Strategic Options to Strengthen Cardiovascular Medical Group Affiliations

March 30, 2023

Written by Clinton Flume, CVA, Cordell J. Mack, Tim Spadaro, CFA, CPA/ABV, Christopher Tracanna, Colin McDermott, CFA, CPA/ABV

The following article was published by VMG Health’s Physician Practice Affinity Group

Cardiovascular disease ranks as the leading cause of death in the United States, so it should come as no surprise that healthcare executives are placing an increasing emphasis on the stability and growth of cardiovascular services. In addition to the aging U.S. population, management is being forced to take strategic action due to industry factors such as shifting physician employment trends, patient procedures transitioning to lower-cost outpatient care settings, and payor models changing from fee-for-service to value-based care. To ensure continuity of alignment for cardiology providers and stakeholders, executives need to consider the strategic impact of cardiovascular medical group affiliations in their decisions. These decisions include investment in comprehensive cardiac care services, external affiliation models (joint ventures or joint operating agreements), and alignment models with private equity.

According to the Physician Advocacy Institute, as of January 2022 approximately 67.3% of cardiologists were employed by hospitals or health systems, 17.9% were employed by other corporate entities, and the remaining 14.8% were in independent practices. The combined hospital/health system and corporate entity employment (85.2%) was 12.2% higher than the number of cardiologists (73.0%) employed by these entities in January 2019 [1]. Due to the high concentration of employment for cardiology, this specialty has been insulated from the traditional roll-up activity seen in the orthopedic, gastroenterology, and ophthalmology spaces. This suggests the industry is primed for a reversal of employment back to private practice as providers look for ways to diversify from legacy employment models and engage in outside investment opportunities, such as private practices and surgical centers.

Shift to Outpatient

Health systems, payors, providers, and, most importantly, patients are increasingly seeking high-quality and lower-cost options for routine cardiovascular care. Outpatient cardiology services began to see a transition to the outpatient setting in 2016 when the Centers for Medicare and Medicaid Services (CMS) approved pacemaker implants for the ambulatory surgery center (ASC) covered procedure list (CPL) [2]. In the 2019 Final Rule, CMS added 17 cardiac catheterization procedures to the ASC CPL, and in the 2020 Final Rule, CMS allowed physicians to begin performing six additional minimally invasive procedures (percutaneous coronary interventions) in ASCs. Additionally, several states have followed CMS’ lead by removing barriers to accessing cardiovascular care in ASCs [3]. The continued approval of procedures to the CPL and expanded access to care are major catalysts for the shift in cardiology services to the outpatient setting and the desire of providers to engage in external clinical investment opportunities.

Reimbursement and Payor Impacts

Cardiologists have long sought refuge from rising costs and downward reimbursement pressure by aligning with larger entities that have more leverage and pricing power. This often materialized through traditional health system employment with many hospital providers looking to operate traditional in-office ancillaries in an adjunct hospital outpatient department. The arbitrage in reimbursement (HOPD versus freestanding) was an offset to the ever-increasing physician compensation inflation. However, challenges continue to mount.

The Medicare Physician Fee Schedule (MPFS) conversion factor has fallen year-over-year since CY 2020. On November 1, 2022, CMS released the 2023 MPFS which continued to lower the conversion factor and resulted in cardiology reimbursement falling an estimated 1.0% [4]. During the same period, many health systems are reporting larger net professional losses per cardiologist as costs continue to rise faster than revenue.

These factors, coupled with bundled pricing initiatives and trends focused on value-based care initiatives, are compelling cardiologists to consider all alternative employment scenarios in response to slowing compensation growth. Whether cardiologists continue to be employed by health systems and corporate entities or they venture into private settings to explore outside investment opportunities, there is no doubt cardiology will continue to face financial pressure from rising operating costs in tandem with reimbursement cuts.

Cardiology employment trends, increasing access to outpatient cardiology services, and changes in payor models are all leading indicators that impact the strategic alignment of cardiology medical groups. The following are key external and internal drivers that serve as signals of the fragmentation of the cardiology market. Healthcare executives should be proactive in their evaluation of these market factors which can dictate how cardiology coverage is delivered and can impact current and future affiliations.

Physician Alignment

Degree to which cardiology services are provided by independent cardiologists, employed providers, or a group professional services agreement.

High Impact – To determine the top-line revenue impact between two parties’ contracts.

Entrepreneurial Leadership

The presence of forward-thinking medical leadership.

High Impact – Visionary leadership required to change the market status quo, and generally visionary leaders see today’s disruption (rate pressure, ambulatory migration, etc.) as opportunity.

Economic Sustainability

Degree to which current employed or contracted cardiology economics remains financially viable.

High Impact – Health system alignment can result in inflated market compensation and greater economic burdens for healthcare organizations. The higher the degree of financial unsustainability, the higher the likelihood of stakeholders (health systems, payors, and providers) are open to alternative structures.

Physician Contracts

Degree to which physicians are subject to a noncompete or other similar provisions.

Medium Impact – This may delay fragmentation, but ultimately a large cadre of cardiologists seeking an alternative care model will likely prevail.

Payor Fragmentation

Depth of managed care and commercial contract consolidation.

Medium Impact – The more consolidated the managed care community is in a market, the stronger the likelihood of evolving lower total-cost care models.

