艾昆纬-医疗科技公司寻求与门诊手术中心合作的六大关键见解

ME

WhitePaper

QVI

DTECH

SixKeyInsightsforMedTechCompaniesLookingtoPartnerwithAmbulatorySurgeryCenters

PerspectivesfromASCleaders

PATKALLAL,ConsultingManager,MedTechStrategyConsulting,IQVIA

KYLEBIESECKER,Principal,MedTechStrategyConsulting,IQVIA

PATRICKHUNT,ConsultingManager,MedTechStrategyConsulting,IQVIA

1

Introduction

AmbulatorySurgeryCenters(ASCs)haveseenimmenseproceduralandfacilitygrowthoverthepastdecade,

drivingsignificantMedTechmanufacturerfocuson

thiscaresetting.Theconfluenceofphysicianslookingtobuildfinancialequity,strategicinvestorsseekinganexpansionoftheircaredeliverychannels,andpayers

lookingtosteertheircoveredpartiestolower-costsitesofcarecontinuestodrivequickevolutionintothisarea.

In2023,IQVIAMedTechpublishedourperspectiveon

strategiesthatMedTechcompaniescanutilize

to“win”intheASCspace.Tobuilduponthesestrategies,we

spokewithleadersintheindustry,includingphysicianswithanequitystakeinanASC,CEOsofhospital/

physicianjointventureASCs,anddevelopmentdirectorsofASCmanagementcompanies,capturingin-depth

perspectivesfromclinicalandadministrativeleadershipatboththelocalandcorporate/investorlevel.In

speakingwiththeseleaders,sixkeyinsightsemerged.ThiswhitepaperwilldiscusseachoftheseinsightsandprovideguidanceforMedTechorganizationslookingtopartnerwithASCsinthecomingyears.

Muchoftheday-to-dayASC

facilitymanagementandstrategicdecisionmakingremainsatthe

localASClevel,despitestrategic

investorsholdingmajority

financialownership.

Since2017,ASCownershipstructureshaveshifted,

movingtomorejointventures.Whilephysician-only

ownedentitiesstillrepresentthemajorityofASCs,

theylikelyrepresentamuchsmallerpercentageoftheproceduralvolumeastheyhavelessorganizational

scalethanhospital-orcorporate-ownedentities.

Conversely,therehasbeensignificantgrowthinjointventuresbetweenphysiciansandcorporationsaswellasthree-partyventuresbetweenphysicians,hospitals,andcorporations.Theincreaseinjointventureswith

hospitalsandcorporateentitiesspeakstothescale

andoperationalexpertisethatisincreasinglyrequiredforASCstobecomesuccessfulintheirgeographies.

Physicians,onceseekinganequitystakeinASCsto

havemoreadministrativeandclinicalcontrol,arenowpartneringwithhospitalsandcorporateentitiesthat,althoughnotoccurringtoday,couldthreatenelementsofthatveryautonomyinthefuture.Laterinthis

piece,wewilldiscusstheimplicationsofthesefinancialpartnerships.

PercentownershiptypeacrossASCentities

Hospowned(3%)

Corpowned(4%)

100%

Phys+Hosp

+Corpowned

(1%)

Physician+

Corporate

owned

21%

Physician

+Hospital

owned

64%

Entirely

physician

owned

0%

2022

Importantnote:ThepercentdistributionofASCentitieslikely

doesnotmirrorthepercentdistributionofASCprocedurevolume,aslargehospitalorcorporate-ownedASCsaremorelikelytohavegreaterorganizationalscale.

Source:BeckersASC

Hospowned(2%)Corpowned(3%)

Phys+Hosp

+Corpowned

Physician+

Corporateowned

Physician

+Hospital

owned

Entirelyphysicianowned

4%

24%

7%

15%

2017

52%

50%

25%

75%

Thepartnershiphasa

self-governancemodelwitha

medicalexecutivecommittee.

Whilewehaveamajoritycontrolonthefinancialentityitselfandtheresponsibilitytowardsthe

debt,wedowantourphysicianstohaveactivestewardshipofthebusinessoperations.

—VPofOperationsforanASCmanagementcompany

|1

2

Whenownershipissplitbetweenphysiciansand

astrategicinvestor,itisnotquiteanequal50/50

relationship,thoughallpartiescontinuetomaintainmeaningfulequitytoensureproperorganizational

alignment.50.1%hospitalorcorporateto49.9%

physicianownershiprelationshipsaremorecommon,withtheinstitutionalpartnertakingamajoritystaketoholdtheultimatecontroloverdecisionmakingwhile

preservingfinancialincentivesforphysicians.TheASCleaderswespokewithwerequicktonotethatthereissignificantmeaningfulintentionplacedonachievinganequitysplitthatleavesallpartiesfinanciallyengagedinmakingtheASCasuccess.

