybe it's because of,
you know, just the the local kind of
payer community, you know, how they've kinda organized
themselves.
It could be
the market dynamics of what you're in is,
you know, your market's not growing. It's maybe,
you know, aging, and maybe you have a
deteriorating payer mix that's there.
And so
kinda, you know, taking a step back and
really, you just, you know, organizing
what's
best for your community and, you know, your
system and your kind of stakeholders
is this is, you know, a 100% of
space where there is really not a one
size fits all.
And,
being
very intentional
about your approach, I think, will will pay
off in the in in the long run
as compared to,
you're making more,
you know, short term, you know, opportunistic
type decisions that, you know, could, you know,
go against really what's in the best interest
of your, community over the long haul.
Yeah. Really important to highlight, Cordell,
the uniqueness of each market that health systems
are operating in and how that will inevitably
change
ASC strategy.
Well, it's been great talking to you both,
and I I wanted to end our conversation
on kind of a forward looking note.
I'm curious if you could share
any shifts or emerging trends that you anticipate
shaping the ASC landscape in the next few
years
and one step that health systems can take
now to prepare
for what's coming.
Sure.
I'll jump in, Eric. I'll I'll just give
you a couple things. One,
just maybe in the way that, like, society
is moving in general. I I do think
we're gonna continue to see more
subspecialty
focus inside the ASC space.
And so,
you know, whether we're talking about your musculoskeletal
and it's musculoskeletal
focused on total joints or,
you know, spine related or,
you know, cardiac, and now a subset of
cardiac is really electrophysiology.
So I do think you're gonna continue to
see, you know, more and more interest in
in finding,
you know, kind of, you know, single specialty,
centers. That has been a trend, but I
think that's only going to kind of, you
know, potentially accelerate.
I I think we're we're gonna see health
systems
that have to start thinking differently about their
entire managed care strategy as a result.
And it it just intuitively, it doesn't make
sense to me that
I can have the same procedure
in a hospital setting
as compared to an ASC setting, and the
ASC setting is getting paid,
you know, 50¢ on the dollar of what
you'd get reimbursed inside of a hospital setting.
And the connection to that is, well,
if hospitals and health systems were getting, you
know, remunerated
adequately for, you know, the excess capacity
that they have to have and being a
being a hospital,
maybe, like, the idea of site neutrality
for these procedures
are appropriately gonna push, you know, things that
can be, you know, off the hospital campus,
into the community, into an ASC.
It's gonna potentially make, you know, all of
that,
a lot a lot easier a lot easier
to accept.
So I think really progressive
health systems are going to
look at, you know, long range financial planning.
They're gonna build all of that in. And
I think they're gonna take a really hard
look at just their overall kind of managed
care strategy,
specifically for their, you know, their ED business,
for their inpatient business where they really need
to have
capacity. Then the last thing I'd say, and
it's, you know, something that Aaron kinda started
with, we're in this perpetual,
like, cycle right now where no matter kind
of what we do,
the hardest part of this is access,
workforce shortages,
actually finding, you know, high quality, high value
doctors to be able to deliver care.
And so I do think that you're also
gonna see, like, a an increasing
preponderance of health systems are gonna open up
syndication opportunities
for employed physicians. Some already do. A lot
already do,
but some have been resistant to that. I
think just in trying to solve their workforce
issues, I think they're gonna use ASCs as
another tool and another vehicle to be able
to kind of attract
high level talent to their respective communities themselves.
Such great notes, Cordell. Thank you so much.
Aaron, anything that you'd add as you look
to the future here?
No. I you know, just one one thing
to to to add, and that's, you know,
the the continued
migration of procedures,
surgeries
being right for the ASC setting,
aging population and utilizers,
you know, patient needs requiring more access points,
the regulatory and reimbursement environment. All those things
for for some time now have been very
positive tailwinds for ASC. It's a it's a
growing market. And really, to Cordell's point, when
I look at that and I say, okay.
Well, what's the what's the headwind?
I think it's really how quick
can you move because in some markets,
more ASCs may be disruptive to
sort of legacy operations.
And
is is there a physician
supply issue? Is there sort of a having
the right high quality
physician partners is is you can't have an
ASC without that. And so there's there's certainly
a lot of tailwinds as we as we
look forward, things sort of blowing wind in
the sales of the the ASC market. And
it's really gonna come down to to, I
think, execution on how do you align with
the right, you know, physician partners and the
and the and the right institutional partners to
to sort of deliver on an ASC strategy.
Absolutely.
It's been such a great conversation with you
both. I appreciate you walking me and our
listeners through this landscape that it sounds very
exciting and challenging at the same time, a
lot of opportunities ahead, but also,
the need to keep an eye on some
shifts in policy,
payer procedures and policies as well.
But just wanna thank you both for making
the time for Becker's today and for sharing
your expertise with our listeners.
Thanks for having us, Erica. Thanks, Erica.
It's been great having you both. And, of
course, we'd also like to thank our podcast
sponsor today, VMG Health.
Listeners, be sure to tune in to more
podcasts from Becker's by visiting our podcast page
at beckershospitalreview.com.