The ups and downs of different settings
Freestanding vs. hospital-based vs. corporate ASCs
By Stephen W. Earnhart, MS
President and CEO
Earnhart and Associates
Dallas
Even though freestanding surgery centers, hospital-affiliated centers, and corporate centers are becoming more difficult to distinguish from each other at first glance, the differences remain vast. (See Same-Day Surgery, September 1996, p. 106, for a discussion of differences between single-specialty centers and multispecialties for the management staff.)
Before you become so frustrated about your work that you make a leap to another type of center, you may want to consider the pluses and minuses of each setting. All definitions of same-day surgery settings are logically arbitrary, so I’ll give my definition of the three (all can be single- or multispecialty):
• Freestanding: completely independent from the local hospital. In fact, the hospital is its main competitor. Usually owned by a single physician or group of physicians.
• Hospital-affiliated: can be in the hospital, on the campus, or at a satellite location from the hospital, but owned by the hospital. It may have physician venture partners. Corporate ambulatory surgery centers (ASCs) are the main competitors.
• Corporate freestanding: located just about everywhere but usually close to a hospital to give the perception to patients that it is part of the hospital community. It usually has physicians owning a part of the center, but no greater than 49% of the entity. Competes primarily with the hospital or hospital-affiliated ASC.
Life within the walls of these centers is completely different from one another. I know this all too well, since I have worked in all three environments. I have competed with all of the above at one time and have learned the inside secrets of the trade for each.
It has become more difficult to distinguish between these centers’ structures primarily due to the competition for the managed care contracts. There was a time when you could offer greater efficiency, equity participation, or the security of the hospital environment to lure the physician and his or her cases to your center. Well, that statement is still true to some degree, but there is not a person reading this column who doesn’t know that it has, for the most part, changed. Today, more time is spent on contract pursuit and negotiations than physician recruitment.
The area I found to be the most different in the above scenarios was working with my boss. As a freestanding ASC administrator, far too much time can be spent on dealing with the pressures of working with a relatively small group of physicians. A great deal of time is spent on dealing with triviality and the idiosyncratic needs of the owners. Often, requests can be unreasonable and self-serving to the individual owners.
The staff is usually underpaid when compared with their hospital or corporate peers, and turnover of staff is high. There is a strong sense of alienation from the local hospital and the peers that work there. Much of the staff at the center left the local hospital to work at the center to enjoy the better hours and excitement of the freestanding industry, but at a price. They know that it could be difficult to get a job again at the hospital. Often the staff and physician owners are viewed as expatriates by the hospital. The chance for career advancement is low and increasingly frustrating for the staff. Job security is often poor in this type of center, due to the continued threat of cutbacks and mergers by another group or the hospital.
Often, this type of center is the first to lose the important contracts that will keep their physicians in the center. With the changing health care milieu, the odds are good that a local hospital or corporate chain may buy the center away from the physician owners, and the staff could be out of a job.
On the bright side, this group usually enjoys a more satisfying lifestyle. Meetings are usually rare, and when staff are off duty, they can usually enjoy their time off without fear of being called back in to cover for someone who called in sick or who is on vacation. What they may lose in salary may be made up by having a more family-oriented workplace. The staff is usually close-knit and works well together. The degree of petty bickering and back-stabbing is much less than one might find in another type of center. The physician owners, knowing they need their staff as much as the staff needs them, is usually more generous with nonsalary and monetary rewards than other center structures.
Hospitals: Always in a meeting
Hospital-affiliated centers just have too many meetings!
Every time I return a call to a hospital ASC, I always get the message that the person is in a meeting. I remember my own frustration of sitting in a hospital meeting for 30 minutes trying to decide when we would have our next meeting. We had to jockey our time to get together around each other’s meetings!
An obvious disadvantage to a hospital-affiliated ASC is the fact that you are a part of a much larger and diverse organization. That can clearly have its advantages. Job security is the highest in these centers, but it can also be a downfall. Often, individuals that should have been given the boot years ago are still there and still complaining about everything.
Hospitals tend to have more benefits than the other types of centers. These benefits can be a major plus for staff members raising a family or seeking tuition reimbursement, but their salaries typically are lower than that of the corporate world. The corporate centers do not have the same level of benefits, however.
Job satisfaction is usually high in the hospital environment, due to the fact that you typically see all types of cases and usually can rotate through various other departments if you wish. The price is often shared call, weekends, and holiday coverage.
Normally, efficiency (in time and profitability) is lacking in the hospital centers. Not as much time is spent on getting the best pricing on supplies, and room turnaround is usually much higher than the other types of centers. Yet the hospital centers have the best shot at obtaining the contracts that will keep their physicians coming back.
More physicians are rebelling at the lack of efficiency and equity participation in the hospital centers, however. As a result, more hospitals are establishing satellite surgery centers that allow for both by farming out the management of their centers and revamping their not-for-profit structure to allow for equity participation.
The corporate ASCs, once the promise of the industry, are having their own difficulties.
While hospitals spend too much time in meetings and the freestanding centers spend too much time on trivia, the corporate world spends too much time on pennies per share.
To understand the corporate environment, you need to understand that the majority of these centers belong to only a few large companies. These centers are publicly traded or looking to be publicly traded in the near future. They need to demonstrate to Wall Street or their venture capital partner their ability to grow and efficiently manage their centers.
A corporate chain with two centers can double its size by the development or acquisition of two new centers. Everyone is happy. But once they have 20, 50, or 100 centers, they need to gobble up vast amounts of centers to show continued growth. As a result, the administrators at these centers find that they are playing musical chairs with their regional vice presidents or directors. They just establish a rapport with one person, then bang! That person has been replaced, and they have to start all over again. It is a similar situation with the physicians. They often complain that no one is concerned about their needs and that the need of the company always is important.
Job security at the corporate level is not what it was even two years ago. With declining profit margins in all the centers due to managed care contracts and reduced surgery, cutbacks in services and personnel are often the norm. Some of the mega-centers in the corporate world that handle more than 10,000 cases per year have become what the physician users were looking to escape from years ago when they started bringing their cases to the center to begin with. While the corporate world used to boost the highest salaries, much of that money is now bundled with incentive bonuses, which is usually based upon reaching or exceeding budget.
As outpatient surgery continues to grow and become a dominate player in the health care environment, we are going to see more changes take place. Already their are hybrids of the above categories that will take ambulatory surgery into the next century. They are a combination of the above that seek to draw upon the strengths of the existing programs and weed out the less desirable traits. It is going to be an interesting next few years.
[Author’s note: I delivered the keynote address at the International Congress on Ambulatory Surgery in Adelaide, Australia, in September. While there, I visited with a number of ASCs and government agencies. In next month’s column, I’ll report on issues discussed at the conference.
To offer feedback or suggest column ideas, contact me at Earnhart and Associates, 5905 Tree Shadow Place, Dallas, TX 75252. Telephone: (214) 713-6626. E-mail: [email protected].]
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