The People

“When I started in the business in 1978, if you told someone you worked in a freestanding ASC, they looked at you as if you were talking in a foreign tongue,” says Beth Derby, RN, BS, MBA, executive vice president for Health Resources International, a start-up development equity and consulting firm. “In my professional life, I have been very blessed,” she says. “I’ve had the opportunity to visit hundreds of facilities across the country, working with physicians, ASCs and hospitals.”

Derby is also an independent consultant, is very active with the accreditation association, and serves as a surveyor. “I had shared the task force on the corporate alliance program for AAAHC, so I got involved with corporate programs doing accreditation for large companies owning multiple ASCs,” she says. “That’s been a unique opportunity to bring the business side to the accreditation side. I sit on the board of directors of the Institute for the Quality Improvement (IQI), a relatively new organization that has begun to fill the niche of providing benchmark and performance improvement evaluation in the ambulatory setting.”

Derby has been an active member of the Federated Ambulatory Surgery Association (FASA), having served on the board for 14 years. “It was a life-affirming and wondrous opportunity to be involved locally, nationally and internationally,” she says. “That kind of recognition and exposure — meeting and having experiences with congressional leaders, and prominent leaders of providers of care — was an opportunity that I don’t think I would have had, had I not moved into the ambulatory arena.”

The fact that the surgical industry as a whole has come to regard ambulatory care as part of mainstream medicine is very gratifying, Derby says. “Patients have become comfortable having surgery and going home. Physicians and nurses have become acclimated to how to take care of a patient safely, efficiently, and effectively in an ambulatory environment and prepare them to do the remainder of the healing process in their own environment. We’re no longer the unusual new kid on the block, but part of mainstream surgical care.”

As president of Ellis Medical Consulting, Inc., Stephanie Ellis, RN, CPC, works with surgery centers on compliance and reimbursement issues. “We help to ensure that they are billing, coding and documenting properly so that they’re being reimbursed as much as possible,” she says.

Ellis worked as a fraud investigator for the Tennessee Medicaid program, and had extensive experience working with physicians and hospitals on billing and coding issues. Wanting to be involved in all aspects of the billing and coding picture to help providers from the front end, Ellis founded Ellis Medical Consulting. A member of 14 professional associations, she has served as a speaker for FASA and the American Association of Ambulatory Surgery Centers (AAASC) at a national level on training and coding, and champions the importance of industry associations. “The state and national association meetings are extremely important because they update their members on both clinical aspects — new surgical techniques or new equipment, and new procedure aspects that are very important for them to remain on the cutting edge. FASA and AAASC are very involved in legislative issues,” she says.

“I do a lot of auditing of ASCs to make sure that they are not leaving money on the table,” says Ellis. “We answer coding questions; we can provide coding when a facility’s coder is out on an interim basis. We do everything we can to be of assistance to those we work with. We work with individual ASCs as well as big companies that own multiple locations.”

Ellis is loyal to the ASC market. “I really enjoy the surgery center industry,” she says. “It’s a very refreshing change from straight physician work. It’s a great group — they really make me feel appreciated. People call with coding questions, and we’re able to get their claim coded and out the door. They’re so thankful. They’re just a joy to work with.”

As a lobbyist for the American Surgical Hospital Association (ASHA) and a number of other organizations serving the ambulatory surgery industry, Randy Fenninger, JD, is a very familiar face in Washington, D.C. these days. Whether it’s appearing before members of Congress or the Centers for Medicare and Medicaid Services (CMS), or interacting with a half-dozen entities fighting the surgical hospital moratorium, Fenninger spends long days and nights hopping planes, making calls and petitioning on the behalf of the outpatient healthcare delivery model. “It’s been a very time- and labor-intensive process, but the interaction has been fascinating.”

“The lion’s share of the political activity this year has been focused on the two studies mandated by Congress as part of the 18- month moratorium, which will expire in June,” Fenninger says. The studies are being conducted by the Medicare Payment Advisory Commission (MedPAC) and CMS.

In his work for ASHA specifically, Fenninger says their mutual goal is to strengthen the advocacy tools that the association had, and in doing so, created a political action committee to fund political advocacy on behalf of the ASC industry and to broaden its political influence. Visits to Capitol Hill by small groups of industry members will continue, especially around the time the MedPAC and CMS reports come out some time in March.

“We are working hard to continue to build new political relationships and improve the ones we already have in anticipation of the real debate next year,” he adds. “Both sides in this debate have been on Capitol Hill all year; the level of activity is not as intense as it was during the latter part of 2003 when Congress was actively considering the Medicare bill, but it’s hard to see that’s it’s quieted down a great deal in 2004. The other camp has been just as active in trying to put out its own version of information. The jockeying for position continues on a daily basis and will pick up in 2005. The studies themselves will be important; I understand that the American Hospital Association (AHA) is developing its own study, which will probably come out either late this year or early next year. I’m sure it will support whatever it is they say; if their study doesn’t, we’ll never see it.”

Fenninger says his role in 2005 is very clear. “Our job has to be to find enough members of Congress who, whether they really like us or not, don’t dislike us enough to say, ‘We’ll put them out of business.’ Hopefully they’ll say, ‘If these people want to do it and there’s no evidence of harm to the Medicare beneficiary, if they succeed, they succeed.’ There will be lots of plain old bare-knuckled lobbying for a good deal of 2005. It also wouldn’t surprise me to see the moratorium expire while a Medicare bill is under consideration because typically, Congress generally doesn’t do things in little pieces. It’s conceivable the moratorium could expire in June and we will not see the final legislative response, if any, until September or October 2005.”