Upon evaluation of the internal and external environment, health systems have strategic options that range from staying the course with minimal change through employment to proactively migrating the cardiology care delivery model in partnership with a private equity-backed platform. Below are strategic opportunities for organizations to consider when developing long-term cardiovascular medical group affiliations.

Investment in a Comprehensive Cardiac Institute

  • Service line realization that the tertiary nature of cardiology requires continued hospital/health system investment in integrated and differentiated clinical programs.
  • Enhanced service offerings, improved governance (including physician participation), and the development of cardiac operations focused on retaining and attracting community and practicing physicians.
  • If successful in the implementation of a cardiovascular institute, the likelihood of third-party competitive investment is diminished.

Joint Venture Management Services Organization (MSO) Model

  • Migration of employed physician practice to an alternative, independent practice structure. This could be a health system-endorsed response depending on current practice economics.
  • Migration of in-office ancillaries (nuclear, echocardiography, stress testing, etc.) to support primary cardiology services.
  • Development of a joint venture MSO model owned by physicians and health systems.
  • Separate ASC joint venture syndication with community cardiologists.

Partnership with Private Equity

  • Migrate physician practice to private equity and incorporate an income-less expense model for provider compensation.
  • Make it optional for health systems or stakeholders to be in the capitalization table of supporting practice MSOs. While most PE sponsors may question a role for health system involvement, a regional sub-MSO could at a minimum create value leveraged by the health system’s competitive position.
  • A comprehensive joint venture ASC strategy with three-way ownership (health system, private equity, and cardiologists).

Staying the Course

  • The existing environment affords continued incremental strategic investment and limited overall repositioning.
  • A high likelihood that self-assessment results in limited exposure to fragmentation.

As healthcare executives evaluate the overall strategic positioning of cardiovascular services, industry factors such as physician employment trends, a shift to lower-cost outpatient care, and changing payor models will continue to change the cardiovascular landscape. Mindful executives with a strong pulse on external and internal factors, such as physician alignment and service line stability, will have an advantage in tactical decision-making. Position opportunities, such as investment in comprehensive cardiac institutes, joint ventures with MSOs, and partnerships with private equity firms, are all potential models for long-term strategic success.


  1. Physicians Advocacy Institute Research & Avalere Health. (June 2022). Physician Employment and Acquisitions of Physician Practices 2019-2021 Specialties Edition. Physicians Advocacy Institute.
  2. Toth, M. (September 19, 2019). What Does CMS’ Proposed Addition of PCI in ASCs Mean for Hospitals? Cath Lab Digest.
  3. Outpatient Surgery Magazine. (2021, March 17). The Building Blocks of an Outpatient Cardiac Program.
  4. American College of Cardiology. (July 8, 2022). CMS Releases Proposed 2023 Medicare Physician Fee Schedule Rule.
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Significant Insights from the Doximity & Curative 2023 Physician Compensation Report

March 24, 2023

Written by Caroline Dean, CVA

Doximity, Inc., an online networking and news website for medical professionals, has published its 2023 Physician Compensation Report (Doximity Report)1, with the survey results noting a number of important trends and challenges related to physician compensation in the United States. According to the Doximity Report, which included responses from over 190,000 U.S. doctors over six years and over 31,000 within the last year, there has been a 2.4% decline in average pay for doctors in 2022 compared to a 3.8% increase in 2021. Furthermore, the physician market continues to see a gender pay disparity with males earning almost $110,000 more annually than female equivalents. Aside from compensation trends, nationwide economic strains and expanding physician shortages have led to increasing rates of reported work-related burnout.

Utilizing data from a wide range of medical specialties, employment types, and locations, the survey is a valuable tool to aid in understanding diverse factors impacting healthcare and medical professionals today. The following paragraphs dive deeper into some of the significant insights contained in the Doximity Report.

While 2021 data saw a slight increase in compensation across all specialties, 2022 data showed physician compensation remained relatively flat or saw a slight decrease for many specialties. The top three specialties that reported the largest increases were emergency medicine (6.2%), pediatric infectious disease (4.9%), and pediatric rheumatology (4.2%). This is likely a result of the increased demand for these specialties due to lingering waves of COVID-19 and rising respiratory syncytial virus (RSV) cases amongst children. In addition, the Doximity Report notes compensation growth varied by employment setting. Specifically, after controlling for specialty, those employed with a single or multiple specialty group reported a 0.7% decrease in compensation growth, whereas those employed with a solo practice or health system reported a 3.0% and 1.4% increase in compensation growth respectively. A factor that could further impact this slight downward trend in 2023 is the 2% cut in Medicare payments which may have a greater impact on small private practices without the facility charges to supplement a decrease in professional payments.

The Doximity Report continues to demonstrate a significant compensation gap amongst male and female physicians. However, the 2022 compensation data indicated a slight decrease in the gender pay gap from a 28% disparity in 2021 to a 26% disparity in 2022. The top three specialties with the largest pay gaps include oral and maxillofacial surgery, pediatric pulmonology, and allergy and immunology. The top three specialties indicating the smallest pay gaps include nuclear medicine, pediatric cardiology, and pediatric gastroenterology.

