3 Trends in Mergers and Acquisitions in the ASC Sector

Historically, physician-owned centers that opened without corporate support have had an easier time doing well financially; then, if the physician-owners so chose, they could have their choice of corporate partners to whom to sell 51 percent of the ownership for a big payday. Unsuccessful centers could easily find corporate partners specializing in turnarounds willing to take them on.

The market downturn has caused a near-180 in the physician-owned-ASC-friendly atmosphere the industry has become accustomed to. Here, Joyce Deno, RN, the COO, Eastern Region, for Regent Surgical Health discusses the three trends in mergers and acquisitions that the ASC sector is seeing as a result.

1. Financing is tougher to obtain.“With less equity available and banks tenuous, it’s going to be harder to obtain de novo startup financing,” says Ms. Deno. And whether an established center is successful or unsuccessful, corporate partners are going to be more selective and are going to scrutinize more closely during due diligence because, “if they’re going to come in and buy 51 percent, it’s going to be harder for them to justify spending the capital on a facility that has only a minimal chance of survival or turnaround.”

2. There are still opportunities for joint-ventures and mergers with hospitals. With funding for purchasing shares in successful surgery centers difficult to come by and higher valuations tough to obtain, “I think we’re going to be seeing more ASC joint-ventures with hospitals,” says Ms. Deno. “The payor market is shrinking to a few major payors, meaning there’s less ability to negotiate even marginally profitable contracts — in a lot of cases, payors are coming back with take-it-or-leave-it offers that would result in ASCs losing money on cases they perform.”

In other words, ASCs face serious financial challenges on more fronts than ever before, and this may prompt them to join with hospitals to present a stronger unit to payors and financial institutions alike.

“For ASCs, a JV brings negotiating power, stability, less vulnerability,” says Mr. Deno. “ASCs can bring a large volume of cases under the hospital’s wing. If physicians and hospitals are open and receptive to what they can bring to each other, they will be able to provide better healthcare. Really, they need to band together to get through this time — and a lot of strong symbiotic relationships can come out of it.”

3. Another rough year — or even two — is on the horizon. There are two key reasons that the industry will likely remain in this trough before improvement is seen.

First, “Payors are probably losing money on the funds they’ve invested, so we’re going to see a lot of slow pays, and that hits down at the facility level,” says Ms. Deno. “More facilities counting on those day-to-day dollars may begin to fail. Those making marginal profits or hanging in there and doing well may want to look to a corporate partner or JV in order to spread their risk around.”

Second, it may take that long for things to settle at the consumer end.

“The banking and stock market situations are trickling down to patients; if they are losing jobs and insurance coverage and homes, unless it’s a very emergent situation, they won’t be spending co-pay and deductible dollars on elective surgery in the ambulatory setting,” she says. “Those with no insurance may look at ASCs as a lower-cost method for getting necessary procedures done, but they still may have a hard time paying. Until the whole job situation is turned around for the end users of healthcare, it’s going to be rough time.”

Ms. Deno ( jdeno@regentsurgicalhealth.com This e-mail address is being protected from spam bots, you need JavaScript enabled to view it ) is the COO, Eastern Region, for Regent Surgical Health, which buys, develops and manages outpatient surgery centers and physician-owned hospitals, and specializes in turnaround situations. Read more about Regent.

Bausch & Lomb Launches Instrument CE Programs

Bausch & Lomb Japan Names Mitsuo Hirose as Chairman

Bausch & Lomb Japan has named Mitsuo (Mike) Hirose as chairman, effective immediately. Mr. Hirose has served on the subsidiary’s Board of Directors since January 2009.

State Report: Wisconsin

In his january state of the state speech, Wisconsin Governor Jim Doyle described his success in making health insurance premiums tax deductible. He also praised the BadgerCare Plus program, through which “any child in Wisconsin can get health insurance.” The program gained 100,000 new enrollees in 2008, two-thirds of whom were children. Wisconsin ranked second nationally for health insurance coverage, Doyle said.

In addition, he urged private insurers to cover treatments for autism and said he plans to make all public places in the state smoke-free.

 He has endorsed a plan to tax revenue of most hospitals in the state to garner about $393.5 million more in federal aid. Officials at the state Department of Health Services say every $1 of tax revenue would generate $1.65 from the federal government for Wisconsin hospitals. The majority of the money would be returned to hospitals that treat Medicaid patients. Some of the funding would pay healthcare costs for 41,000 low-income, childless adults. If the hospital tax is enacted, the state could use tax dollars originally planned for healthcare to help relieve the state budget deficit.