Decisionsaremadelocally;I(corporate)bringindatafromothercentersthathelpsinlocaldecisionmaking.

—VPofDevelopmentforanASCmanagementcompany

Despitestrategicinvestors’abilitytosupersede

physicians’preferencesinoperatingdecisions,both

partiesindicatethatphysiciansholdsignificantpowerandretaindecisionmakingatthelocallevel.ASCs

remainself-governingorganizations,notlimited,

constrained,ordictatedtobylargecorporateentitiestodrivedecisionmakingsolelybythebottomline.

Themodelisthattheyare

ownersandhavecontroland

somewhatofastrongvoiceinthe

executionofvisionofthatcenter.We(corporate)aretheretosupportandexecutealongwiththem.

—VPofOperationsforanASCmanagementcompany

OneofthekeydriversoftheremaininglocalASCcontroliscompetitionoverthepoolofavailablephysicians(see

Insightfive

).ASCsrecognizethatphysicianshaveoptionswhenitcomestotheirproceduralwork,particularly

inurbangeographieswheretherearemultipleASCs

forphysicianstochoosefrom.Asaresult,ASCsare

inclinedtoletphysiciansdriveday-to-daydecisions,

includingMedTechpurchases,asameansofattractingandretainingtalent.Inadditiontorecruitingnew

physicians,physicianretentionisalsoaconcernas

physicianshaveshownawillingnesstomoveiftheirneeds(clinical,technological,economic)arenotmet.

Therefore,ASCdecisionmakingoftencapitulatesto

physicians’demandsinthenameofphysicianretention.Lastly,ASCsareconcernedwiththeincreasingtrend

offull-timephysicianemployment,whichultimately

precludesphysiciansfromjoiningASCsnotaffiliatedwiththeirhospitalorsystem.Thisreductioninanalready

competitivetalentmarketfurtherretainsthelocusofpoweranddecision-makingatthelocallevel.

Despitereimbursementand

medicalsupplypressures,ASCsdonotappearfocusedon

MedTechpricingasaprimarycostcontrolmeasure.

Onaverage,paymentsforprocedures1conductedin

anASCareabout50%oftherategiventohospital

outpatientdepartments(HOPDs)conductingtheexactsameprocedures.Whilepayersmaycorrectlyassume

thatthereislessoverheadinanASCthananHOPD,andtherefore,alowerreimbursementiswarranted,this

paymentdifferentialleaveslittleroomforASCstoabsorbtherisingcostsseeninhealthcare,particularlyduring

andaftertheinitialwavesoftheCOVID-19pandemic.

ASCadministratorsreportthatmedicalsupplycostsarerising,insomecasesfrom20%ofrevenueto40%ofrevenue.Additionally,wagesareincreasingina

timewheninflationishighandthetalentpoolacrossmanykeyrolesiscompetitive.Oneofthemostcriticalexamplesisanesthesiology,whichhasemergedasan

1RegentSurgicalHealth.HOPDtoASCConversion:NoworLaterwithTransitiontoValue-BasedCare.2018.

|2

Creditingcapitalequipmentpurchasestowardsimplantvolumerebates.

Offeringprocedure-basedpricing(“constructpricing”)toreduce

costvariability

areaoftightlaborcompetition.Thisiscompounded

byreimbursementcutsforanesthesiaservicesthat

havenegativelyaffectedASCs’abilitytocontract

withanesthesiaproviders.InapositivedevelopmentforASCfinances,CMSissueda3.1%increasedforall

reimbursableservicesintheASCandindicateditwillcontinuetomirrorreimbursementincreasesbetween

ASCsandHOPDs.

WhilemuchofthecurrentdialogueintheMedTech

industryfocusesonpricingpressuresandtheneedformedicalsupplycoststodecrease,theindustryleaderswhospokewithIQVIAMedTechdidnotlistMedTech

pricingasakeyareaoffocustodriveorganizationalsuccess.Interestingly,manycountervailingtrendsappeartodiminishthefocusonMedTechprices.

