By Tom Mallon, CEO A few years ago, the ambulatory surgery center (ASC) at St. Mary’s Regional Medical Center in Reno, Nev., was unprofitable. Managed by the 376-bed, not-for-profit hospital, the underperforming surgery center struggled to earn enough income to cover its expenses. While busy with 500 cases per month, the center was squeezed by shrinking reimbursements, certain unprofitable surgical specialties and rising costs. Six months after the hospital brought in Regent Surgical Health, a specialist in turnaround situations, the ASC started to thrive. The road to profitability started in 2005 with a group of physicians, led by neurosurgeon James Lynch, MD, who formed a syndication with Regent and approached the hospital’s management about teaming with them to revitalize the ASC. The physicians were impressed with Regent’s model, which allows majority ownership and control by the doctors and the many services it could provide them. St. Mary’s leadership recognized Regent’s ability to turn around facilities and the company’s experience in the Nevada market. (Regent manages two Las Vegas ASCs, one of which is also partnered with another hospital.) In February 2006, Regent syndicated Surgery Center of Reno with 22 physicians owning 75 percent; St. Mary’s, which retained 13 percent ownership after selling the facility to the center; and Regent, which became a 12 percent owner. The ownership model was a limited liability company (LLC) with five surgeons, the CEO of St. Mary’s and one Regent partner serving on the board of directors. The new partnership focused on high quality/ high acuity surgical services. It also made renovations to the 17,000-square-foot, five operating room (OR), one special procedures room facility, which also has two overnight rooms. New paint, flooring, carpeting, furniture, flat-screen TVs and computers were installed to provide comfort and amenities for patients, families, physicians and staff. Thus a new look was created, but more importantly, a newly focused center of excellence in the key specialties of spinal neurosurgery, bariatric surgery, urology, ENT and pain management was augmented by purchasing the finest equipment for those areas. “Our goal is to create programs of excellence in multiple specialties by recruiting the most prominent physicians,” says Lynch, president and chairman of the board of directors. “We have invested in state-of-the art equipment and imaging technology that allows us to perform more complex procedures and introduce subspecialties like the pediatric ENT program.” Lynch credited Regent’s leadership with improving the center’s payor contracts, boosting revenue and developing a more efficient and cost-effective operating philosophy, which in turn contributes to an enhanced level of patient care. The outpatient surgery center now operates from a strong business platform, which includes reduced supply costs and the benefits of competitive bidding. Billing and collections also were moved in-house giving the facility’s administrator, Anne Roberts, the ability to constantly know the daily cash position of her business. Financial results have been strong. During the first year, the center generated a 50 percent return on investment; by the end of the 14th month of opening, the facility had a 110 percent return on investment. After two years, the financial return on the initial investment to the partnership is excellent. To achieve such success, it is essential to hire and retain the best staff in the community and to attract other surgeons to use the facility. Financial success is also paramount to developing and expanding programs that ultimately improve patient care. In addition, St. Mary’s has benefited from partnering with the physicians on more complex cases at the hospital and sharing technology platforms. And some of the ASC partnership surgeons have moved onto the St. Mary’s campus, which has resulted in increased volume for the hospital for inpatient cases. “Our physician owners have found a corporate partner with interests very much aligned with ours,” Lynch says. “We are now more directly involved with delivering the highest quality and standards of patient care.” The partnership has proven that a prestigious not-for-profit and religious hospital system can successfully partner with a management firm and community surgeons. When you can bring everyone together for the benefit of all, the patients and community really benefit. By procuring equipment and creating centers of excellence in four high acuity specialties: neurosurgery and spine, pain management, gastric banding and ENT, the center was able to attract the finest doctors and specialties to the area and benefit from high reimbursements and an exceptional profit margin. Surgery Center of Reno is now regarded as the most successful and clinically excellent physician, hospital and corporate partnership in northern Nevada. It took the courage of a hospital administration to agree to relinquish its day-to-day management and reduce its ownership position as a general partner to a minority owner and place the control and majority ownership in the hands of its local surgeons. All parties have benefited from this arrangement, especially the patients and doctors. Reproduced with permission from SurgiStrategies Magazine, April 2008 issue. ©2008 Virgo Publishing. All Rights Reserved.