Although he’s in the lion’s den daily, Fenninger says he relishes his work and draws upon a background that includes a small law practice, nine years with the American Medical Association, and experience with start-up companies before starting MARC Associates, Inc. “I gravitate to the entrepreneurial side of healthcare because of the interesting issues and interesting people. I enjoy a good fight, I have to admit. Looking back on the projects I’ve taken on, the ones that were the hardest afforded the greatest satisfaction; most of these cases at the onset seemed to have the least chances of success.”

He adds, “I enjoy problem solving in a political environment. I have found my greatest interest and satisfaction in the political arena as opposed to the courtroom; the process of how we get to the beginning of a legislative idea to the end point is one I find fascinating. Democracy in action is fun, and there’s a lot of gratification in achieving success for a client. The tricky part is realizing what success is in an environment that is based on compromise. This is not an all-or-nothing game. That was clear last year. People tried to put us out of business, but they didn’t. They’ll try to put us out of business again this year. It’s likely there will be some further compromise. What is it? Part of my job is to help negotiate that.”

In the last year, National Surgical Care has acquired facilities in Nevada, California, Maryland and Texas, adding to a portfolio that includes ambulatory surgery centers and short-stay surgical hospitals in markets across the United States. These centers perform approximately 18,000 cases annually, have a total of nine surgical suites, three procedure rooms, and are operated in partnership with 52 physician investors.

E. Timothy Geary, chairman and CEO, attributes the company’s success to its “core principals, the most important of which is being a good partner.” He adds, “We place our partnerships with physicians and hospital systems at the forefront of our decisions. We believe in a consensus approach to all major decisions affecting a center, and make an effort to get each partner’s opinion. We’re sensitive to what our partners face today as healthcare providers, and our goal is to help them participate in a successful surgery center with as few headaches as possible.”

Geary, who has 20-plus years of senior leadership experience in the outpatient surgery industry, co-founded National Surgical Care in 2002 with an initial funding commitment of $75 million from JP Morgan Partners and Brazos Private Equity Partners.

Prior to starting NSC, Geary was chairman and CEO of National Surgery Centers, which he co-founded in 1987. By 1998, National Surgery Centers operated 42 surgery centers in 14 states and had revenues of approximately $120 million. From 1983 to 1987, Geary was a vice president with Medical Care International with both operating and development responsibilities, including management supervision of 22 surgery centers. NSC is operating facilities in states that have faced numerous challenges from industry detractors, but Geary says the company strives to keep facility personnel focused and upbeat about the industry.

“Everyone at NSC is a proponent of the ASC model because we believe it’s proven to deliver excellent patient outcomes,” he emphasizes. “Being physician advocates, we are proud to play a role in expanding ambulatory surgery involving physician owners. I have been in this business over 20 years, and there have been several challenges to us, yet the industry keeps growing. I think it’s because, at the end of the day, you can’t fault a service that is cost-effective, quality-driven, and physician-oriented. Nevertheless, it’s important for us to support the efforts of FASA, AAASC, and our state associations as our industry advocates.”

Geary believes the ability to thrive, and not merely survive, in a competitive marketplace is influenced by several factors. “Our experience with operating a portfolio of centers is that every center’s success is due to a unique combination of factors. All centers will face challenges; the key is how to overcome those challenges. Our operational approach is anticipative: we prefer to address potential issues before they become critical. For example, we typically revisit each center’s managed care contracts in order to ensure we’re getting the best level of reimbursement available for our services. In addition, new physician recruiting is an almost continuous effort as we try to identify those surgeons with new or growing practices around our centers.”

Richard Hanley is a founder, president, and CEO of Health Inventures, LLC, an ASC management and consulting company. Since his first exposure to ambulatory surgery in 1981 with Sutter Health in Sacramento, Calif., Hanley has developed and operated numerous ASCs and physician organizations.

“I’ve been involved in the industry since it was in its infancy and I’ve kind of grown and evolved along with it for the past 23 years,” he says. Health Inventures was formed in 1995 as Horizon Health Services, and after four years of successful operation, was purchased by Johnson & Johnson.

“We were with Johnson & Johnson for four years, and they were a very productive four years; it was a great opportunity,” says Hanley. When Johnson & Johnson made the decision to divest themselves of their service businesses, Hanley and his original group were able to buy the company back in January 2003. “It’s basically the same company and the same leadership team,” he says. “We’re just much bigger and much better now.”

For Hanley, a thorough understanding of the industry and of the circumstances unique to each project has been key in attaining success. “This truly is a people business and a service business,” he says. “Our philosophy is to be flexible in the way we support clients and be creative in the way we build businesses. We actually try to customize and build a business to fit the individual client and the individual market.”

Hanley explains that his company seeks to guide its clients rather than control them. “Basically, the clients we work for control their businesses,” he says. “We provide the direction, advice and support for those companies over time.” Hanley cites solid support and collaboration as important factors in his company’s excellent track record over the years. “A lot of it is long-term experience, a lot of it is good proprietary technical tools to do our work, but most of it centers around having the ability to be surrounded by good people. Health Inventures is loaded with very talented people and we’ve had the good fortune of working with great clients,” he says.

Marc Koch, MD, MBA, has used innovative thinking and a disciplined approach to help increase the healthcare industry’s awareness of ambulatory and office-based anesthesia services. As president and CEO of Somnia, Inc., Koch and his company manage the day-to-day operations of numerous anesthesia practices across the country and strive to help doctors focus on what matters most — their patients.

Considered to be one of the founders of modern office-based anesthesia, Koch has been guided by looking toward the future of medicine. “I’m just one of these people who thought, along with my business partner Dr. Robert Goldstein, about what was going to be the next change, the next paradigm shift and where would surgery go next,” he says. “My view was that in front of the backdrop of cost containment, the office-based environment would permit not only a more cost-effective arena, but also one that was more convenient for patients, more efficient for physicians and also less costly to third-party payors.”