The Wisconsin Hospital Assn. endorsed the proposal noting “it has been more than a decade since hospitals received an increase in what they are paid to care for Medicaid patients.” Wisconsin hospitals experience an annual shortfall of more than $600 million between what it costs to treat patients and what the Medicaid program pays, according to the WHA, which urged legislators to act quickly on the plan so it can be applied retroactively beginning fiscal year 2009.

 PILOT LAUNCHED

Humana Inc. has partnered with the Wisconsin Health Information Exchange to ensure clinicians have access to the most comprehensive community-wide data available for emergency department patients. WHIE uses information technology to provide secure authorized access to clinical data, improving communication and reducing duplication. Humana has agreed to provide a WHIE-administered incentive to providers for utilization. WHIE launched the ED Linking Project in 2007, with clinical use beginning in 2008.

As of February, WHIE had 13 hospitals across four delivery networks contributing data to the exchange, and five emergency departments using the exchange in regular patient care. During 2009, it plans to expand the number of participating organizations and the types of data available to participants, including lab results, pharmacy information, and imaging results.

PHYSICIAN SHORTAGE

Wisconsin has a shortage of 374 primary care physicians, primarily in rural areas and some inner-city neighborhoods, according to a new report by the Wisconsin Council on Medical Education and Workforce. The shortage, which is expected to increase as more primary care physicians retire and fewer medical school students enter primary care, coincides with an increase in demand for primary care physicians due to an aging population. The number of Wisconsin residents age 65 and older is projected to double by 2030.

To address the problem, the report recommends enrolling students from rural areas; increasing tuition reimbursement programs for physicians who practice in underserved areas; recruiting out-of-state physicians; and increasing the roles of nurse practitioners and physician assistants.

INFANT MORTALITY ADDRESSED

The Wisconsin Partnership Program recently announced a five-year, $10-million initiative designed to reduce infant mortality in the state, which has the highest African-American infant mortality rate in the country, according to the Milwaukee Journal Sentinel.

One of the goals is to help coordinate existing infant mortality programs in Beloit, Kenosha, Milwaukee and Racine, the four cities that account for 92% of the deaths, and to increase public awareness. A co-chair of the steering committee forecasts the initiative will last 10 to 15 years.

MHE Sources: Centers for Medicare & Medicaid Services; Urban Institute; Kaiser Family Foundation; U.S. Census Bureau; The Commonwealth Fund. 

Protect Your Windows PC from the Conficker Worm

The Conficker worm has infected millions of Windows computers—and is set to be unleashed on April 1st, 2009. Here’s what you need to know to keep yourself safe.

What is the Conficker Worm?

Microsoft released an update in October to resolve a critical security hole in the Windows “Server” service. Since people were not as diligent about patching as they should be, hackers created a new worm that spread like wildfire, leaving systems completely under their control. Security researchers have determined that the virus is expected to go “live” on April 1st, 2009, causing your computer to do bad things—but since the worm uses a P2P protocol it’s nearly impossible to identify the source.

How Does It Spread?

The worm originally started spreading using a network attack against the file sharing services in Windows, but since it can automatically update itself, it adapted to spread through the autoplay feature on removable media like USB thumb drives, by adding a new option to open where you see “publisher not specified”. This allows the worm to spread to systems already patched against the original vulnerability, so using anti-virus software is even more important, because once it’s on your computer it can spread further.

Is My Computer Affected?

Most anti-virus software has already been able to detect and remove the Conficker worm for a while now, so you are probably not at risk as long as you keep up with your updates and have real-time scanning enabled.

To actually detect and remove the worm, you can use the freely available Microsoft Windows Malicious Software Removal Tool that can remove a large number of viruses for a full guide, I’ve also written an article on how to scan and remove malicious viruses.

How Do I Stay Safe?

Staying safe from this, and many other viruses and worms, requires a combination of keeping your computer updated and using anti-virus software. Here’s a couple of quick tips to follow:

• Make sure your system is fully patched using Windows Update, and update MS08-067 has been applied.
• Make sure your anti-virus is fully updated, enabled, and you’ve run a full scan.
• Make sure you are using strong passwords (see our guide to choosing great passwords).
• Disable the AutoPlay feature—which Conficker uses to infect systems.
• Make sure your firewall is enabled when you are on untrusted networks.
• Make sure your data is backed up—if you aren’t sure what to use, see our five best Windows backup tools.

Keeping your system and your data safe is extremely important, so make sure to take some time out of your day to keep your system patched, updated, and virus-free. Hit the link for Microsoft’s explanation of the situation, or check out my article on scanning and removing malicious viruses for the walk-through approach.

