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Business Advisor
Convincing Surgeons to Invest in Your ASC
Chris Bishop
Publish Date: December 1, 2008

In developing several successful surgical center ventures, I've heard most every excuse a surgeon can have for not investing in a project. I've also learned how to counter them.

I'm too busy to shift my practice to the ASC.
Translation: I enjoy the 45-minute turnover times at the hospital as opportunities to check my stock portfolio, get a football recruiting update on my alma mater's Web site and see the latest Porsche GT 3 upgrades.

Overcome: Dr. X, you may not be interested in our seven-minute turnover times, but most of our partners find an extra half a day in their weekly schedule to use as an additional clinic day (more surgery) or take all of Friday off instead of half a day.

My practice isn't well-suited for the ASC.
Translation: I'm more comfortable having the hospital's overnight option available for every patient.

Overcome: Remind the surgeon that the ASC must have a transfer agreement with a local hospital for any patient that may require further observation due to pain and nausea. Also, statistics show that only one patient between 1,000 and 2,000 requires transfer, and that this is most often in simple transfer mode — not ambulance sirens blazing. Share with that surgeon this example: "You know, Dr. Jones had that same concern before he shifted his outpatient orthopedic cases to our surgery center. He simply agreed to schedule his lower acuity, healthy patients initially, until he became more comfortable with the high-quality care the ASC delivered."

I can't afford to invest at this time.
Translation: I spend like Donald Trump.

Overcome: Our partners receive substantial distribution income on a monthly basis from their investments. If I could show you how to finance the majority of your investment with your local bank, would you be interested in earning a substantial return on your investment to help you fund all those toys you can't afford? (Disclaimer: If the surgeon invested everything he had in Bear Stearns Subprime Mortgage Division, move on to the next prospect. He ain't lying when he tells you he can't afford the investment.)

The hospital will crush me if I compete against it.
Translation: I'm not one to rock the boat.

Overcome: If you can reduce your turnover times by 80 percent, work in a considerably lower infection rate environment, earn facility fee income from the profits of the ASC as an owner and see your patients achieve a better experience due to the convenience of the ASC, isn't this worth the negative pressure that the hospital may apply? Ask any physician-owner if his practice has been negatively affected by his ownership or if his quality of life has improved from his days of only operating at the hospital.

My No. 1 competitor is an owner there, and I don't want to line his pockets.
Translation: We never liked each other anyhow.

Overcome: I see this pretty frequently and can generally overcome it with a little positive competitive pressure. Yes, doctor, I understand your concern over potentially lining your competitor's pockets, but keep in mind that you'll also earn income from his cases as an owner. The last thing I'd want to see if I were in your shoes is for your competitor to gain the upper hand by marketing to the community that he works in a state-of-the-art, efficient facility, while you are often starting three hours late due to your hospital-based procedures getting bumped for a trauma that arrived in the ER in the middle of the night. At least this way, you're equal to him from a facility perspective and can beat him with your natural charm and better-looking, friendlier office staff.

I can achieve a better return in the stock market.
Translation: I know the market, warts and all. They didn't teach physician ownership in med school.

Overcome: Operated properly, your surgery center should return considerably better than the stock market over time. I certainly wouldn't advise a surgeon to invest his entire net worth in the ASC, but the difference here is that your addition of cases in the center should have a very positive impact on the operation of the facility if the center is operated properly. We have no control over GE's multi-billion dollar acquisition of a Chinese power company when we buy GE stock (do you ever take the time to complete that proxy you receive in the mail?), but in a small ASC business, you should be actively involved in the decision making as an owner and active board member.

The legal documents require me to sell my shares back for a substantial discount if I depart early for an adverse terminating event.
Translation: I don't plan on operating when I'm 70.

Overcome: If you're investing in a profitable center, you should calculate your estimated return on investment and have a strong sense for when you hit 100 percent return on that investment. If you anticipate practicing in that area up to that point, it's probably worth the risk to pursue this investment. Additionally, this provides you with some protection against the other investors leaving for the exits.

If for some reason you believe you may leave early before reaching a substantial return on investment, don't invest. I find that most surgeons understand the prestige and ROI (return on investment) in an ASC, and suggesting that they don't move forward with this investment will actually often create a stronger desire to move forward.

I have an office-based suite to perform my pain procedures, but would be interested in bringing some of my cases to the ASC as an owner.
Translation: I won't risk not being paid for these $10,000 pain pumps and would like to dump them on the ASC, while also enjoying the profits from the ortho, ENT and ophthalmic partners.

Overcome: Are you crazy? These surgeons will never be good partners due to their divided loyalties. They select the most profitable procedures to be done in their office, that they own 100 percent of, and bring the less desirable cases to the center. You're better off without them.

I have dreamed for years of developing my own single-specialty ASC for my group.
Translation: If my group or I own this ASC 100 percent, we enjoy 100 percent of the profits.

Overcome: I understand the pride in ownership. And more should be better, right? Not necessarily. Industry statistics suggest that two-thirds of ASCs are break-even or worse. One hundred percent ownership of a money-losing surgery center will eliminate most of the pride you shared in the development of that center.

Please understand that the GI community is reeling from the recent Medicare reimbursement reduction of about 20 percent. That will move many endoscopy centers into the red. Consider the advantages of diversifying your center across multiple specialties, as well as the advantage of a higher volume spreading the high overhead associated with building and equipping a facility. Stay in touch with this surgeon via e-mail every couple of months; it's likely he'll become frustrated with the extensive setup process and realize the advantage of joining your already-operating facility.