Koch has been tireless in his advocacy efforts. He has chaired the Society for Ambulatory Anesthesia’s Committee on Office-Based Anesthesia, served on the American Society for Anesthesiology’s Committee on Ambulatory Surgical Care and their task force that developed national guidelines for office-based anesthesia, and was a board member for the Society for Office-based Anesthesia.

In his work with Somnia, Koch and his colleagues have a very specific focus. “Really what Somnia is, we’re all about safety, one patient at a time,” he says. “It’s showing a commitment to the industry and this is manifest oftentimes as a lot of attention to detail. This includes paying attention to quality assurance, peer review, compliance issues and using those tools to guide better patient outcomes.”

Peter Lohrengel’s primary involvement with the ambulatory surgery industry has been in the state of Florida; Lohrengel has been the executive director of the 200- member Florida Society of Ambulatory Surgery Centers for 10 years.

“It’s still a growth marketplace,” Lohrengel says. “We’re seeing a maturing in the sense that the newer facilities, or facilities with a mix of doctors more up-to-date with reimbursement, are starting to replace some of the older surgery centers. We’re seeing a conversion and a replacement of old centers. You could almost call it a second wave of development, which is interesting, because in some states, they are just at the beginning of getting licensure that allows them to get away from CON so we can have surgery centers in proliferation. Florida is seeing a recycling of new ASCs with new approaches replacing surgery centers whose approach the reimbursement may have changed on, or who doctors retired on.”

Benefits have been added for the surgery centers that are members, primarily in terms of fighting legislative and regulatory battles. “We’ve worked to defeat harmful legislation and to promote valuable legislation,” he affirms. “We’ve worked in the regulatory arena to have good and reasonable regulations that don’t have adverse costs, and we’ve worked in the legal arena supporting the reduction of a tax that was costly to surgery centers.”

When asked about the most crucial issues in Florida, Lohrengel replies, “The biggest issue is the squeeze on reimbursement, and the rise of expenses that aren’t being reimbursed. It’s just increasingly difficult to handle all types of reimbursement because they’re constantly being changed and in most cases lowered or frozen while our costs continually march upward.”

Florida is very friendly to surgery centers, he adds. “Part of our purpose is developing a positive outlook toward ASCs by regulators and legislators. It doesn’t mean they don’t try to enact regulation that might be unfavorable, but when we go to them and talk to them about it, they recognize that they don’t want to do something that would hurt the ASC industry.”

He points out that ASCs do one-third of outpatient surgeries in the state, approximately one million a year, while hospital outpatient do approximately 2 million a year. “That’s a big piece of pie,” he says. “Hospitals can’t absorb the load that ASCs have. Could they absorb another million? That would be a disaster. They don’t function as efficiently. What if you had to get all those cataracts done in the hospitals? Our legislators and regulators are quite wise to that.”

In 2001, Thomas Mallon founded a company whose purpose, in part, was to do what other companies couldn’t in the ASC-turnaround market. In that challenge lies all the fun, says the CEO of Regent Surgical Health.

“We have the creativity needed to look at a situation that causes other people to turn and run — that’s the kind of challenge that gets our team excited.”

To address today’s challenges, Mallon draws upon a background specializing in tough sells; in college, Mallon successfully sold books door to door and also recruited other students to join him. “Whatever challenges I face today, nothing is as hard as that was,” Mallon says, laughing.

Prior to working in the healthcare industry, Mallon spent 12 years in commercial office leasing, supervising the leasing and marketing for national and local firms based in Chicago. “I focused on distressed office buildings that were in the wrong place or that were poorly marketed, trying to figure out what was causing them to fail, and addressing it. ASC-turnaround business is very much like that. A surgery center may have a substantial amount of dark OR time, and chances are the local hospital has a capacity problem; it’s our job to market to the physicians to get them to come to our ASC.”

Prior to founding Regent, Mallon served as a founding member of Gryffindor Capital Partners, a venture-capital fund, and in 1994, he co-founded a Chicago-based firm, Same Day Surgery, which acquired five distressed and underutilized ASCs and a physician management company, for which he helped recruit 70-plus physician partners.

Mallon says he learned some of his most important lessons outside of the classroom, in the real world. “I literally went from being a commercial office broker to an ASC administrator over a weekend. During a very busy day at my first center, I was helping out by assisting patients to the door of the facility, and helping them into their car. I’m holding a barf bag for a patient and thinking, ‘This is probably something not many of my fellow alumni are doing today.’”

“What we do every day is part business, part mission,” he says. “Much of the joy in this business comes from reading patient-survey responses where patients had a good experience and were complimentary of our people — that is what makes it all worthwhile. It’s what causes me to get up early and to stay late.”

Mallon attributes his firm’s success to the professionalism of his team. “We have a seasoned group of top managers, people who have dedicated their lives to this industry and who are good at solving problems. If you have high-quality partners, business is easy. Also, there is a lot of business to go around; I don’t believe every facility is right for us and we are not right for every group of partners. When I go into an opportunity, I’m not looking to win at any cost. I’m looking for an opportunity where our skills can solve their problems and there is a mutual business philosophy. Mutual financial goals will only take you so far; if you don’t do business the same way, it won’t be a good partnership. We’ve been fortunate to attract people who have a long track record of success in both the hospital and ASC industry, and that makes my job very easy and a lot of fun.”

John Marasco, AIA, NCARB, a principal/ owner of Marasco & Associates, has been involved with ASCs long enough to learn a great deal about the industry. “We find that the No. 1 reason that physicians do these surgery centers is the patient care level,” he says.

