2019

Regent’s 7.7% Case Volume Growth is Nearly Double the Industry’s Rate

It’s a good time to be in the ambulatory surgery center (ASC) space, and a great time to be part of Regent Surgical Health. The ASC industry, which has historically grown 2-3% annually, is trending much higher and Regent is poised at the forefront of that growth, having achieved unprecedented 7.7% case volume growth in 2019.

Taking time to reflect as the year winds down, Regent CEO Chris Bishop shared his thoughts on the company’s accomplishments in 2019 and his excitement about the year ahead.

“We targeted very aggressive goals this year, and I’m proud to say we are realizing them,” says Bishop. “Our team put some pretty difficult stretch goals out there, and thru hard work, our team has managed to achieve those goals.”

 

Growth Opportunity

According to a report from Bain Consulting, case volume growth in the ASC industry overall is projected to reach 6-7% over each of the next three years. While publicly traded companies in the industry report 3-4% growth in 2019, Regent’s 7.7% performance is nearly double that rate.  “We are very pleased, but not satisfied,” Bishop says. “We have high expectations, so we expect that level of performance to continue in the years ahead.”

Bishop cites two key factors contributing to the industry’s growth:

  • Patient care continues to move to the ambulatory setting because the shift makes financial sense, and patient satisfaction rates are materially higher in ASCs than in hospitals.
  • Medicare CMS has begun to recognize the ASC industry for delivering higher quality, lower cost care: beginning in 2020, knee replacements for Medicare patients can be done in surgery centers; hip replacements are no longer on the “hospitals only” list; and six more cardiac codes have been added for ASC reimbursement – following addition of twelve codes last year.

Growth in total joint replacement (TJR) procedures was exponential once again in 2019. Regent will approach 100% growth on volume for joint replacements again this year, as existing centers grow the number of patients they feel comfortable serving, and Regent opens new centers offering ambulatory TJR.

“Regent is outpacing the market growth rate in TJR because we’re very intentional about training surgeons, recruiting surgeons, and intentionally designing new facilities to accommodate TJR,” says Bishop. “We continue to put systems in place to help joint surgeons feel comfortable shifting those procedures from inpatient to outpatient. We’ve had a lot of success doing that, and 2020 Medicare changes will only amplify our growth.”

An additional growth opportunity began to emerge in 2019 within the TJR arena: joint replacement revisions. Says Bishop: “In our more mature centers where the surgeons are comfortable providing primary TJR, we are now beginning to schedule healthy patients in need of revision surgery. Our partner, Oregon Surgical Institute has been at the forefront of this trend and are among the first to be doing total joint revisions in surgery centers.”

 

A Winning Team

“Our success starts with the incredible team we’ve assembled,” says Bishop. “When you’re in high growth mode, you have to continue to add high quality teammates. As we grow, we continue to add great people that can better serve our clients, improve the quality of patient care, and expand the services we’re offering in our centers.”

Four talented leaders joined Regent in 2019: Alexandra Reyes came onboard as Operations Vice President for the Northeast region, and Beth Johnson became Regent’s first Senior Vice President of Operations. Two new VPs also joined the company’s business development team – Scott Bergman on the East Coast, and Justin Neerhof on the West Coast.

In addition, the company promoted Erin Petrie, a three-year veteran of Regent’s revenue cycle team, to Vice President of Revenue Cycle Management, while Gina Tolbert was promoted to Revenue Cycle Manager.

“Erin and her team have grabbed onto the concept that, as an ESOP, we are all owners of the company,” says Bishop. “We’ve seen our revenue cycle metrics raised across the board over the last three years under Erin’s leadership. And that’s a critical performance component of a surgery center’s success.”

Bishop also notes Regent’s success in tracking key clinical metrics in 2019: “We highlighted two in particular to focus on this year: on time starts and turnover times. We saw a 22% improvement in on-time starts over last year. At $18 an Operating Room minute, if a doctor routinely shows up late for cases, that becomes very expensive. Tracking and sharing that information with medical directors and surgeon partners has really had a direct impact.”

 

Expanding Partnerships

Adding new partners is among the five-year goals established with Regent’s conversion to an ESOP three years ago, and the company is on track to meet projections. New partners added this year include:

  • Universal Health Services (UHS), a 27-hospital, national health system.

“For the first time in company history, Regent has signed a national partnership with a hospital system, and it’s a chance for us to really leverage our own national platform to deliver ambulatory services to a high quality health system” says Bishop. “This is our largest partnership to date, and we’re already working with them in over a dozen markets.”

  • Bone & Joint Institute of Tennessee in Nashville, a joint venture with Williamson Medical Center, the Bone & Joint Institute, and Regent.
  • ASC North, in Anchorage, AK, a partnership with a multi-specialty group of surgeons.

“In addition, we were successful securing two certificates of need in the state of New York for musculoskeletal centers, both of which will be constructed in 2020 within our partnership with Catholic Health Services of Long Island,” Bishop added.

 

Outlook for the Future

In two areas, Regent did not see the progress it expected in 2019: Bundled Payments and HOPD Conversions.

“With bundled payments, we’re finding that doctors are ready to go, but the insurance companies have been very slow to adopt this value-based care strategy, in large part because it’s difficult for their IT systems,” Bishop says. “We continue to meet with payers, pressing them to consider growing their value-based strategy, but I can’t predict if 2020 will be the year that they finally move en masse to support these types of programs. When they do move, we are well-prepared to expedite.”

While Regent didn’t execute an HOPD conversion in 2019, Bishop believes the industry’s economic climate is primed for hospitals to convert hospital out-patient departments and anticipates multiple conversions in 2020.

In addition, Bishop predicts continued partnership growth in 2020.

“The two fastest growing segments within the surgery center space right now are 3-way joint ventures with hospitals and high acuity surgery centers to accommodate joint replacement, spine and cardiac procedures. Regent is extremely well-positioned to grow with these segments, and we are very excited about their potential. We’re making sure we put the people resources and capital resources in place to help physicians and hospitals capture that growth.”

“One other thing that’s important to us is that when we converted to an ESOP three years ago, we had to take on a material amount of debt to do so, and our senior debt was scheduled to be paid off over 5 years. I’m proud to say that we are able to eliminate our senior note in only 3 years due to the success that we’ve achieved,” says Bishop. “I’m really proud of the team’s hard work and it’s evidenced by the fact that we continue to improve our performance and that has allowed us to de-lever ahead of plan.  It’s really exciting news.”

Looking back over 2019, Bishop expressed gratitude for the favorable industry conditions within which Regent continues to thrive. “I feel like this was our breakthrough year,” he says. “Three years into our ESOP, we have the highest performing team in our industry and have assisted our many centers in achieving record performance. We are incredibly humbled for the opportunity to serve our many physician and hospital partners this year and once again, sets our ASCs and Regent up well for what could be yet again, a record-breaking year in 2020.”