Protect yourself from the Conficker computer worm

Digital Integrating Your Operating Room

During research of Operating Room Integration, one thing stood out, that all of the elements involve extensive planning with facility planning, architects, general and specialized building contractors, and the makers of all of the apparatus.  All systems generally will require some custom-built elements.  

In general, the components of a system fall into the category of equipment and infrastructure the equipment is likely to be replaced or upgraded several times during the projected life of an installation.  The infrastructure should be adaptable, within reason, to the anticipated replacement life cycle of the equipment.  Specialist claim that cabling should be placed in open wireways where additional cables or fibers can be added or replaced as needed.  Installations that use the available wireways and conduits to capacity should be avoided wherever possible, as this will impede system adaptation, thereby impairing its continued usefulness.

So the Integration process of an Operating Room could require and army of people to complete your project.  Your need may be to integrate one room or many and is your team ready for this complexity?  Your team will need to research, so before we begin, where can we look and become better educated in this process.  I give just a few sites to start on your massive undertaking. 

http://www.healthcaredesignmagazine.com/ME2/dirmod.asp?sid=&nm=&type=Publishing&mod=Publications%3A%3AArticle&mid=8F3A7027421841978F18BE895F87F791&tier=4&id=7F034F46E2384341977552D9ED1E97B1

http://blog.medting.com/2008/12/21/video-in-operating-room/

http://www.compviewmedical.com/site/home/

http://www.medtronicnavigation.com/procedures/integrated_operating_room.jsp

http://www.networkworld.com/news/2007/050207-data-integration-medical.html

Crestor’s Effect on Blood Clots and Other Health News

Study: Crestor Reduced Risk of Blood Clots in Veins

The statin Crestor may help cut the risk of blood clots in the veins, suggests a new study, which was presented Sunday during the American College of Cardiology’s annual meeting. The study, which involved more than 17,000 relatively healthy participants, saw 94 cases of venous thromboembolism, or blood clots in patients’ veins. Thirty-four of those cases occurred in people taking Crestor, while 60 took place in those taking a placebo, resulting in a 43 percent relative risk reduction for those taking the cholesterol-lowering medication. This reduction was observed in people with and without blood-clot risk factors such as hospitalization, surgery, or cancer, HealthDay reports. “We’re very pleased that the drug seems to have this beneficial effect,” study author Robert J. Glynn, a biostatistician at Brigham and Women’s Hospital in Boston, told HealthDay. This reduction in risk for blood clots would probably be seen with other statins, too, he added. The study is based on data from the JUPITER clinical trial, which is sponsored by AstraZeneca, the drug maker that markets Crestor.

In November, U.S. News’s Bernadine Healy explored whether, based on earlier JUPITER findings, statins should be prescribed for many apparently healthy people. Also, consider these 6 statin-free ways to reduce inflammation.

Bioidentical Hormones: Safer for Hot Flashes Than HRT?

To take hormones or not to take them? That question plagues womensuffering from menopausal symptoms—like hot flashes and night sweats and the severe sleep deprivation and crankiness that come with them, Deborah Kotz reports. Some women still opt for traditional hormone therapy, like Prempro, which combines estrogen and progesterone. (The latter hormone is included in order to protect women against endometrial cancer, which can be triggered by using estrogen alone.) Other women have turned to what they believe to be a safer alternative: bioidentical hormones. These compounds are identical in molecular structure to the sex hormones produced in a woman’s ovaries.

Here’s a user’s guide to bioidentical hormones. And learn why actress Suzanne Somers loves bioidentical hormones.

How to Get a Cheap Workout: 8 Ideas for Building a $100 Home Gym

If you’re unable—or simply unwilling—to pay a thousand dollars a year or more for a high-end gym membership, never fear. You don’t need to be cashed up to get a good workout. In fact, you don’t need to join a gym at all. U.S. News’s Katherine Hobson asked four fitness pros for 8 tips for putting together a home gym for $100 or less. Among the advice she got: Start by looking at what you already own, and don’t buy anything you’re sure not to use.

For more on saving money on your fitness routine, try these 5 ways your workout can weather the recession. Also, find out how you can spend less time exercising.

Register Now for Free SourceMedical Regional Client Meeting on June 11 in Chicago

SourceMedical, the exclusive ASC Health Information Technology Sponsor for the 7th Annual Orthopedics, Pain Management and Spine Driven ASC Conference held June 11-13 in Chicago, is holding its free client meeting on June 11 at the Westin Michigan Avenue in Chicago, site of the conference.

The client meeting will offer six hours of educational content as well as a networking luncheon. 

The deadline to register is May 29.

To learn more and to register, click here.