First,ASCsaresensitivetoanythingthatmightsuggestthattheywoulddeliverlowerqualitycare,giventhe

competitivenessofASCsintheirgeography.ASC

leadershipunderstandsthatqualitycarerequiresthe

righttoolsandarehesitanttocutcornersthatmay

ultimatelycompromisepatientoutcomesorevencreatetheperceptionofputtingfinancialhealthinanywayoverpatienthealth.Asaresult,devicesthatcanarticulate

avaluepropositionbasedonclinicalbenefitsmaybe

partiallyinsulatedfrompricingpressures(see

Insight

four

foradditionaldiscussionofqualitymetricsinASCs).

Second,oftentimesphysicianpreferenceovercomes

pricingconcerns,particularlyformedicaltechnology

thatisdirectlyusedbythephysician.Forexample,a

particularkneeorshoulderimplantandaccompanyinginstrumentsetwilllikelyreceivesignificantlylesspricingscrutinybecauseitdirectlyaffectsthephysicians’

proceduralexperience.Conversely,othercapital

equipmentlikebedsorIVpumpsmaybelessinsulatedfrompricingpressures,astheyarelesslikelytobe

protectedbyphysicians’preferences.Thus,forfirms

thathavebothcapitalequipmentandphysician-utilizedtechnology,bundlingthesepurchasestogetherwilllikely

servetoinsulatesomerisktocapitalequipment

pricingerosion.

AlthoughASCleadersdonotexpecttobeaggressiveindemandingMedTechpricingdiscounts,whendiscussing

servicesthattheywouldvaluefromtheirvendor

partners,theyexpressinterestinachievingmutuallybeneficialpricing,suchas:

WithcompanieslikeStrykerofferingrobustASCservicesfordenovopractices(includingfinancing),wewere

surprisedthattheseASCstakeholdersdidnotindicate

thatmanufacturer-providedfinancingisameaningfulordifferentiatedoffering.FormanyASCsthatarealignedwithlargerorganizations,accesstocapital—whenthe

purchaseisjustified—doesnotappeartobeof

majorconcern.

Thedelicatelinewe

alwayshavetowalkisthatASC

doesn’tequallowerquality.

Wemaintainthequalityofcare

butthroughefficienciesand

economyofscale,weareableto

bemoreproductive.

—OrthopedicsurgeonandASCowner

3|SixKeyInsightsforMedTechCompaniesLookingtoPartnerwithAmbulatorySurgeryCenters

3

Wecanhaveanextremely

valuable,durable,single-specialty

ophthalmologycenterorGIcenter.Thatcenterisnotnecessarilygoingtohaveashighofamargin,butitisanextremelydurable,predictable,valuablebusiness.

—VPofOperationsforastrategicASCinvestor

Strategicinvestorsandpartners,likeASCmanagementcompanies,looktoinvestinprocedureareasthatprovidedurablegrowth,notjusthighmargins.

Similartostrategicinvestors(i.e.,payersorhospitals),ASCmanagementcompaniesoftentakeamajority

financialequitystakeinanASCandprovidearange

ofadministrativeandstrategicservices.Giventheir

organizationalscaleandgeographicbreadth,itmaybeexpectedthatthesestakeholderscareprimarilyaboutimmediateandshort-termmargins.Whilemargins

areandwillcontinuetobecritical,ASCmanagement

companyleadersarticulatethreekeydriversofinterestintheirdiligenceofASCinvestments.

Maybethemulti-specialty

spineandortholocationisgoing

tohavehighermargin,butitmightnotbeasdurablebecauseitis

concentratedwithafewphysiciansorconcentratedwithafewservices

thatcanhavedrasticallyvaried

reimbursementovertime.

—VPofOperationsforastrategicASCinvestor

First,thedurabilityofthemarketiscritical.Here,

theyevaluatetheextenttowhichtheclinicalarea

andassociatedprocedureshavehighvolumesanda

reliablepatientbase.Forexample,gastroenterology

andophthalmologyproceduresmaynothavehigh

margins,buttheseclinicalareashavehighvolumeandareextremelyreliableanddurabletootherwisevolatilemarketconditionsfacinghealthcareinrecentyears.

Second,futuregrowthisalsoanimportantconsiderationwhenevaluatingASCpartnershipinspecificclinical

areas.OrthopedicsandENThaveexperienced

significantgrowthinthepastfiveyears,andasaresult,managementcompaniesareincreasinglyinterestedinpartneringintheseclinicalareas.