Marasco has discovered that physicians’ goals often coincide with those of his family- owned and -operated healthcare architectural firm as well. “If anything, it’s just very encouraging being a consumer as well as an advocate in the business to be able to see first-hand that it’s not greed; it’s quality of care that is really the driving factor behind these surgery centers. This is really nice from an architect’s perspective in that it’s what we want to provide to their clients anyway — we want them to have that quality experience, that nice waiting environment, that low anxiety level facility to go through, and since the physicians have the same attitude, it just makes things very easy.”

Over the course of 30 years, Marasco & Associates has designed and developed approximately 500,000 square feet of healthcare architecture, including more than 260 ASCs. Much of the firm’s success is due to discipline and honesty in dealing with potential projects. “Basically all of the projects that we work on are success stories, because although we’re architects, we find it extremely important to determine and make sure that the financial viability of these centers exists before we start development of them,” says Marasco. “We’re very bluntly honest with our clients as to whether or not we think it’s a good project.” Preparation is crucial for Marasco in guiding his firm. “It’s a pretty rock-solid business if you’ve done your homework to begin with.”

Bringing customers together is something Peter Myhre relishes; as president of MarCap Corp., he has the opportunity to lead a talented group of professionals who enjoy financing the deals that tap into the synergies between diagnostic imaging and ambulatory surgery.

“Recently, we’ve put together a surgery center developer and a diagnostic provider,” Myrhe says. “The businesses are different but the physicians are the same. For example, orthopods are big referrers of MRIs, and they are also in surgery centers, so it’s a natural fit. But you must be creative in bringing in imaging services due to safe harbor regulations; they allow for surgeons to own the surgery centers, but they don’t allow for referring physicians to own diagnostic centers. Imaging can’t be owned directly by the surgery center but it could be affiliated somehow. It’s our job to come up with creative financing solutions.”

“We introduced Nueterra to Imaging Solutions, which has more than 50 centers in the U.S.; they were looking to put imaging into existing Nueterra sites. That ties in with the market maturing; ASC developers are looking for new ways to bring money to the doctors and to make more money themselves.” Myrhe has a unique point of view in that he most recently served as senior vice president of DVI Financial Services, Inc., the healthcare financing company that went bankrupt in 2003.

“I learned a lot from that experience. DVI had a lot of good, long-time customers. All of a sudden, DVI was gone and most customers struggled to find a finance company that could fill the niche DVI filled. There was no one out there except for MarCap; back then we were more of a specialty niche player; now we are the aggressive finance company going after the healthcare market.

From last year to this year, we have grown by more than 50 percent; a significant amount of that is in the surgery area. DVI was good at some things and not good at other things; I tried to take from DVI the positive elements; they had some very good people who knew the business but they had the wrong leadership. They didn’t learn from the Enron situation, they didn’t adjust to the marketplace.”

And investment in people, Myrhe says, is key to a company’s success. “Teamwork works phenomenally well in business. It’s critical to set goals, with the entire company participating; establishing a strategy together buys everyone into the process. You can create a strong, cohesive unit moving in the same direction, and that’s almost unstoppable.”

Richard D. Pence, chief development officer of National Surgical Care, says success in the ASC industry is largely determined by a solid business plan coupled with a multifaceted growth strategy.

“As we began NSC in late 2002, we looked at several approaches to building the company. To date, we have emphasized the acquisition of successful centers, as it allowed NSC to grow from no revenue to almost $32 million on a pro forma basis. However, acquisitions are only one prong of our development approach; in the next 12 to 18 months, NSC plans to initiate more new development centers as well as hospital joint ventures. We’re confident that hospitals and healthcare systems will see NSC as a unique and attractive business partner.”

Pence previously served as executive vice president and chief operating officer of MAGELLA Healthcare, a national group of peri-natal healthcare providers, where he was responsible for operations with revenues of $120 million. Prior to that, he was chief operating officer for National Surgery Centers, where he was responsible for 20-plus sites with annual revenues in excess of $50 million. He has also served as controller, then vice president, for Medical Care International for nine years, with responsibility for managed-care marketing, insurance and operating systems.

Pence says being an effective individual in this business requires a keen eye for spotting a chance to capitalize on a trend. “In the business development process, I’ve found that you have to be persistent in identifying and fostering opportunities,” he explains. “Typically, only a few opportunities end up being a good fit for your company. The entire NSC development team is persistent in its drive to find opportunities and build a relationship with key decision makers.”

Integrated Medical Delivery (IMD) was founded in 1992 to provide administrative, development services for surgical hospitals, surgery centers and diagnostic imaging centers. Physician-owned facilities contract with IMD to help develop the facility and create a business plan. The facilities are totally clinically driven; IMD provides accounting, coding, transcription, human resources, etc.

Teams of IMD staff are assigned to work with each facility. “The thing we’re committed to is these smaller facilities that are controlled by physicians,” says Laura Nelson, director of government and public relations for IMD. “It’s wholly owned by the doctors. Two, all administrative services are performed off-site, allowing clinical people to singularly focus on taking care of patients.”

John Perri, the founder and president of IMD, also is a founding member of ASHA. “I saw a need for a better system of healthcare delivery that was more patient-focused and efficient,” he says.

One of his contributions has been the development and deployment of an integrated medical delivery system, the first of its kind in the United States. The system manages a patient from the time of the first visit to the physician’s office through the time of the insurance company’s payment of the claim.

The business model is based on the concepts of consolidating overhead and outsourcing administrative services. IMD provides the information system upon which the business operations are built.

Perri also developed a PPO network and a managed-care product with the underlying strategy to establish a partnership among employers, their payors (risk bearer) and medical providers, thereby avoiding the adversarial atmosphere frequently associated with workers’ compensation.

He notes that these programs can assist with the spiraling cost of healthcare. “No one can continue to absorb the escalating cost of healthcare. We have a responsibility to focus on what we can control. For surgical facilities, significant cost reduction will come from consolidation of services, reduced overhead and the more efficient delivery of patient care,” Perri adds. “This industry continues to push the envelope and drive the standards of patient care higher. The outcomes speak for themselves. Competition is good for patient care.”