N.J. Assembly Passes Bill Amending Codey Law; Would Limit New Surgery Centers

The N.J. Assembly has passed a bill amending the state’s Codey Law that will now be presented to the state’s governor for approval; if signed into law, the bill will confirm that physician ownership of surgery centers is permitted in New Jersey but will limit the construction of new physician-owned surgery centers.

If the new version of the Codey Law, which is essentially the state’s version of the Stark Law prohibiting physicians from referring patients to a facility in which they have a financial interest, is signed into law, physicians interested in opening a new surgery center will have just 180 days — after the new version of the Codey Law is signed into law — to identify a site and develop plans for their facility and start the application process before a moratorium on new surgery centers begins, says Michael Schaff, a healthcare attorney and chair of the corporate and healthcare departments for Wilentz, Goldman & Spitzer.

“They have to start moving now and take it seriously because the clock is going to start running soon,” says Mr. Schaff. “There’s nothing in [the law] that says construction has to be completed by a certain time, but you just have to start the process.”

Other changes to the law under the bill will include:

• existing surgery centers will be required to become accredited by an accrediting organization;
• physician-owned single operating room surgery centers which were previously exempt from state Department of Health regulation will have to register with the Department of Health and will be subject to the accreditation requirement and the moratorium on new facilities;
• certain services that were once exempt from the Codey Law, including lithotripsy, will no longer be exempt one year after the effective date of the law, although existing physician ownership in these services will be grandfathered; and
• new ASCs that are owned by hospital, including joint ventures between physicians and a hospital, will be exempt from the moratorium.

The original Codey Law (named after Sen. Richard Codey) was passed by the N.J. Senate in 1991 and included greater restrictions on physician referrals than Stark, but was rarely enforced, and whether it applied to surgery centers was unclear, says Mr. Schaff.

But in Nov. 2007, a trial court judge issued a ruling in the case of “Garcia v. Health Net of New Jersey” which said that referrals to an ASC in which the referring physician had a significant financial interest violated the state’s Codey Law. However, the judge said physicians in this case, and physician owners of surgery centers in the state, had not committed fraud because they thought (based on common practice and rulings by the state’s Board of Medical Examiners) physician ownership was not a violation of the Codey Law, says Brian Kalver, healthcare attorney with Wilentz, Goldman & Spitzer.

“That prevented physician ownership of ASCs before the Garcia decision from being fraud per se,” says Mr. Kalver. “But once the decision was published, the question was, can physician-owned surgery centers be accused of fraud now that they know that they are violating the Codey Law (at least according to one trial court judge)?”

In response to the Garcia decision, the legislature worked on several proposed amendments to the Codey Law, before the current version passed the state Senate and Assembly. Despite the significant new restrictions on surgery center, the bill creates a clear exemption under the Codey Law for physician-owned surgery centers as long as they follow some guidelines that are commonly observed, such as distributions based on investments and not on the number or value of cases brought to the facility, says Mr. Kalver.

View the Codey Law as it was passed by the state’s Senate Nov. 24 by clicking here.

AmSurg Revenue Increases 8% in Fourth Quarter

AmSurg, a terrific surgery center company, announced that revenues for the company increased 8 percent for the fourth quarter and increased 16 percent for the 12 months ended Dec. 31, 2008, according to a news release.

Net earnings from continuing operations increased 13 percent for the quarter and 19 percent for the year.

The company acquired 13 ASCs in the fourth quarter and added a total of 20 centers in 2008, bringing the total number of ASCs for the company up to 189 by the end of 2008.

“We are pleased to have achieved double-digit earnings growth in the fourth quarter during a tough economic environment while meeting our financial guidance for the quarter and the full year,” said Christopher Holden, president and CEO of AmSurg, in the news release. “Reflecting this environment, same-facility revenue was essentially flat for each month of the quarter. In addition, our revenue performance was affected, as expected, by the negative impact of the Medicare rule revising the payment system for ASCs, which totaled $0.01 per diluted share for the quarter and $0.05 per diluted share for 2008. Although this impact for the fourth quarter was offset by positive same-facility procedure growth, it contributed to a flat same-center revenue performance on a comparable-quarter basis.

“For 2009, we again expect to fund our planned capital expenditures primarily with internally generated funds, with cash flow from operations for 2009 expected in a range of $95 million to $100 million,” he said. “We also have additional capacity under our revolving credit facility, which matures in July 2011, of approximately $50 million. With our strong financial position and sources of liquidity, we are confident of having the financial resources to fund our anticipated growth for 2009, despite the challenging credit and economic environment.”

AmSurg is projecting revenues in a range of $650 million-$680 million for 2009, up from about $601 million in 2008, and the addition of 13-16 new centers for the year.

Read the news release about the AmSurg fourth quarter.

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