Marriott Rivercenter San Antonio, Texas Oct. 13-16
orexcellence.com

Operational Benchmarking:
The Story of Your Business
Your surgical facility is awash in data: AR days, turnover times, block schedule usage. These numbers tell the unique story of your center — and either signal its prosperity or its poor health. Stephanie Martin, BSN, RN, CNOR, CASC, the administrator of the Flagler Surgery Center in St. Augustine, Fla., will show you which metrics are most important to measure and how often you should monitor them. It's time to tame the numbers. Register now at orexcellence.com to see Ms. Martin and our other great speakers Oct. 13-16 at the beautiful San Antonio Rivercenter.

Few saw last month's Tenet-USPI mega-merger coming. But in true if-you-can't-beat-them, buy-them fashion, one of the country's biggest hospital chains paid $425 million for one of the country's biggest ambulatory surgery center chains to form the country's largest provider of ambulatory surgery.

Tenet Healthcare will also assume about $1.5 billion in United Surgical Partners International debt as part of the deal that will give Tenet 50.1% control over the company. Tenet will have options to buy the rest of USPI later.

The joint venture, which will maintain the United Surgical brand on the facilities, will have ownership interest in 244 ASCs, 16 short-stay surgical hospitals and 20 imaging centers in 29 states. It will have partnerships with more than 4,000 physicians and 50 health systems. Before the deal, Tenet — the third-largest for-profit hospital chain in the country, with 83 hospitals — had only 44 ASCs. Why was Tenet so hot for more surgery centers? Margins and market forces.

• Margins. With operating margins of 30 to 35%, ASCs can be more profitable than full-service hospitals. "The reason margins are so high is that you don't have all the overhead and cost of a 24-7 hospital," says Tenet president and CEO Trevor Fetter. USPI has built its business on the 3-way proven partnership model with health systems and physicians.

Relations can sometimes be strained between hospitals and surgical centers. ASCs have long been vilified as focused factories that cherrypick productive surgeons who perform profitable cases on well-insured patients. That disdain is fading. "The partnership accelerates Tenet's and USPI's shared strategy to expand our ambulatory service offerings to meet growing consumer demand for services that are provided in a lower cost, more convenient setting and that are aligned with the long-term transition to value-based care," says Mr. Fetter.

• Market forces. Tenet's move comes as a direct response to healthcare reform. As more Americans obtain health insurance under the Affordable Care Act through government-run marketplaces and an expansion of the Medicaid program for the poor, healthcare providers are gaining more insured patients and federal subsidies to hospitals are being scaled back.

Value-based care is spreading, too. The deal comes as private and public insurers shift away from the traditional fee-for-service approach to value-based pay that's tied to outcomes, performance and quality of care. One analyst said the deal gives Tenet "a good growth driver to offset the pressures of backloaded reimbursement cuts with Obamacare."

The Tenet-USPI deal also signals that the fragmented ASC sector is ripe for consolidation. It's fair to question the future of USPI's competitors, Amsurg and Surgical Care Affiliates, as well as independent, physician-owned ASCs.

"ASC management companies like USPI and Tenet have been leaders in advancing the ASC model to where it is today — a solution to the high cost of health care and a safe place for millions of patients to receive care," says William Prentice, chief executive officer of the Ambulatory Surgery Center Association. "I fully expect their new relationship to maintain that trend in the markets they operate in. That said, there remain thousands of successful independent ASCs around the country, which shows that both approaches can succeed when allowed to compete fairly."

This deal also represents a major victory for the same-day surgery model that has withstood challenge after challenge, none of which could topple better health, better patient experience and lower cost. Hospitals once thumbed their noses at ASCs. Now they're throwing bouquets at them.