Jeffrey Polansky, MD, had a vision. As chief of orthopedics for Union Hospital North Shore Medical Center outside of Boston, he had begun to study the surgery center concept, and improved upon it. “I thought, we could put a lab together, we could find people in the Boston area who are interested in research and development as well as practice, we could put in a surgi-center — we could do all of these things. The idea began to intrigue me. I knew I’d be retired in 10 years, but I don’t think I could enjoy it knowing that this could be done and we never tried it. It would risk everything. My wife’s response was, ‘We’ve been poor before!’ With that support I thought, that’s it, I’m going to go for it.”

Polansky didn’t know everything necessary to make it happen. “I needed to find people who know the things that I don’t know,” he says. “I have this idea, but what are my limitations? What is my business knowledge in this field? What is my real estate knowledge? I wanted to find someone who would be as involved as I was from the get-go. That’s how I found John Powell. John made this his life’s work, and he filled in all the shortcomings that I have.”

John Powell has spent his 20-year career alternating between hospital administration and managed care. He has served as the CEO of an HMO, the chief operating officer of a community hospital, and the executive vice president of a large healthcare system. His background meshed perfectly with Polansky’s vision.

Working with Smith and Nephew Endoscopy, Powell and Polansky’s dream became the Orthopedic Center of the North Shore. The center, which opened in June 2004, provides superlative patient care and an educational venue for surgeons wanting to advance their practices. More than just a surgi-center, the facility has two ORs, two procedure rooms, a wet lab and an auditorium where surgeons can train on cutting-edge technologies, tools and procedures.

Both Powell and Polanski stress that their aim in creating the center was not monetary. “We wanted to take the whole process and improve it,’ says Powell, “from a physician perspective, from a patient perspective, and from a consumer perspective. Experientially, it is faster, it is more efficient, more productive and more pleasant. That’s what the physicians were trying to accomplish.”

It was a formidable task, and both Powell and Polanski have gained great personal satisfaction from its success. “A number of people were pretty sure we were never going to be able to do this,” says Powell.

“The hospital told us that we were never going to be able to do this. I had friends in healthcare arena in Massachusetts who said, ‘They’re never going to let you do this. They’re going to squash you; they don’t want this to happen.’ To walk around this big, beautiful building, which is getting a lot of notoriety and publicity in the local media and is very successful — the patients, the physicians, the staff love it. We’ve done that, when we started with nothing but a vision.”

In the 27 years in which lobbyist Michael Romansky, JD, a partner in the Washington, D.C. office of law firm of McDermott Will & Emery LLP, has worked with outpatient surgery clients, he has watched the industry grow from just a hundred or so surgery centers to almost 4,000.

His first clients in the outpatient arena were the Outpatient Ophthalmic Surgery Society and the AAASC, and Romansky says, “They were a great introduction to an industry that was just beginning.” He began representing the industry in 1977, and “came in right after the law was passed establishing the benefits; regulation implementing the law had just come out.” He adds, “At the time, both groups were led by real pioneers. These folks recognized early that if they didn’t do a number of things, like expand the ASC procedures list (at the time it had just a few hundred codes on it), and if they didn’t get adequate facility reimbursement, there wouldn’t be many who could go into the business, and the industry wouldn’t be where it is today, with almost 4,000 ASCs. The work these groups did back then is one of the primary reasons why we’ve seen 40-fold growth in 20-some years. I can’t say that making a profit wasn’t an issue, but these folks set up their ASCs when there was no benefit; they were eating the facility fees. That says something about their goals of giving quality care to patients in an environment in which they would feel comfortable and well treated, and where the doctor would have control. That’s what distinguishes this special group of entrepreneurs from others I’ve worked with in healthcare — the money was just part of it.”

Romansky adds, “These doctors were true entrepreneurs — they lived the talk and the walk. From the outset, they were very respectful of taking the advice of the professionals they hired. We don’t go through a lot of bureaucracy and politicking with our client organizations in order to make a decision. We come up with the tactics, advice and strategy; we say, ‘Here’s what you need to get it done’ and they say, ‘Do it,’ while providing us with the clinical data and evidence to support what we want to do.”

Romansky is a firm believer in fostering relationships with clients built on mutual trust and respect. “I have learned that lobbying is not about three-martini lunches and monumental political contributions; it’s a complicated business and you’re trading information. Just as you need to build your relationships with the folks on the Hill, what I found pleasantly surprising is the personal relationships I developed with leaders in this industry. It gave me confidence in my judgment and my advice, and the ability to move forward steadfast and aggressively, knowing that I have my client behind me 100 percent.”

He continues, “Things change daily in this industry, and building that into a political message is challenging and exciting. I am not a lawyer who loves fighting for the sake of having a fight; I get much more of a charge out of coalition building and consensus. That’s when I feel I am being the most effective. I enjoy bringing people together on joint concerns.”

When you double your sales force in a single year, you know you’re on to something good. Just ask Ken Seip, vice president of sales and marketing for MarCap Corp., which financed its first diagnostic imaging center 25 years ago and its first surgery center 10 years ago. “Business has really taken off,” he says. “From a lender standpoint, we measure our success in a financial arena by the volume we generate and book, and by the quality of our portfolio. Those things define whether or not a lender is profitable, and it’s been a great market for us. For years, our salespeople wore two hats, doing both imaging and surgery, and of course, they are two different animals. Our surgery business got so big we needed salespeople who live and breathe just surgery; we’re already seeing benefits of people who focus 100 percent in one market.”

Seip says when setting up a sales force and growing it for the ASC market, he examines the type of customer involved, and their specific needs. “I ask myself, ‘Where do we see the market going and how do we get the sales force aligned with the market?’