Physician Demand & Burnout

With an aging U.S. population, the demand for physicians continued to grow in 2022. The highest in-demand specialties reported were in the realm of primary care with the top five specialties including family medicine, psychiatry, internal medicine, emergency medicine, and child and adolescent psychiatry. Psychiatry moved into two of the top five spots in 2022. Even before the COVID-19 pandemic increased rates of anxiety and depression there was a shortage of psychiatry physicians, and this deficit is expected to worsen.2

Contributing to the physician shortages are increased levels of work-related burnout. A Doximity survey of over 2,000 physicians found that 86% of respondents reported feeling overworked and 66.7% reported considering an employment change. In addition, the Doximity Report found that female physicians reported more overwork than their male counterparts. Burnout could also impact physician compensation trends as 71% of survey respondents reported they would be willing to accept or have already accepted, lower compensation in exchange for greater autonomy and work-life balance, and that percentage is closer to 80% in female physicians.

Economic Factors

Despite growing levels of work-related burnout, economic factors such as inflation and Medicare payment cuts could potentially counteract any trends toward lower-paying roles. The Doximity Report notes that approximately 47% of respondents indicated they are likely to compensate for economic factors by pursuing additional income streams, increasing patient caseloads, or working additional hours. In addition, 62% of survey data respondents said they have a noncompete clause in their employment contracts that prevents them from earning additional income through side jobs. However, with the Federal Trade Commission proposing a rule to ban noncompete clauses, there may be a growing movement of physicians seeking locum tenens or telehealth arrangements outside of their full-time employer.


The Doximity Report detailed a variety of challenges facing the healthcare market over the last year and into the future. Economic strain, increased levels of burnout, and an ever-growing physician shortage will continue to be issues. As a result, physicians are expected to pursue alignment opportunities with both private equity firms and health systems to shield themselves from some of these issues. However, achieving alignment while also having competitive compensation will be difficult due to the negative reimbursement pressures and maintaining compliance with the various laws and regulations surrounding physician compensation. VMG Health experts are available to assist with these challenges by helping to ensure physician practice alignment and that the compensation is consistent with fair market value.


  1. Doximity & Curative. (2023). 2023 Physician Compensation Report.
  2. Weiner, S. (August 9, 2022). A growing psychiatrist shortage and an enormous demand for mental health services. AAMC.
Categories: Uncategorized

Academic Medical Center Growth & Strategic Opportunities

March 13, 2023

By: John Meindl, CFA

Academic Medical Centers (AMCs) are facing unique challenges and opportunities in the current environment. With healthcare systems becoming more complex and dynamic, AMCs are adapting their strategies to preserve their inherent strengths and capitalize on evolving industry dynamics. One of the main challenges facing AMCs is the shortage of physicians, which is predicted to become more acute in the coming years. At the same time, revenue from higher margin care is eroding as new businesses are capturing market share. As AMCs play an outsized role in solving labor shortages, they have also been forced to adapt to the financial pressures. Here we examine some of the major financial and strategic opportunities available to AMCs.

1.) Academic Medical Center Partnerships

Many successful academic medical centers have adopted a hub-and-spoke model where the AMC serves as the hub and partners with community hospitals, medical complexes, for-profit hospitals, and pure-play service providers as the spokes. This model can improve care coordination to the appropriate site-of-care while expanding the population basis to support the growth or addition of specialty service lines.

AMCs entering new partnerships are doing so from a position of strength. Typical AMCs have a unique ability to effectively deliver highly complex care. Additionally, most AMCs have a strong and trusted brand in the communities they serve. However, access has long been a traditional weakness with patients struggling to access AMC facilities promptly. To address the access issue while capitalizing on strengths, AMCs are rethinking their approach to partnerships to provide easier channels for reaching their patients. Access to a more diverse population improves patient experiences, lowers cost structures, and provides revenue opportunities. Successful AMC partnerships may even end up being site-of-care agnostic, achieving the most optimum clinical outcomes while compensating all parties for their respective contributions.

However, partnering with non-academic medical centers poses some challenges. AMCs need to ensure that their partners provide the same quality of care and adhere to best practices, while also maintaining the AMC’s own high standards.

2.) Go at it Alone

Well capitalized AMCs can invest individually in ancillary services to access additional revenue streams and expand their patient base. The right mix of ancillary service lines allow an AMC to expand their footprint, improve clinical offerings, and generate incremental revenue. AMC’s investing in ancillary service lines should consider whether or not to allow the ancillary to use the AMC’s brand name. As outlined below, AMCs typically have a trusted and strong brand name built on a history of excellence. Allowing the ancillary to use the brand can either 1) enhance the volume of ancillary services, 2) dilute the AMC brand name, or 3) a mix of both. Common ancillary services may include ASCs, imaging centers, urgent care, and other retail facilities. 

3.) Co-Branding

As mentioned above, AMCs often maintain a strong reputation and brand name. This intellectual property reflects valuable consumer trust built on history of clinical excellence. With the right strategic partner, AMCs can capitalize on their individual brand to become market makers through brand licensing, co-branding agreements, care network subscriptions, or external affiliations.


By building hub and spoke partnerships with community hospitals and medical complexes, academic medical centers can leverage their inherent strengths to maintain their industry reputation for excellence. AMCs that prefer an individualized approach may choose to invest directly in ancillary services or develop branding or affiliation agreements in order to generate additional revenue streams and expand patient access.

Categories: Uncategorized

New Physician/Health System Models

March 8, 2023

Healthcare providers across the country are facing significant financial and operational challenges amid several competing trends such as losses in investment income, staffing shortages, increased inflation, increasing wage pressure, and the like. VMG Health’s Strategic Advisory Services Division works with hospitals, health systems, medical groups, and providers to take strategic steps that help move the system in the right direction.

