The health care field is evolving at light speed, adapting to changing patient, physician and payer expectations. This is particularly evident in the physician practice management (PPM) and ambulatory surgery center (ASC) industries. We gathered recently in Nashville, Tennessee for the 2018 Physician Practice Management & ASC Symposium to explore and discuss these changes – from what’s improved in the PPM industry since the bubble-burst of the late 1990s to the challenges that lie ahead.

We had more than 500 attendees at the conference – from PPM/ASC executives, private equity professionals and investment bankers to provider-side representatives and fellow attorneys. With so many knowledgeable minds in one place, there was no shortage of learning opportunities around the critical business, transactional and regulatory issues facing the PPM/ASC industries today.

We saw one overarching theme surface during both sessions: running a PPM or ASC is more like running a co-op than a business. Therefore, in order to deliver meaningful value, there needs to be an honest and reciprocal relationship between management and physicians. In other words, there needs to be collaboration and input from all parties.

With that, here are our five key takeaways for bringing value to a PPM/ASC practice:

  • Understand today’s physicians, not those from the ‘90s: Today’s physicians are younger and leave medical school with more debt, but they also expect a more comprehensive work-life balance than Gen Xers did. As a result, they may be willing to work for large, established practices instead of starting their own or joining a small independent practice. Aligning this idea with the reality of increased regulation and administrative tasks means that appealing to the newest generation of physicians doesn’t necessarily mean selling the idea of a PPM, but rather how a specific agreement can add value in a differentiated way.
  • Gather physician input: Whether you’re running a PPM or an ASC, soliciting input from the physicians who run the day-to-day clinical operations is of the utmost importance. This should happen from the outset of the relationship and continue even after the deal is done to foster a workable, successful environment over the long-term. Multiple Symposium panelists touched on how the greatest barrier in acquiring a practice can be lack of trust and understanding. It’s worth going the extra mile to get to know the physicians you’ll be working with. After all, they’re going to be your partners, not only in the management of the practice, but in its overall success as they are revenue generators.
  • Allow for autonomy: Part of developing a strategic partnership with physicians lies in mutual trust. A PPM/ASC that micromanages its physicians signals distrust, which creates an unhealthy partnership. As discussed during the “Delivering on the PPM Value Proposition” panel, one of the two major ways to entice groups that don’t have a “for sale” sign up – aside from valuation – is ensuring that once signed, physicians will continue to have a certain amount of autonomy in their everyday work. When it comes down to it, the daily work of physicians is the practice of medicine, not the administrative tasks.
  • Ensure a smooth transition: As noted during our “Closing is Just the Beginning” panel, acquiring a PPM or ASC is not easy when considering all the logistics to overcome. From financial to personnel to cultural integration, all are important considerations when bringing a new practice under your wing. Cultural integration, in particular, was the consensus among the panelists when discussing the biggest barrier to a smooth transition. Make sure physicians feel welcome, included and comfortable with this arrangement, whether you’re at the deal-making stage, the transition stage or the daily work stage. PPMs must continue to be actively involved and bring value, or there will be physician resentment down the road.
  • Be open to partnership opportunities: When asked about their willingness to partner with health systems and hospitals during the “Getting ASC Deals Done in Today’s Competitive Environment” panel, the consensus among the participants was that if it improves conditions for physicians, it is worth considering.

We want to thank all of the panelists and attendees at our 2018 Physician Practice Management & ASC Symposium this year for contributing their thoughts and allowing us to leave the conference a little bit smarter on today’s PPM and ASC industries. We’re looking forward to next year.

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At McDermott Will & Emery’s 2018 Physician Practice Management and ASC Symposium, some of the leading minds in the PPM and ASC fields gathered to discuss key issues and their thoughts on the future growth and direction of the interconnected ASC and PPM industries. Below are a few of the key takeaways from McDermott’s largest conference to date:

  1. The True Platform. Loose confederacies of physician practices do not equal a sophisticated and integrated platform. The most successful platforms have a developed infrastructure, a talented leadership team, a simple model and a unified vision to build a national/regional company focused on quality of care, patient satisfaction and physician engagement. Competition for those platforms is tough, and building those platforms from scratch requires time, capital, organization and patience.
  2. PPM Differentials. We asked the CEOs of national PPMs why today’s PPMs are different than the failed PPMs of the 1990s. They discussed several key differences, including a shifting physician mentality, difficulty in sustaining independent medical practices, patient dissatisfaction with health care, the shift towards value-based care, the management company’s emphasis on delivering value, and new governance structures/compensation models that encourage communication and alignment among stakeholders. Despite these differences, it is clear that there will be some winners and losers, and that PPMs with a clear growth strategy, a compelling vision, a thoughtful compliance infrastructure and an emphasis on patient satisfaction have the greatest likelihood of success.
  3. ASC Perspectives on the PPM Consolidation. We asked the CEOs of leading ASC management companies for their thoughts on consolidation in the PPM industry. While some ASC management companies are pursuing a limited PPM strategy, it appears that traditional ASC management companies generally view the high multiples being paid in today’s PPM transaction as a barrier to entry. To date, many of the high valuations have centered around the dermatology, dental and ophthalmology specialties; if the transactional focus shifts towards GI and orthopedics, it is unclear whether the traditional ASC management companies may decide to pursue a more active PPM strategy.
  4. ASCs are Hot! Health systems, traditional ASC management companies and other top tier investors continue to strongly believe in the tried and true “ASC model” as a core part of their investment strategy. The good news for investors is that the ASC industry continues to be highly fragmented, with approximately 70 percent of ASCs continuing to be independently owned and operated, and multiples still landing in the reasonable 6-8X range. Expect the trends towards ASC consolidation to increase, as payors and health systems race to lower their cost of care and shift more volume into the outpatient setting.
  5. New Investors. We are seeing many changes to the traditional health care landscape, with payors investing in retail medicine (e.g. minute clinics and urgent care), primary care, ASCs and other providers in an effort to alter the health care delivery continuum. The entrance of tech companies into the health care industry is also being closely watched by payors, providers and other stakeholders. Expect new partnerships geared towards achieving the “triple aim” to emerge in the year to come.

We want to thank all of the panelists and attendees at our 2018 Physician Practice Management & ASC Symposium this year for contributing their thoughts and allowing us to leave the conference a little bit smarter on today’s PPM and ASC industries. We’re looking forward to next year!