Third,managementseeksclinicalareascharacterized

bysteadyreimbursement.Eveninthefaceofsmaller

margins,ifaclinicalareaisspecializedandhasreliably

consistenthistoricalreimbursement,itwillbeprioritized

overhighermarginprocedureswithmorevolatile

reimbursementpatterns.

|4

4

Qualityhasbeentightly

self-governed,butCMSisstartingtomonitorASCsmoreclosely.

OnecommonthemeamongASCleadersistheirfocus

onclinicalquality.Theyperceivepatientsatisfactionandqualityasintertwinedandcrucialtotheirbusinessmodelthatsurvivesonreferredpatientvolumes.Creating

andmaintainingtrustfrompotentialreferrersintheir

community(eitherwithintheirsystemorfromoutsidetheirsystem)iscriticaltomaintainingahealthyreferralpipeline.ASCleadersarealsoquicktonotethattheyarewaryoftheirfacilitiesbeingmisperceivedasprioritizingcostoverqualityandbelievethatthosemisperceptionswouldultimatelymakethemlesscompetitiveagainst

hospitalsandotherASCsintheirgeography.

Althoughclinicalqualityhasbeenakeymetricfor

ASCstotrackinternally,regulatorychangesarealso

surfacingtosolidifyandcodifyclinicalquality.CMS

hasmadesubstantialchangestothequalitymeasuresintheAmbulatorySurgicalCenterQualityReporting

Program,whichresultedinCMStracking12mandatoryqualitymeasures(plusonevoluntarymeasure)in

2023todetermineASCpaymentsin2025.Thesame

measureswillbetrackedin2024andareexpectedtobe

utilizedmovingforward.2ForMedTechmanufacturers,awarenessofandcreationofvalueinsupportofthese

qualitymetricswilllikelydriveadditionalinterestintheirproductandserviceportfolios.

GGIfIwanttouseadevicebut

itscostcausesacasetohavea

marginofonly$500,thatcaseisnotviableattheASC.Atthattimepoint,thenyouhavetomovethatcase

toanacutesiteofservicesuchas

anHOPD.

—OrthopedicsurgeonandASCOwner

Measurementofquality

outcomesandclinicalexcellenceisanextremelyactiveanddisciplinedpartofwhatwedo.

—VPofDevelopmentforanASCmanagementcompany

2CMS–AmbulatorySurgicalCenterQualityReportingFinalRule

5|SixKeyInsightsforMedTechCompaniesLookingtoPartnerwithAmbulatorySurgeryCenters

Qualitymetric

2024status

Mandatory

Patientburn

Mandatory

Patientfall

Wrongsite,wrongside,wrongpatient,wrongprocedure,andwrongimplant

Mandatory

Endoscopyandpolypsurveillance:Appropriatefollow-upintervalfornormalcolonoscopyinaverageriskpatients

Mandatory

Facilityseven-dayrisk-standardizedhospitalvisitrateafteroutpatientcolonoscopy

Mandatory

Normothermiaoutcome

Mandatory

Unplannedanteriorvitrectomy

Mandatory

HospitalvisitsafterorthopedicASCprocedures

Mandatory

HospitalvisitsafterurologyASCprocedures

Mandatory

Facility-levelseven-dayhospitalvisitsaftergeneralsurgeryproceduresperformedatASCs

Mandatory

COVID-19vaccinationcoverageamonghealthcarepersonnel

Mandatory

Outpatientandambulatorysurgeryconsumer

assessmentofhealthcareprovidersandsystems(OASCAHPS)surveymeasures

VoluntaryandshiftingtomandatoryinCY2025

Source:AmbulatorySurgeryCenterAssociation3

3AmbulatorySurgeryCenterAssociation.“ASCQualityReportingProgram.”

|6

5

FutureASCmarketgrowthmaybelimitedbylaborshortagesaswellasdemandforASCstotreatmorecomplexcases.

Healthcareworkers,ingeneral,areinshortsupply.

About150,000leftthefieldbetween2021and2022.4

ForASCs,keycategoriesoflaborshortagesinclude

anesthesia,surgicaltechs,sterileprocessingstaff,and

revenuecyclemanagement.ASCleaderscitetheselaborshortagesandretentionconcernsasoneoftheirkey

areasofconcerninstrategicplanningandthefuture

growthoftheirorganizations.Administrationisactivelyseekingstrategiestoovercometheseissuesincludingofferingnon-compensatorybenefitstostaff.One

strategybeingtestedistheutilizationofwork-from-

homeproviderswhowouldbeabletoprovidevirtual

follow-upcare.Theeffectivenessofthisstrategyremainstobeseen,asmostofanASC’srevenue-drivingcareis

providedinperson.

