Interview with Tom Mallon, CEO, for Becker’s ASC Review Regent Surgical Health celebrates its 10-year anniversary this year (2011). Tom Mallon, CEO of Regent, discusses the milestone, how the company became and has remained successful and what he thinks will be necessary to allow him to reflect on the company’s 20-year anniversary a decade from now.
Q: What does celebrating a 10-year anniversary mean to you?
Tom Mallon: It’s recognition of a committed group of people pulling together for the objective of serving physicians and patients. We’ve been blessed with a great team and they do outstanding work and I think it’s time for them to sit back and pat themselves on the back for a job well done.
Q: How do you think you have been able to find success for a decade which has proven quite challenging for the ambulatory surgery center industry and the U.S. economy?
TM: I think we’ve continually been trying to look ahead to the next trend in surgery centers and physician-hospitals, Initially we brought in cases that were traditionally done in hospitals like spine surgery. That was the first trend we rode for the first couple of years for growth. Then we started bringing in hospital partners as minority partners in order to allow more of the physicians in the community to consider partnering with us. It basically opened up the medical staff of the community. It also befriended the hospitals so we weren’t at war with them, which is never a positive outcome. Then as the number of payors decreased in the market and the rates they were paying us in-network were below our costs, we saw the opportunity to partner with hospitals where they were the majority owner or controlling owner and they could help us with our contracting efforts so that we might be paid fairly and the facilities could stay open.
Q: What are you most proud of accomplishing during the past decade?
TM: The most fulfilling thing for me has been working with just a great group of people. They’re very smart, very committed, high integrity and it makes going to work every day fun. Most of our new centers have been referrals from existing physician-partners. That validates the work we do and it gives us encouragement that we’re on the right path.
Q: What would you say was your biggest challenge during these 10 years?
TM: When we started out we wanted to be in the niche de novo business where we’re building new facilities in very unique situations, we wanted to be in the turnaround business and we wanted to be in the physician-owned hospital business. The third strategy has been the most frustrating and the least rewarding to us and to our physician-partners. The fact that we were able to build two hospitals with physician-owners was a credit. We run them and the results for the physicians and for the patients are very similar to our ASCs. There are very low instances of infection, quick turnaround between cases, everything has worked as we predicted except for the fact that the commercial carriers continue to pay us like ASCs and we didn’t enjoy the financial success commensurate with the kind of work that we were doing.
Q: What do you know now that you wish you knew at the start?
TM: I wish I would have known that our government was going to give a green light to the payors to consolidate and reduce the competition in most of the markets in America. While it’s opened up opportunities for us in turnaround situations, it really has hurt the independent practice of medicine. Even though we’re being paid below what we feel is fair and sometimes below what Medicare pays us, which is 60 percent of our costs, what those same insurance companies that have grown so large have done to independent physicians is basically forced them into large hospital-owned groups. So now instead of trying to serve the patient as best we can, we’re trying to position our business model in a way we can survive to serve the patient. In many instances the only way to do that is consolidating, consolidating and consolidating in a market with the major hospital chains. They’re the only people who can receive reimbursement commensurate with the service they provide.
Q: What do you think will be the key to another 10 years of success?
TM: If we are still in business 10 years from now, which I hope we will be, it will be because we have joined with hospital systems in order to be able to continue to do the good work we have been known for. There is no way we can continue as an industry — either physicians or independent physician-owned ancillary services like ASCs — unless we joint venture these with hospitals.