Among the three models of financing — full recourse, full non-recourse, and partial recourse — Seip says MarCap is known for its non-recourse financing deals. “A second option we offer is the more limited recourse, which allows physician partners to minimize their recourse. We offer the most flexible solution from an interest rate pricing standpoint, priced to the risk and to the market. There’s a certain niche every lender provides best; it’s our job to take care of the customer, and if ultimately we aren’t the best solution, it’s our job to help them find one.”

A recent trial by fire was the DVI bankruptcy; Seip says it impacted the entire industry and created invaluable lessons for surviving companies. “Although DVI was our main competitor, it’s not good for business to have a company go down. Ultimately it put at risk the concept of physicians going to entities other than banks for financing. Customers were caught in the middle with projects partially funded, and we tried to help as many as we could through a painful process. On an ongoing basis, customers now are more aware in the financial soundness and experience of their lender. For us, the lesson learned is, DVI had strong relationships in the market, and except for the last chapter in the book, there was a lot in that book that was very good — we can learn from that. They had a lot of repeat business; it renewed our belief that this is truly a relationship business. It’s an 80-20 rule, where we get 80 percent of our business from 20 percent of our customers. We must get to know that 20 percent, make sure we take care of them, and communicate with them consistently.”

Seip, who has been with MarCap for seven years, says that when you’re a lender, the most impressive financial pedigree is nothing without a deep understanding of what the market needs and when. “It comes down to knowing what we can deliver and what we can’t, and being honest with people. We strive to understand our customers’ business as much as we can, to understand our strengths and weakness, and to put our best foot forward.”

Joni M. Steinman, managing principal of San Diego-based AUSMS Healthcare Consultants, has a global view of developing surgical services within the emerging surgical facility model. Armed with almost 30 years of experience in supporting the development and management of healthcare businesses, facilities and services — including extensive work in short-stay hospitals, ambulatory surgery centers, post-surgical recovery centers and office-based surgical suites — Steinman travels the world, addressing foreign ministries of health and professional associations to discuss integration of public and private health strategies. A big proponent of alternate sites for surgical services, Steinman is fluent in describing how a new breed of surgical hospitals and surgical centers is changing how healthcare is delivered.

“People are keen on taking the U.S. model for alternate-site healthcare and making it work in their country,” she says. “It’s heartening because we’ve been speaking about it for many years; initially, people thought we were way out there, but now they are embracing the concept.”

Most recently, Steinman was in Europe discussing public health policy and infrastructure, discussing how to take models of healthcare from other countries and making them work. “We used the emerging surgical facility as a model and how to adapt it to suit new environments, cultures, and economies in which the idea did not originally develop.” The ESF model is used in concert with the short-stay unit, an alternate site for performing surgical procedures designed to lower the cost of surgical care without diminishing quality or outcomes. “The narrower your clinical focus, the greater your profitability,” she says about the emergence of the ESF. She adds that traditional healthcare facilities must go to the next level of focus to continue competing in the marketplace. “Hospitals must look at a planning philosophy that entails alternate-site programming. Providing alternate-site surgery allows healthcare facilities to increase and diversify surgical services, respond better to managed care needs, provide an alternative to replacing aging hospital physical plants, and help increase market share.”

Steinman points to the United Kingdom’s renewed interest in outsourcing select surgical procedures into the private sector, directing some surgeries to hospitals while sending others to new freestanding facilities in the community. “They realize you can’t keep people waiting for the healthcare they deserve. We hope they will take some of our best ideas and see if we can plant seeds for them.”

Currently, Steinman is working with a colleague from HealthSouth to study the impact of physician ownership of surgical facilities on quality of care. “So much of what gets thrown at them is that somehow there is a built-in lowering of the quality of care when you move from either hospitalor corporate-type management to physician ownership. We’re going to look at it in the U.S. and elsewhere; there are many parts of the world that are now experiencing this new form of ownership and we want to see how people view it. Do they even notice a difference in quality of care and if so, is it positive or negative? Or does it show at all, since many improvements are substantive but not palpable to consumers? It won’t be a highly scientific survey, but it will be very controlled. We will try to find statistics and good anecdotes about what appears to work and what doesn’t. We hope to present our first round of findings at the International Ambulatory Surgery Association meeting in Spain in the spring as well as the AAAHC Quality Institute meeting in December 2005.”

Todd Tidmore, managing director of MedCapital Group, has fit a great deal of involvement in the ASC industry into just four and a half years. While working for a medical office developer as their CFO, he realized he wanted to branch out on his own, and he noticed that there was no one in the marketplace who offered commercial mortgage brokering for medical-related real estate — surgery centers, imaging centers and medical office buildings.

Why surgery centers? “No one else is doing it,” he replies. “It’s a business that understands specialization. I didn’t see anyone as a specialty doing commercial mortgage brokering for those types of projects.”

Also, he noted in 2000 that although other real estate components were relatively strong, he knew that cyclically, that would change — but that medical real estate, if it stayed at the level of activity of that time, would then be more appealing to lenders. “You’re going to always need healthcare,” he points out.

Tidmore will often work with physicians who have a good relationship with their banks, but still do not get the loan dollars they need upon appraisal. “There are a lot of details in getting this done,” he adds. “There’s a culture of how you get real estate financing, and this is all we do all day long, so being able to understand that culture and what the banks need helps us provide solutions for customers, because we’re not direct lenders; we’re brokers, consultants, intermediaries, whatever you want to call us. We think that’s a good role, because we can get the best financing option for the client.”

Typically, MedCapital does not work with the largest banks. “We work a lot with smaller, mid-size lenders, and our unique product for permanent financing for some of the surgery centers is to be able to lock in interest rates for longer than the bank can,” he explains. “[On one project], we’re basically locking in about 6 percent and they’ll pay that interest rate for all 15 years of the loan, whereas the bank will only typically be able to fix it for a maximum of five years.”