Problem Statement

A myriad of 2022/2023 stewardship issues are confronting hospitals and health systems, and physician integration and relationship models are not immune to the underlying financial stress. As these challenges mount, there are alternative physician strategies developing in the market with a subset of physicians seeking greater independence and returning to private practice, dry capital investments from private equity including robust ambulatory assets, and clinical network solutions making a bolder step towards value.

Supporting Context

For many hospitals and health systems the value proposition of investing in an integrated delivery system with employed/contracted physicians has not been realized or accounted for in a way that feels economically sustainable. To this end, new platforms and strategies are emerging that health systems need to be aware of in the context of making sound strategic decisions.

VMG Health’s Solutions

VMG Health experts have developed a leading solution set to reposition physician practice alignment that is customized for your unique market and underlying facts and circumstances. A sampling of physician enterprise strategy offerings include:

  • Clinical Enterprise Assessment – Too many hospitals and health systems make uninformed business decisions based on antiquated methods. VMG Health has developed an enterprise-wide approach to physician practice benchmark testing the sustainability of physician practice investment.
  • Alternatives to Physician Employment – Too often the desire for standardization has impeded material service line expansion and growth. Clinical service offerings in orthopedics, cardiology, gastroenterology, urology, and other critical specialty areas now have alternative considerations with expansion of ambulatory surgery and/or office-based labs. If you employ a large cadre of providers in any of these areas, alternative joint venture models (as alternatives to employment) should be evaluated.
  • Ambulatory Investment Repositioning – ASC investments and joint ventures have long been a staple of hospitals and health systems looking to align with community physicians. Many of these multispecialty assets will migrate to a more directed service line (cardiovascular, musculoskeletal, etc.) over time. Growth opportunities exist across key product lines with a more specialized organizational model and structure.
  • Partnered Growth with Private Equity – Many health systems look at private equity as a significant competitor. VMG Health has developed leading strategies with private equity and health systems affording health systems opportunities to reposition certain physician assets, invest in a practice platform for growth, and materially migrate its ambulatory positioning with partner focused on growth.

Other ways VMG Health can help systems like yours during this tumultuous time in the healthcare industry:

Categories: Uncategorized

Health System Financial Repositioning

March 8, 2023

Healthcare providers across the country are facing significant financial and operational challenges amid several competing trends such as losses in investment income, staffing shortages, increased inflation, increasing wage pressure, and the like. VMG Health’s Strategic Advisory Services Division works with hospitals, health systems, medical groups, and providers to take strategic steps that help move the system in the right direction.

Problem Statement

For many health systems 2022 was one of most challenging years in recent memory. Labor costs, stagnant reimbursement, consumer preference, demographics, and increased competition from non-traditional organizations combined to negatively impact profitability and future sustainability.

Supporting Context

The factors contributing to a decline in operating performance are not likely to change in the coming years. Labor costs, demographics, and competition are likely to continue trending in ways that challenge performance.

VMG Health does not believe 2022 was an aberration, but rather portends what future clinical and operating performance will look like when absent of change and innovation. Organizations will need to maintain or improve patient access and quality but at a lower cost. How, where, and by whom care is provided will need to be evaluated and reimagined to achieve a sustainable operating platform.

VMG Health’s Solutions

VMG Health’s experts have partnered with health systems across the country to identify opportunities for improvement in clinical and operating performance. The work effort begins with understanding the current state of the organization and its operating environment. VMG Health then works with organization leadership to identify a short list of opportunities the organization can further explore and implement. At the conclusion of the work effort organizations will have a menu of strategies and tactics that can advance the organization towards clinical and financial sustainability when fully implemented.

Other ways VMG Health can help systems like yours during this tumultuous time in the healthcare industry:

Categories: Uncategorized

Aligning Physician Compensation & Reimbursement Models to Maximize Revenue Opportunities

March 8, 2023

Healthcare providers across the country are facing significant financial and operational challenges amid several competing trends such as losses in investment income, staffing shortages, increased inflation, increasing wage pressure, and the like. VMG Health’s Strategic Advisory Services Division works with hospitals, health systems, medical groups, and providers to take strategic steps that help move the system in the right direction.

Problem Statement

The varying types of physician compensation models being used by health systems today can result in a misalignment of physician and organizational incentives. This can limit the health system’s ability to maximize revenue opportunities as the industry moves towards empanelment and patient outcomes.

Supporting Context

With more of a health system’s revenue at risk for quality, panel management, and other non-productivity factors, aligning physician and health system incentives is key. These incentives help get the compensation formula right which is essential to the continued success of the health system.

As organizations continue to enter payor contracts with either partial or full risk (i.e., capitation), one key factor for organizations to understand is panel size and panel management. Accurately measuring and acuity adjusting primary care physician (PCP) panel size and implementing quality metrics tied to how well a PCP and the rest of the care team takes care of the patients on their panel, will drive organizational successes under these value-based reimbursement models.

VMG Health’s Solutions

VMG Health’s experts have helped numerous health systems design physician compensation plans that incentivize physicians to provide high-quality care for a strong panel of patients to ensure alignment of physician and organizational goals.

