It might be tough for a doctor intent on building a surgery center to give up a chunk of the ownership before even the first spade of earth is turned. But there's a strong argument to be made to do just that. While many doctors would like to get their centers solidly profitable before they seek out corporate partners to help expansion or reward sweat equity, be aware that corporate partners can be a benefit right from the start.

Corporate partners can take care of all the things doctors and administrators don't want to be bothered about. "Most physicians just want to take care of their patient and not really worry about the business side of things," says Michael Schwartz, MD, part owner of Northpoint Surgery and Laser Center in West Palm Beach, Fla.

The time has never been better to take on a partner. By some estimates, about 50 companies are looking to funnel money into surgery centers (see "The Wall Street View of Surgical Centers" on page 108).

Better bottom line?
One of the most compelling reasons to hire a corporate partner is that it could mean more money in doctors' pockets. An ASC with corporate backing typically generates 30 percent more in both revenues and profits, says Jon Vick, president of ASCs, Inc., of Valley Center, Calif., a consulting firm that helps physicians negotiate and structure deals with corporate partners. The average surgery center with a corporate partner averages facility fees of $1,400 per patient, according to SMG Marketing Group. By contrast, doctor-only centers generate fees of $1,100 per case. Why? Corporate partners are able to negotiate good contracts with third-party payers. All this adds up to a savings that might well make up for the ownership share you give away. "A smaller piece of a bigger pie is better than a big piece of a small pie," says Dr. Schwartz.

A corporate partner can do a feasibility analysis, help with licenses, hire an attorney, write the pro forma, hire the architects, secure computer hardware and software, write bylaws and more, says Jim Corum, director of development for Surgis, Inc., of Nashville, Tenn., which has shares in 23 surgery centers and has five others in development.

Corporate partners can also help plug gaps you might not have anticipated. You might have 10 or 12 doctor-owners who are gung-ho when you start out, but by groundbreaking two or three might have dropped out. A corporate partner can syndicate shares to other doctors to keep the cases flowing in the crucial early months of operation.

In his home state of Florida, a hotbed of malpractice, Dr. Schwartz says his corporate partner, National Surgical Care, has obtained good prices for insurance and put risk management procedures in place.

While it's true that most corporate partners want a significant equity position, many are happy to let doctors have control over day-to-day operations. Physicians can design an operating agreement that requires a supermajority of owning partners to sign off on a big decision like an expansion or a major equipment purchase.

You can always insist on majority ownership, even if that means going with a private corporate partner. Surgis, for example, structures deals so it owns 30 percent of the ASC's assets and surgeons own 100 percent of the real estate, says Mr. Corum.

The case to go it alone
ENT surgeon William Cast, MD, isn't so sure that surgeons need corporate partners right from the start. In 1972, he and a group of surgeons opened the second freestanding ASC in the country. After operating as an independent center for several years, Dr. Cast partnered with now-defunct American Surgical Centers, Inc. Then in 1997, when Health-South acquired ASCI, his surgical center suddenly became a HealthSouth partner.

Dr. Cast sees all the talk of how hard it is to build an ASC - and how surgeons should concentrate on surgery rather than business - as a lullaby corporate partners sing. A doctor who builds a surgery center and makes it profitable is likely to get a better deal from a corporate partner than someone who hooks up with a corporate partner in development, he says.

To get the most out of corporate partners, you shouldn't just settle for money, risk sharing, advice and the like, says Dr. Cast. A corporate partner should give you something you can't get anywhere else, he says. That something extra might mean negotiating with payers, getting good prices for office equipment and getting in good with local employee benefit people. But it should be something of value that stays as value.

Finally, Dr. Cast urges that you make sure you get support from the central corporate office. When you're doing reference checks, make sure your corporate partner is good about returning calls and is effective in resolving problems. "If you are not being properly taken care of, it raises a giant red flag," he says.