CASE STUDY: MARIETTA SURGERY CENTER

A Rural Surgery Center Turns the Corner

In its first five years, the Marietta Surgery Center failed to turn a profit. Until a partnership with Regent Surgical Health turned the center around.

Founded in 1999 by five orthopedic surgeons, the 5,200 square foot Marietta Surgery Center began procedures in the Spring of 2000 and began losing money from the start.

The two-OR center, situated in the small city of Marietta, a semi-rural area in southeastern Ohio, should have been profitable. The physicians had strong practices, and there were plenty of cases. And while there are four hospitals in the region (two in Marietta and two in nearby Parkersburg, West Virginia), Marietta Surgery Center was the first and is still the only outpatient surgery center in the area.

Yet the physician partners who founded the ambulatory surgery center knew the center required intervention. Enter Regent Surgical Health.

"When our doctors set up the business, they did what seemed to be safe. They limited the number of insurance companies they worked with to a few big names that they knew and accepted the contracts the insurance companies offered," says facility administrator Shirley Thomas. "Plus, our charges were too low. So the surgery center wasn’t even breaking even on its reimbursements and expenses."

To complicate matters, the underperforming outpatient surgery center didn’t have its own business office. Its administration was part of the business office of the partners’ practice; the surgery center’s costs were ignored.

For the first five years, the physician owners took no income from Marietta Surgery Center, and in fact, the partners had to put money into the venture. Yet the partners were still skeptical when they met in early 2005 with Regent Surgical Health and learned the first thing they needed to do was to get out of their comfort zone and take a risk. They sold a minority interest in the center to Regent, a leader in surgery center development, which brought in a team to help the center become profitable.

"Regent delivered the knowledge base you normally find only in the big players," says Dr. Greg Krivchenia, an orthopedic surgeon and a physician partner in Marietta Surgery Center. "Regent delivered it to us at the local level and that allowed us to compete successfully."

First, Regent ended the contracts the partners had set up when the center opened. Regent then increased charges to the 80th percentile, established a separate business office in the surgery center and immediately hired a biller.

The changes were significant and the results immediate. "I was really nervous at first, because when we dumped the old contracts, Regent taught us to negotiate with the insurance companies. I thought it was going to be like negotiating with a used car salesman. But do it a few times and you get the hang of it," says Thomas.

"I’m not nervous anymore. I established a floor for what we expect to get paid and it’s the absolute lowest I will go. It’s the 85th percentile, and we can do that the first time around or the tenth time, it doesn’t matter because I’m not going to budge."

Under Regent’s guidance, the Marietta Surgery Center deepened its insurance pool and Marietta’s biller began collecting on old accounts. "We began to see immediate results," says Thomas. "Within three months, our reimbursements were up almost 450 percent." With the improving cash flow, Regent Surgical Health proposed increased salaries for employees.

Last year, the center handled more than 1,000 cases. Capacity is approximately ten cases per day. (Currently, only one of the two ORs is used.) To expand the center’s utilization, an anesthesiologist and pain specialist have joined, and the physician partners are recruiting other orthopedic surgeons to join the practice.

In October 2005, the physician partners began receiving a return on investment. The skepticism expressed by the partners when the process started evaporated as Regent’s specialty in ambulatory surgery center turnarounds shone. "The physicians are believers now," Thomas says with a smile. "At every step of the process, Regent did what they said they would do when they said they would do it.”

Dr. Krivchenia agrees. "Regent helped us deal with the inefficiencies inherent in the system and better use our time," he says. "That puts patients first. Respect the patients, the physicians, the employees. Do these things and it’s win-win-win for everybody."

"It’s a true partnership that let us take some risks," says Thomas, "but we felt safe in doing so. Regent was there the whole time to encourage us and help us through the process. You know, when we started, Regent President Tom Mallon promised two things would happen: We’d become friends and we’d learn our business. And that’s what happened."