Through this body of work, VMG Health works with organizations to profile their reimbursement environment so organizations better understand how revenue flows into the system through payor contracts. VMG Health’s experts also help organizations learn which levers need to be pulled in order to maximize revenue under these value-based contracts. Once the reimbursement environment is fully understood by all parties, VMG Health works with organizational leadership to create a compensation model that incentivizes physicians to work in a way that maximizes revenue while providing high-quality care.

Other ways VMG Health can help systems like yours during this tumultuous time in the healthcare industry:

Categories: Uncategorized

Strategic Case Study: Behavioral Health Services Assessment

February 8, 2023

A large, physician-owned behavioral health organization expressed a desire to expand its care model and services to new states. The current service portfolio includes outpatient behavioral health clinics, intensive outpatient behavioral health therapy, partial hospitalization, and inpatient behavioral health services.


A highly successful physician-owned behavioral health organization expressed a need to expand its service offerings to new markets. The leadership’s vision for their existing market had reached maturity and top line growth was projected to slow. The organization understood behavioral health services were in high demand nationally but needed assistance with developing an expansion plan. Leadership recognized there was an incomplete understanding of provider, competitor, payer, and population dynamics outside of their home market. There was a need for outside assistance in identifying growing markets that fit with the organization’s business model to offer the best opportunity for success.


The behavioral health organization retained VMG Health to perform a national market assessment to educate leadership on key trends, to prioritize states and metropolitan statistical areas (MSA) for management review, and to recommend specific communities for expansion. Working with the organization, VMG Health experts developed a framework that identified and weighed factors most conducive to program expansion and tested the potential of individual MSAs.

A critical aspect of the process was understanding the key factors that are essential for a clinically and operationally sustainable behavioral health program. VMG Health performed a series of analytics to determine critical success factors and prioritize new markets.  Analytics included a review of patient access, reimbursement trends, provider economics, Medicaid policies, competition, and regulatory requirements.

Interviews and analytics identified numerous factors that are most critical for a sustainable program. One of the major considerations which required in-depth insight on physician alignment strategies was the need for a renewable source of physicians in a high demand specialty. In addition, having a full continuum of behavioral health services easily accessible to patients was highlighted as a critical factor for success. This includes not only convenient access points, but the full spectrum of services from inpatient services to home care, all supported by social programs.

Each of these factors were fully explored followed by VMG Health recommending three priority markets, potential partners and real estate opportunities.


The behavioral health organization selected a preferred market based on VMG Health’s opportunity assessment and signed a definitive agreement to acquire a large behavioral practice in the market.  Today the organization is successfully operating in its second state and is leveraging the original market evaluation to guide decisions for the next market expansion.

Categories: Uncategorized

Hospice Medical Directors: Compliance Considerations

February 1, 2023

Written by Britt Martin, CFA

The hospice market continues to grow, and medical directors have always held a prominent role in compliance and operations. The Centers for Medicare and Medicaid Services (CMS) regularly revise existing hospice regulations governing coverage and payment for hospice care under the Medicare programs and continue to identify hospice medical directors as a key component. As a result, understanding guidance around this role is critical for both compliance and business operations. Further, CMS typically places more investigative resources in places where there is growth.

Growth in the Hospice Sector

As baby boomers, the second largest age group in America, begin to reach retirement age the healthcare industry is planning the best way to serve this population across all healthcare services. Most notably, long-term care and hospice care are both poised to see the most significant impact of the baby boomers’ toll on America’s already overburdened healthcare infrastructure.

To keep up with this emerging and anticipated demand the number of hospice agencies has grown significantly. Per the VMG Health 2022 Healthcare M&A Report, the number of hospice agencies increased 3.8% annually from 3,498 in 2010 to 5,058 in 2020. This increase was primarily attributable to growth in for-profit hospice providers. In certain states like California, government organizations have noted that the number of newly licensed providers does not correlate with community needs and can potentially create an incentive for fraudulent practices. [1]

Compliance Guidance

The Department of Health and Human Services Office of Inspector General (OIG) has published numerous warnings and reports since 1995 highlighting hospice fraud and abuse. In 2021, the OIG noted hospice as a top area for criminal recoveries. [2] Beginning in 2023, an audit of hospice eligibility will be conducted by the OIG. The audit will focus on patients who did not have hospitalization, or an emergency department visit prior to electing hospice. [1] A focus on compliance processes is crucial for hospice providers to successfully navigate this increased scrutiny.

A key component of a compliant hospice program is the oversight of a qualified medical director. Per government regulations, all hospices must designate a physician to serve as the medical director of the hospice. [3] The duties of a hospice medical director generally include:

  • Oversight of hospice clinical services at the facility.
  • Developing a plan of care for each patient.
  • Certification of Terminal Illness (CTI) that is recertified every 90 days.
  • Acting as a resource to hospice staff, patients, family members, and attending physicians regarding pain and symptom control measures.
  • Monitoring quality control measures.
  • Develop clinical protocols and patient care policies.

Fair Market Value Tips

Due to the potential ability of the medical director to refer patients to the hospice programs they might oversee, the compensation paid by the hospice program to the medical director must be set at fair market value (FMV). Obtaining a third-party fair market value opinion and understanding the appropriate interpretation of the fair market value compensation is key in structuring a compliant medical director arrangement.

