CASE STUDY: THE SURGERY CENTER OF RENO

A Classic Turnaround Story in Reno, Nevada

For the past few years, the ambulatory surgery center at St. Mary’s Hospital in Reno, Nevada, was unprofitable. Managed by the 376-bed, not-for-profit hospital, the underperforming surgery center struggled to earn enough income to cover its expenses. The center, while busy with 500 cases per month, 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 with the addition of a spine program.

In 2005, a group of physicians, led by neurosurgeon James Lynch, MD, formed a syndication with Regent and approached the hospital’s management about teaming with Regent to revitalize the ASC. The physicians were impressed with Regent’s model that allows majority ownership and control by the doctors and the many services it could provide them. St. Mary’s recognized the company’s ability to turn around facilities and Regent’s experience in the Nevada market. (Regent physician and hospital partners manage two Las Vegas ambulatory surgery centers.)

The Surgery Center of Reno was formed in February 2006 by a syndicate of 22 physicians owning 75 percent; St. Mary’s, which retained 13 percent ownership after selling the facility to the center; and Regent. The ownership model was an LLC with five surgeons, the CEO of St. Mary’s and one Regent partner serving on the board of directors. Renovations to the 17,000 square-foot facility created five operating rooms and a procedure room and included new paint, flooring, carpeting, furniture, flat-screen TVs and computers to provide comfort and amenities for patients, families, physicians and staff. The improvements facilitated additional specialties of spinal neurosurgery, bariatrics surgery, urology and pain procedures by adding new equipment for spinal surgery, bariatrics surgery, ENT, ophthalmology and orthopedics.

"Our goal is to create programs of excellence in multiple specialties by recruiting the most prominent physicians," says Dr. 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 sub-specialties like the pediatric ENT program."

According to Dr. Lynch, Regent’s leadership—experts in developing and managing ASCs—improved the center’s payer 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 from competitive bidding. Collections have also improved substantially.

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 has had a 110 percent return on investment. Such success, Dr. Lynch says, 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 ambulatory surgery center 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," Dr. Lynch concluded. "We are now more directly involved with delivering the highest quality and standards of patient care."

Regent’s Jeff Simmons, president for the Western Region, says 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."