In Brief: Here’s what hospital leaders need to consider when deciding whether an in-house or outsourced MSO solution is best for their ASC.
Your organization has an ambulatory surgery center (ASC) or has decided to add one to its portfolio. What questions should you be asking to understand whether an in-house or outsourced management services organization (MSO) is the right avenue to provide services to your ASC?
WHEN should hospitals think about establishing an ASC MSO?
Hospitals are increasingly evaluating their capabilities to bring MSO services in-house rather than entering into third-party agreements with external management companies. We also see hospitals creating joint venture MSOs with those third parties, where equity is shared and services are provided by one or both parties. ECG recommends that any hospital or health system with an existing ASC, and those with intentions of building, buying, or partnering with one, should:- Work through a structured process to understand the management services required for an ASC.
- Evaluate their abilities to deliver those services at market-competitive rates.
- Determine the best short- and long-term approach to providing the services.
WHY would a hospital want to provide MSO services to an ASC?
A hospital can offer to help an ASC with payer contract negotiations, improve access to purchasing relationships, and obtain better pricing of support services. The hospital would receive management fees in exchange for the services, and ASC owners would retain 100% equity in the venture. In contrast, third-party management companies often have an equity position in the ASC and charge management fees that are tied to an ASC’s revenue stream.With the increasing shift from HOPD to ASC settings, in almost all cases, the value of preserving equity will far outpace potential near-term savings/value created by a management company seeking an equity position. The long-term value of building an MSO is evident as surgical services continue to shift out of the hospital to ASCs, where revenue generated from the MSO can help offset hospital losses sustained from reduced HOPD receipts. Furthermore, a successful MSO could potentially serve as a platform for future growth opportunities in existing and new ASC partnerships. The MSO also helps create further linkages (partnerships) between a health system and other healthcare providers in the market.
WHAT MSO services might your organization want to provide to an ASC?
Successful ASCs depend on a variety of management services to optimize operations and drive positive financial outcomes. Understanding what those services are is essential when it comes to aligning your organization’s resources and capabilities with ASC needs. From governance structure and day-to-day business office management to growth and sustainability measures, MSO services can give an ASC a critical infrastructure beyond the operating room, leaving clinicians to focus on providing high-quality care to patients. Examples of MSO services include:
- Regulatory compliance oversight.
- Policy and procedure development and tracking.
- Group purchasing and legal support.
- Business office management, payer contract negotiation, and revenue cycle management.
Once you understand an ASC’s needs, you will need to examine whether your MSO can provide those services in a cost-competitive manner with appropriate benefit to the ASC.
WHO can provide MSO services to an ASC?
Finding a team with the skills and time to deliver the appropriate ASC management services can be challenging. ASCs can either hire administrative and clinical leaders who provide MSO services internally or purchase some or all of these services from an external organization. External organizations can include hospital/health system partners and organizations dedicated to ASC management.
Regardless of the external entity providing the service, any organization that provides MSO services is legally required to charge a fee consistent with fair market value for the services rendered. This fee structure is necessary to avoid the appearance of inducement for referrals into the ASC or to the hospital if the hospital is providing the MSO services.
Edited by: Matt Maslin
Published December 21, 2022