Key Considerations for a Fair Market Value Analysis of a Hospice Medical Directorship

  1. Specialty – Pay close attention to the medical specialty survey data selected. If the medical director is an orthopedic surgeon, but the hospice medical director’s duties do not require that level of medical specialty, then this medical specialty selection may be incorrect for the determination of hospice medical director compensation.
  2. Limitations in Specialty Survey Data – The surveys utilized may categorize hospice medical directorship compensation under a separate specialty if the majority of a respondent’s work is in another specialty. For example, a family medicine physician who spends most of their time in family practice but also provides hospice medical director services may have the compensation categorized under the family medicine medical director dataset. An understanding of the survey and how it interprets the respondent’s information is key.
  3. Percentile of Survey Data – Another key consideration in a fair market value analysis is what percentile to select or what indication to select within the fair market value range provided. Higher percentiles of compensation may be warranted for medical directors with more administrative experience or other credentials that might benefit the quality of care provided at the hospice (certified hospice medical director, etc.).

The role of the hospice program will continue to become a more prominent component of healthcare continuity of care. Also, with the increased prominence there will be increased scrutiny of the government to ensure compliant programs.


  1. Parker, J. (2022, December 13). Key Trends That Will Shape the Hospice Industry in 2023. Hospice News.
  2. Kofman, A. (2022, December 6). How to Research Your Hospice (and Avoid Hospice Fraud). Pro Publica.
  3. 42 CFR 418.102.
Categories: Uncategorized

ASCs in 2022: A Year in Review

January 26, 2023

Written by Jack Hawkins, Ryan Mendez, and Colin Park, CPA/ABV, ASA

The following article was published by Becker’s ASC Review

2022 saw a continuation of 2021 trends as the healthcare industry further rebounded from the coronavirus (COVID-19) pandemic. The Ambulatory Surgery Center (ASC) subindustry largely recovered in 2021, but certain specialties that lagged in 2021 saw a further recovery in 2022. The ASC industry continued to consolidate throughout 2022 despite not having the major platform-level transactions that were observed in 2021. There were trends that started pre-pandemic that continued to be observed in 2022 such as the shift of higher-acuity procedures from the inpatient setting to the outpatient setting, consolidation of ASCs by management companies, and a push by hospitals to grow their ambulatory footprint with a particular focus on the outpatient setting.

Along with these recurring trends, the subindustry was impacted by macroeconomic trends related to upward pressure on labor, supply, and general costs resulting from a tight labor market and elevated inflationary pressures. The continued trend of increased Medicare reimbursement rates saw its largest escalation ever as a direct result of these pressures.

COVID-19 Pandemic Recovery

In March 2020, the world was impacted by the spread of the COVID-19 pandemic, and subsequently, 2021 was a year of rebuilding and recovering from the lasting effects brought on by the pandemic. ASCs in 2021 had an increase in case volumes across almost all specialties. This was primarily due to patients who were willing to resume elective procedures that were postponed and centers that kept their doors open.

In 2022, ASCs saw case volume return to pre-pandemic levels or experienced continued growth if they had not already experienced a return to normal operations. Specialties that were hit especially hard by COVID-19, such as ENT, returned to pre-COVID levels in 2022 as schools and school activities returned to pre-pandemic normalcy. In 2022, the impact of the pandemic on ASCs was less related to revenue and more related to expenses. The lingering effects of COVID-19 were related to the shortage of healthcare workers and the supply chain issues that continued to pressure the profitability of surgery centers. Looking into 2023, controlling labor and supply costs will be a point of focus for ASCs.

Shift to Higher-Acuity Cases

The trend of higher-acuity procedures shifting from an inpatient or HOPD setting to a freestanding ASC setting continued throughout 2022. In 2022, specialties that increased their footprint in ASCs included cardiology, orthopedics, and higher-acuity spine procedures. According to data from the ASC Association, orthopedics was the most common specialty serviced by ASCs in 2022.

Director of ASC Operations at Virtua Health Catherine Retzbach said ASCs that perform these high acuity cases “offer patients more options to have procedures be performed in a high-quality, low-cost environment.” Furthermore, according to the most recent Ambulatory Surgery Center report published by Research and Markets, ASCs are projected to perform half of all cardiology procedures by the mid to late 2020s.

The ASC subindustry continues to focus on higher-acuity specialties when considering both organic growth and M&A opportunities. President of Tenet Saum Sutaria noted the continued focus of the ASC business toward higher-acuity service lines in the company’s Q3 2022 earnings call. Tenet is the parent company of USPI and is the largest outpatient surgery center operator in the United States. The company reported that these procedures made up 20% of USPI’s year-to-date volume due to growth in their orthopedic and spine business. Sutaria further said “the [USPI] team is focused on organic growth, [and] increase in higher-acuity services and M&A.” These insights highlight the ASC subindustry’s focus on higher-acuity service lines, and indicate the shift towards ASCs for these types of procedures is likely to continue in the future.

Intellimarker: VMG Health Multi-specialty ASC benchmarking study

Transaction Activity

In 2022, we saw the continued expansion of a prominent large-level ASC platform player highlighted by the finalization of a large platform-level transaction that began in 2020. In addition, there were a significant number of transactions at the individual-facility level. Consistent with the observed larger platform-level transaction, the fragmented ASC industry has continued to consolidate. It is worth noting that although the industry continues to consolidate approximately 70% of ASC facilities remain independent as of 2022. This leaves room for further consolidation at the individual-facility level.