Tidmore notes that although this is a complex process, physicians are obviously intelligent and can sometimes complete the process without help. But for others, he adds, “Generally I can do a better job, because that’s all that I do. I consider what we do a service that enables the physicians to practice, the developers to develop and us to take care of the financing. Just knowing that culture, and being accepted in that culture, is really a lot of the benefit we bring to those guys. It’s the same thing in any other business; you have a set of sometimes un-communicated or informal expectations that it takes time to learn, and these guys who try to do it on their own sometimes will get it done and sometimes they’ll stumble.”

As executive vice president of operations for NovaMed, Inc., Michele Vickery has witnessed firsthand the growth of the ambulatory surgery industry. “The factors that started the ASC industry were that it was a safer, more comfortable setting for the patient, and it was a more efficient setting for the doctor,” she says. “When you couple that with the advent of new anesthetics and new technologies, the variety and scope of surgical procedures that can be done in the outpatient surgical setting has expanded tremendously.”

In 1990, Vickery was hired by Surgical Care Affiliates (SCA), a company specializing in the management of outpatient surgery centers, as a regional vice president from 1990 until 1992, and as one of two senior vice presidents of operations from 1992 to 1996. Upon the acquisition of SCA by HealthSouth in 1996, she continued as a senior vice president of the surgery division of HealthSouth until joining NovaMed in 1997.

Providing the opportunity for doctors to improve their lives and the lives of their patients and staff is what drives Vickery. “Building a surgery center allows many physicians to provide an employment environment that is very positive for their staff — they have more control over it,” she says. “However, physicians for the most part want to practice medicine, not practice management. I am passionate about being able to provide them with that piece of it, so that they don’t need to worry about it. They can provide the efficiency for themselves, that quality comfort for their patients, and that control over what they can provide for their staff in terms of a work environment.”

Vickery stresses that a surgery center is only going to be successful to the extent that it is also profitable. “High-quality care is absolutely required in order to even begin to think about a profitable enterprise in healthcare,” she says. “I am very passionate about making sure we are minimizing the number of healthcare dollars that are being spent in the centers, and yet having a profitable center so that those employees do continue to have a job.”

For nearly 20 years, the acquisition and dissemination of knowledge have shaped Jo Vinson’s experience in the ASC industry. From her first exposure to the idea of a surgery center when she helped open one for ophthalmologists in 1986 to her current role as director of clinical operations for Acumen Healthcare LLC, the process has been in constant motion.

Initially, Vinson’s independent thinking and ingenuity helped her to find her way in a new and foreign industry. “Thinking outside of the box has been the way of my life for my entire career, so that did help a lot and helped my survival at that time,” she says. Aided by the resources of FASA, Vinson tackled AAAHC accreditation for a multi-specialty surgery center. “We were one of the first surgery centers at that time to be accredited within a year of opening, and it was after that that I was called in to be a AAAHC surveyor,” she says.

Still a surveyor for AAAHC and FASA, Vinson also completed a 10-year stint on FASA’s board of directors in 2004. During that time, she became known as a resource and began to do some consulting work. “I’ve always enjoyed sharing what I learn — I think that’s how we all grow and develop,” she says. Vinson also is passionate about bringing groups together, as evidenced by her involvement in arranging the first AORN/FASA nurse’s seminar.

At Acumen, Vinson’s dedication to teaching is put to good use. “My job is to work with administrators to help them learn their job of how to run a center, all-inclusive,” she says. “We want to be able to teach people how to do things right, and teach them well enough that they might not need us anymore.” Her energy and dedication to the industry is reflected in the company’s approach. “Our philosophy is that the ASC industry is exciting and it’s a young industry,” she says. “It takes a unique approach to make it work.”

Before assuming his current position as medical director of Santa Barbara Surgery Center, Robert Welti, MD, spent 20 years at a large hospital system. Like many other physicians who have become involved with ASCs, the idea of having a stake in ownership and a voice in the operational decisions of the facility appealed to him.

Welti has also come to believe that ambulatory care offers many advantages to patients as well. “Ambulatory care in this kind of setting really offers the opportunity to deliver one-on-one care to the patients,” he says. “I think the patients truly benefit. They also appreciate the atmosphere — it’s much more personal than a typical hospital setting.”

Although Santa Barbara Surgery Center is now a successful and profitable center, this was not always the case. Soon after opening, the center found itself in dire straits, with poor equipment, inadequate capital, and no plan for expanding its services. Welti says overcoming the shortcomings of the center’s first management group was a significant step. “I think my biggest achievement was keeping all of our surgeons together and communicating with them and making them feel like they finally had a place where their needs and complaints were listened to.” Working with a new management company was also important in turning things around for the facility.

As an anesthesiologist as well as medical director, Welti focuses on bringing the staff, surgeons, patients and administration together. “I think of the job as master of ceremonies,” he says. “I try to keep everyone happy and keep the whole place working efficiently.” In this effort, Welti has found that the ASC environment requires a change in perspective. “The biggest difference I see between the hospital-based surgery center and the smaller physician-owned surgery center is that equally important to the patients as clients is the recognition that our clients are the surgeons,” he says.

The aspect of partial ownership is a significant motivational factor in Welti’s quest to keep the center going strong. “Given that I too am an investor, there’s no limit to what I would do to make the center succeed,” he says. “There’s no limit to what I will do for the patients as well. The drive to serve and make everyone happy is just huge.”

“I like being a part of a process that creates something that didn’t exist before,” says Bob Williams, president of Robert C. Williams and Associates. In the early 1970s, Williams became the executive director of the first ambulatory surgery center in Phoenix, and has seen the evolution of the industry from its genesis to the present. A past president of FASA, he serves on the board of the AAASC and is secretary to the International Association of Ambulatory Surgery (IAAS). His eponymous company provides consulting, development and management to surgery centers.