Additionally,asechoedatthe2023AdvaMed

conference,5thelong-termgrowthoftheASCmarket

maybelimitedonce“easy”segmentsbecomefully

penetrated.Todate,ASCshavegrownbycapturingtheproceduresandthepatientsthatarebestsuitedfor

thatsetting.Theseprocedurestendtobelower-riskandmorestraightforward,aswellasperformedinpatients

whoarehealthierandhaveaccesstocareandsupporttorecoverathome.

However,withtherateofgrowthandtheproceduralscalesinASCs,eventuallygrowthfromthese“easy”

clinicalareasandpatientsegmentswillbeexhausted.TheindustrywillneedtoevaluateanddeterminetheappropriatenessandtheabilityforASCstoexpand

intomorecomplexclinicalareasandtomoresevere

patientpopulations,includingpatientswithmorelimitedresourcesandsupport(e.g.,limitedcaregivercapability,restrictedaccesstotransportation,andotherburdens,

whichmayincludepatientswhorequiretheASCtoprovidesomedegreeofat-homecare).

4Becker’sASCReview

Ifthemarketeventuallypursuesthesetypesofpatients,

ASCsmayfinditchallengingtoaccuratelyidentify

patientswithadditionalcarerequirementsandmatchthoseneedsinacost-effectiveapproach,leading

tosomedegreeofrisk.Coupledwiththeincreased

formalizationofqualitymetricsdiscussedpreviously

in

Insightfour

,theincreasedclinicalcomplexityof

patientstreatedinASCsmaycreateorganizationalandreimbursementrisk.

GGThecost-sideobstaclesthatwearerunningupagainstarestaffing.Anesthesiastaffing,nursingstaffing.SterileProcessingDepartment(SPD)isabigburden.Retentionofthose

peopleisabigburdenwithalot

ofnursesleavingandgoinginto

travelerpoolsandtravelersreallybeingtooexpensivefortheASCasaneffectivemeansofstaffing.

—OrthopedicsurgeonandASCowner

52023AdvaMedConference.SessionTitle:“DriveOptimalCareQualityasCareSettingShifts”

7|SixKeyInsightsforMedTechCompaniesLookingtoPartnerwithAmbulatorySurgeryCenters

6

ASCsrelyonanddemandhigh-

touchvendorsupport,particularlyforclinicalcasedays.

AlthoughMedTechpricingisnotakeydriverofdecisionmaking,ASCleadersconsistentlyreportthatsales

representativeandclinicalcasesupportisacompellingvaluedriver.Vendorswhoprovidehigh-qualityservicedifferentiateandingrainthemselvesintoanASCteam,makingthemindispensable.ASCleadersdefinehigh

qualityserviceinfourways:

Clinicalsupport

Supportingthephysicianthroughcase

planning,basicsitelogistics,andinsomecases,supportinginteractionswith

patients’caregivers.

Reliabledelivery

Forproceduresinwhichproductisnot

inventoriedorthereisanuncommonsize,theASCcanrelyontherepresentativetodeliverequipmentandsuppliespromptly,eliminatinganypotentialdelays.

Troubleshooting

Providingtechnicalsupporttominimize

proceduredelaysduetoanyissuesthatariseusingthecompany’smedicaltechnology.

GeneralASCservice

Offeringsupportthatreducesadministrativeorclinicalburdenonthestaff(e.g.,pulling

inventoryaheadofcases,supportingclaimsissues,orsupportingreorders).

Totaljoints,overthepast

fiveorsixyears,havebeenthe

hotspecialtythathasreallyshiftedtotheoutpatientsetting.We’re

seeingourtotaljointvolume

growsignificantly.

—VPofDevelopmentforanASCmanagementcompany

Let’ssayinaGIsuite,having

anOlympusreparoundwhen

you’regoingfullthrottleatthe

endoftheyearandeverybody’s

onlowgas,justhavingthatextra

supporttoconstantlytroubleshootishuge.Therearethingsthatcan

gowrongwiththeequipment,theinstruments,disposables,whatever.

Juststeppingin.Notnecessarilywiththepatient,butwiththe

caregiversandsaying,Whatelse

canIdo?I’llhelpgetthesescopes

tothecleanroom.Letmeseewhy

yourpicturequalityislowafteryoujustdid500.Justnoticingthelittle

intricaciesoftheefficienciesofthe

procedurestyleishuge.Ifyouhavego