In 2020, Tenet Health finalized a deal for $1.1 billion to acquire 45 ASCs from SurgCenter Development. This was the first stage of a multi-part acquisition, and in Q4 of 2021, USPI entered a $1.2 billion deal to acquire SurgCenter Development’s remaining centers and established a long-term development deal. The transaction included acquiring ownership interest in an additional 92 ambulatory surgery centers, other support services in 21 states, and providing continuity for future de novo development projects. In 2022, USPI made substantial strides in consolidating the 92 ASCs it acquired from SurgCenter Development. This process is expected to continue into 2023 as the centers are further consolidated. The acquisition has enabled Tenet and USPI to expand their footprint and solidify their position as a leader in the ambulatory surgery center market.

“There’s anticipated additional synergies related to the SCD transactions that will continue to grow as we move through next year as well. And the other thing is the M&A activity that USPI will execute on. The pipeline is robust.”

-Dan Cancelmi, Chief Financial Officer

On June 21, 2022, USPI and United Urology Group formed a joint venture partnership in 22 ASCs. USPI acquired a portion of United Urology Group’s ownership interests in ASCs located in Maryland, Colorado, and Arizona. The ASCs will be owned and operated by the joint venture, and USPI will provide management and support services to the ASCs. The transaction closed in the third quarter. In February 2022 The Rise Fund, an impact investing strategy managed by TPG, announced the acquisition of Blue Cloud Pediatric Surgery Centers which is the largest operator of pediatric dental ASCs in the United States. TPG Rise is a large impact investing platform with more than $13 billion in assets across its various funds, including The Rise Funds, TPG Rise Climate, and the Evercare Health Fund.

On December 9, 2022, Michigan-based Sparrow Health System and Michigan Medicine, formerly the University of Michigan Health System, announced an $800 million partnership. Michigan Medicine will invest $800 million into the expansion of Sparrow’s ASC and neonatal care unit.

In April 2022, UnitedHealth Group’s Optum announced the purchase of Kelsey-Seybold, a Houston-based physician group for $2 billion. The acquisition expanded Optum’s presence in the primary care market. As part of this acquisition, Optum gained two ASCs that were owned by Kelsey-Seybold.

Finally, on May 3, 2022, Surgery Partners and ValueHealth announced a partnership that aims to construct new ASCs and implement ValueHealth’s value-based surgical programs at Surgery Partners’ existing and upcoming locations. Additionally, Surgery Partners will manage and take over ValueHealth’s stake in three current ASCs and four centers that are in the development phase.

As of December 31, 2022, the largest operators (in terms of the number of ASCs) are United Surgical Partners International (USPI), Envision Healthcare/Amsurg Corporation, and Surgical Care Affiliates (SCA), with ownership of approximately 440+, 260+, and 260+ ASCs, respectively.

As noted in the chart below, the number of total centers under partnership by a national operator, as a percentage of total Medicare-certified centers, saw an increase from 2021 to 2022 growing from approximately 1,752 centers to 1,804 centers. Additionally, the top five management companies have increased the number of centers under management by approximately 511 centers since 2011 which represents a compound annual growth rate of 5.37%. As management companies have increased in size they are able to increasingly provide a greater level of strategic value by bringing greater leverage with commercial payors, enhanced management and reporting capabilities, and improved efficiency related to staffing, supplies procurement, and other general and administrative expenses.


On November 2, 2021, the Medicare reimbursement fee schedule for ASCs in 2022 was finalized by the Centers for Medicare & Medicaid Services (CMS). Consistent with previous years for CYs 2019 through 2023, CMS will update the ASC payment system using the hospital market basket update instead of the Consumer Price Index for All Urban Consumers (CPI-U). CMS published the 2021 ASC payment final rule which resulted in overall expected growth in payments equal to 2.0% in CY 2022. This increase is determined based on a hospital market basket percentage increase of 2.7% less the multifactor productivity (MFP) reduction of 0.7% mandated by the ACA.

Moreover, the ASC payment final rule for CY 2023 was released by CMS on November 1, 2022, and resulted in overall expected growth in payments equal to 3.8% in CY 2023. This increase is determined based on a projected inflation rate of 4.1% less the MFP reduction of 0.3% mandated by the ACA. The 3.8% growth in payments represents the largest increase in projected payments year over year and is a direct result of the increase in labor, supplies, and other cost pressures seen over the last year. Although the industry recognizes the increase in payments as a win, many major players believe the increase was insufficient given the extraordinary cost pressures hospitals and ASCs are facing. The way ASCs navigate the dynamic macroeconomic environment currently in place will be a major point of interest over the coming years.

The table below reflects a summary of the estimated Medicare ASC payments for 2022 and 2023 for the top 10 CPT codes performed in ASCs in 2022. As noted below, the observed 2022 payments by Medicare for the top 10 CPT codes are projected to increase by 3.9% through the estimated 2023 payments.


CMS has implemented a new policy that will provide complexity adjustments for certain ASC procedures in CY 2023. These adjustments will be applied to combinations of primary procedures and add-on codes deemed eligible under the hospital outpatient prospective payment system (OPPS). In the past, add-on codes did not receive additional reimbursement when bundled with primary codes. However, with this new policy Medicare will provide adjustments to the payment rate for certain primary procedures to account for the additional cost of performing specific add-on services.