The positive service that ASCs provide to a community is a source of passion for Williams. “Creating something that is needed that didn’t previously exist, something that provides positive benefits to everyone concerned. From the quality of care patients receive ... the physician satisfaction, the efficiency that it affords and the feathering of the innovations associated with outpatient surgery. After 30 years, it continues to be exciting, and I cannot imagine doing anything else.”

What makes a successful ASC? The commitment of the owners to make it successful, says Williams. “What the owners reflect will trickle down to the way that the staff responds. The enthusiasm, support and commitment of the owners will be a guide to everything else that happens. The lack of that commitment will also be reflected in how the center operates. If that’s there, all other things being equal, it will be successful.”

Today,Williams garners the respect due to one of the founding fathers of ambulatory surgery. He is optimistic about the future of the industry. “There have been so many changes,” he says. “I take great comfort in believing that the industry is strong, if not stronger than it’s ever been. It’s something to be proud of, but not something to cause you to feel that everything that can be done has been done. I think that it is absolutely a catalyst for continued advancement, and that to me yields a continuing excitement as to what it represents to healthcare and to society.”

Thomas Yerden, MHA, is a passionate, earnest man with a plan to help put a stop to the “brain drain” he sees in the industry currently. Yerden, the founder, president and CEO of Aspen Healthcare, Inc., a Colorado-based development and management company, says the key to ASCs’ success is the grooming of new leaders.

“The next generation will carry forward the industry and we’ve got to cultivate more leadership. We have a huge brain drain occurring and the schools aren’t turning out enough qualified leaders. So our company started a residency fellowship program for grad students. We must do it, to start accelerating the pace of developing exceptional leaders. If you look at the top 10 percent of industry pioneers, experts, and gurus, many of those folks are getting up there in age, and I don’t see a large contingent of the next tier behind them. People ask me, ‘Are we supposed to spend all of our time training?’ and I say, ‘The industry is only as good as we leave it.’ If I can provide an avenue for people to become leaders in the industry, I’ve done my job.”

Yerden should know; he has a rock-solid educational background and draws on two decades of ASC management experience when speaking on the college-lecture circuit and to professional organizations. Believing that having a degree doesn’t necessarily equate real-world smarts, he tells students, “Your schooling will start the day you graduate; everything you learned is just a prerequisite to get your first job.”

Yerden adds, “The skills I’m not seeing enough of include financial management, the cornerstone of business and certainly healthcare. After all, it’s a complex system and an industry in which your customer is usually also your boss; this person is getting paid less than his or her charges, as are you, and you learn that you never get paid what you bill. Leaders also need good human-relations abilities. Physicians are not your typical customers; you must learn how to deal with very accomplished individuals, making them feel important but getting them to change their behaviors without insulting them. It takes maturity and common sense.”

Prior to forming Aspen Healthcare, Yerden was the chief operating officer for Medical Management, Inc., in Boise, Idaho; executive director of ASMG Outpatient Services in San Diego; and regional manager of ambulatory surgery for Intermountain HealthCare, Inc., in Salt Lake City. Having developed a keen eye for the nuances of the industry, he has a few observations he believes challenge the status quo.

“The winners will be those who don’t get caught up in a bottom- line orientation,” he says. “While profits are important, we must focus more on expense management and not letting our product suffer from lower quality. We spend a lot of time in the past in this industry, talking about how wonderful we were. We come together at conferences and just talk about our successes. I think that’s important, but at the same time, we see seminar tracks listed under financial management with the code name, “Uh-Oh.” The way I see it, we must spend more time on telling our story. We take for granted that people outside of the industry understand us, and they don’t. We have to do a much better job of demonstrating our quality, too. And lastly, convince the folks that govern us that we’re an integral part of a health system, not simply a for-profit niche for physicians to diversity revenues. Those in the clinical realm are doing all the work so that all of us can take the credit. Clinicians just need to keep doing the fantastic job they do and give us these incredibly high patient-satisfaction scores; owners, managers, and governing bodies of centers must protect these clinicians’ livelihoods. We must keep looking to the future and determining how we’re going to position ourselves so we can continue to have good centers providing good care.”

Yerden has a few strong opinions on industry infighting, too. “Sitting on the FASA board, and hearing things as they come straight from CMS, one of the things I’ve realized is the need for better collaboration. There are several factions in a very tiny cottage industry; everyone is trying to carve out a piece as their own through lobbying efforts. We must realize we are not as big as we think we are; the hospital lobby is who we are battling against, so why don’t we utilize more collaboration to unite our message, whether it’s among associations or among management companies? Although we are competitors, we share identical concerns.”

It’s why Yerden embraces what he calls the I-Four Philosophy of insight, innovation, integrity and investment. “We were just awarded a center in Ohio, beating out 11 competitors; I spent the entire first paragraph of the RFP outlining what my expectations of them were because we won’t jeopardize the I-4 philosophy. Insight, innovation, and investment all come from being experts, but integrity is a quality you can’t hire or train — it has to be in your DNA. If you do what’s best for the industry and the client in the long run, you will always make the right decisions — it’s called ‘taking the high road.’”

Jim Yondura, RN, is, in simple terms, a multi-tasker. He is both an OR nurse and an independent consultant for the Yondura Group; he also is currently working in the medical research department for Atlantic Gastro Associates in Egg Harbor Township, N.J.

Yondura has spoken to OR nurses about the cost effectiveness of MSI Precision instruments; he has visited potential surgery centers and spoken to physicians about pro forma studies to determine the cost effectiveness and financial viability of a potential center. He also writes policy procedure manuals and customizes them