CMS considered 64 recommendations for new procedures to be added to the ASC CPL for CY 2023. After reviewing the clinical characteristics of these procedures, four were chosen to be added to the CPL for the upcoming year. These procedures are typically performed in outpatient settings and have little to no inpatient admissions. The four procedures are outlined in the table below. However, the addition of only four codes resulted in pushback and a continued desire for additional procedures to be added to the CPL that is being performed safely and successfully by ASCs.

“CMS’s decision to add only four new procedures to the ASC-CPL for 2023 after ASCA proposed 47 procedures that ASCs are performing safely and successfully for privately insured patients is a serious mistake and denies beneficiary access to high-value care. Forcing otherwise healthy Medicare beneficiaries to receive care in higher-cost settings for these procedures needlessly increases costs to the Medicare program and undercuts Medicare’s mission of serving as a responsible steward of public funds.”

– Bill Prentice, Chief Executive Officer, ASCA

Presented in the chart to the right is a summary of the historical net inflation adjustments for CY 2015 through CY 2023. The annual inflation adjustments are a presented net of additional adjustments, such as the MFP reduction, outlined in the final rule for the respective CY. The CY 2023 inflation adjustment is nearly double the increase we have observed in each of the last eight years and is largely driven by labor and supply cost pressures.

Overall, the final ruling to increase ASC payments by CMS and the increased recovery from COVID-19 both indicate an expected increase in total ASC payments. Ultimately, CMS has projected total ASC payments in 2023 to increase by approximately $230 million from 2022 payments to approximately $5.3 billion.

In conclusion, 2022 was a year of growth throughout the ASC industry and a year of continued recovery from the effects of the pandemic. Key trends to look for going forward are the effects of increased cost pressures impacting the healthcare industry as a whole, and specifically how ASCs respond. Expectations for 2023 are continued growth and consolidation in this sub-industry. The ASC setting provides a convenient, cost-effective way for patients to receive high-quality care. The continued shift of higher-acuity procedures to the outpatient setting should give optimism to the success of the subindustry as a whole as long as cost pressures are mitigated properly. Overall, ASCs at the center level are expected to continue the positive momentum that persisted in 2022 and the subindustry is expected to see the level of transactions increase through 2023.

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Looking to Formalize Your Physician Compensation Strategy? Follow the 1-3-5 Rule

January 16, 2023

Written by Anthony Domanico, CVA

As a strategy consultant focusing on the physician enterprise, and more specifically on physician compensation design, one question I frequently get asked is how to develop a strategic plan for managing physician and advanced practice provider (APP) compensation. Specifically, organizations look for guidance on how often they should be rebasing and/or recalibrating their compensation plans to ensure their compensation program remains competitive and contemporary.

When answering this question, I often advise clients to follow the “1-3-5 Rule.” Here is a breakdown of the rule and what each component means:

1: Rebase Market Compensation Rates Annually

To ensure your compensation program remains market competitive, it is important to rebase your salary, productivity, and other compensation rates on an annual basis. Many organizations choose to tie their rates to a target market percentile of the physician compensation and productivity surveys. This subjects their physicians to market-based increases typically in the 2-3% range.

There has been high market volatility in 2022 and it is expected in 2023 due to the COVID-19 pandemic, inflationary growth and cost of living challenges, the 2021 Medicare Physician Fee Schedule, and other factors. Because of this many organizations are adjusting their approach to continue to provide reasonable increases to their physician compensation pool. Regardless of the methodology used, rebasing your compensation levels on an annual basis is essential to ensure your providers’ compensation levels keep up with the market and avoid potential retention issues.

3: Consider Compensation Plan “Tweaks” Every Three Years

After going through a compensation plan design process, it may be tempting to just “set it and forget it.” After all, a lot of work went into setting levels of base salary, quality, and productivity incentives in the new compensation program. Also, the compensation rebases annually to ensure the total remuneration remains competitive, and surely that should be enough, right?

Not necessarily.

Payor contracts tend to come up for renewal every three years or so. As the industry continues to move from volume to value-based reimbursement, more of an organization’s revenue will be tied to quality and other non-productivity-based outcomes the next time a contract comes up for renewal. Those contract renewals could impact what an organization might do in its provider compensation program.

For example, consider an organization with a compensation model that is 90% base salary, 7.5% wRVU-based productivity, and 2.5% quality. Then, consider that organization’s payor contracts shift such that 80% of revenue is driven through fee for service and 20% through quality and shared savings programs. In that case, the organization should consider shifting those percentages to align its compensation program with its payor contracts.

5: Consider a Major Compensation Plan Overhaul Every Five Years

The healthcare industry is changing with an increased focus on providing high-quality, low-cost care to patients. As this trend continues, new types of compensation programs have emerged to shift the focus away from things like wRVUs and toward panel management and outcomes-based payment arrangements. Over time, as more organizations consider and adopt alternative compensation models, these models will become more mainstream and may make legacy models look a bit antiquated. This can create recruitment and retention challenges for an organization.

About every five years, organizations should evaluate their strategic plans relative to the physician enterprise. This should be done to determine if the compensation structure (e.g., the 90% base, 7.5% wRVU, 2.5% quality model) remains contemporary and competitive with modern physician compensation programs.

When considered in totality, the “1-3-5 Rule” can help organizations better manage their physician compensation and alignment models. In turn, this will ensure the organization is always able to best compete in an increasingly competitive marketplace.

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