ASC management and development company Health Inventures is in the midst of major changes. Last summer, the company introduced three new service lines: perioperative performance improvement, physician services and human resources. This diversification takes the company well beyond the bucket of surgery center management — an interesting and powerful move in a healthcare industry increasingly focused on the "continuum of care." Here Christian Ellison, senior vice president of corporate development for Health Inventures, discusses what drove the change and how the company is reaching out to clients old and new.
Question: What drove Health Inventures to diversify its business, and where did you start?
Christian Ellison: Chuck Peck became our CEO in the beginning of 2011, and his strategy was to diversify our business beyond ambulatory surgery development and management — to really evolve with the needs of our hospital and physician partners. Health Inventures has been focused almost entirely on physician/hospital joint ventures since 1995, which is longer than any other surgery center company in having that exclusive focus. When we looked at what we do really well and what will be important to our customers in the future, we viewed it not as running surgery centers, but as really helping doctors and hospitals work effectively together in long-term partnerships.
We started looking at other areas where we can leverage our ability to do that. One area is the hospital surgical environment — really helping hospitals optimize the performance of their inpatient operating rooms, providing consulting as well as interim management services. Another area within that bucket is working with hospitals on optimizing their anesthesia relationships. A lot of them are paying subsidies to anesthesiologists, which is usually caused by inefficiencies in the OR or supply and demand of anesthesiologists. We are helping hospitals and physicians work through that.
Q: In what other areas are you expanding?
CE: The second area is physician services, and it probably falls into two areas. One is physician/hospital integration, which means working with doctors and hospitals to find ways to work together more effectively. In some cases that means direct employment, and in some cases it would take the form of some other model. The other area is helping physician practices run more effectively from an operational perspective, and that would apply to hospital-owned physician groups and independent physician practices. Those services would include consulting as well as long-term management.
The third area of expansion is human resources. We've always had a human resources company that employs staff in our surgical facilities, and we are taking that to the market and selling it to other small healthcare businesses, physician practices or surgery centers that we don't operate. We will help them by providing outsourced HR services. That service will provide value because we're more than your typical professional employer organization; we understand the healthcare business.
Q: When did Health Inventures start offering these services?
CE: We officially launched them last summer, when we went live with our new website. We've been marketing these services to varying degrees over the past nine months. We do have customers in each of these areas beyond our core ASC business, so it's been a slow, deliberate ramp-up over the last nine months, and we're taking hold now in the market.
Q: How did you go about introducing these services to the market? Did you start with existing customers or pursue new territory right away?
CE: We first introduced this to our existing customers. They know us and they trust us, and they're willing to take a chance on us doing different things. We run three surgery centers for OhioHealth, and they just contracted with us to run their 11 sleep centers, so we've been able to leverage our relationship with that health system. Once we contacted our existing customers, we started marketing more aggressively to the marketplace.
We've gone to past customers, where we had good, strong relationships, and we're also taking on new customers. We had our first perioperative consulting engagement back in the fall of 2011 with a new customer to the company. We signed the first long-term physician practice management contract with an orthopedic group in the Northwest this spring.
Q: What challenges have you experienced so far in launching the new service lines?
CE: I think it's been a little bit of a challenge from a marketing perspective to help potential customers understand the link between the surgery center business and some of the other services. We believe the healthcare market is evolving to be very service line-driven, and we really view Health Inventures as a surgical services company.
We want to work across the spectrum, whether it be in the surgeon's practice or the hospital or the surgery center. With the potential for bundled payments on the horizon, it's essential to be able to manage your cost and coordinate care among different venues. I think it's been difficult for some customers to make that leap easily.
Q: Why do you think a surgery center management company is well-suited to managing these other service lines?
CE: I think it comes down to two reasons. One, the ability for doctors and hospitals to work together effectively is going to be critical to each of those entities' long-term success. It's really unavoidable. We've got a long track record of developing and running successful physician partnerships. As it relates to consulting, a lot of our competitors are consulting firms, and the advice they give is often theoretical. We actually do have experience running physician-led organizations, and we have a track record of delivering results and seeing what works and what doesn't.
Learn more about Health Inventures.
Related Articles on Transactions and Valuation:
Sansum Clinic Proposes Ambulatory Surgery Center
Construction of Pennsylvania's Reading Hospital Surgical Center Delayed
Colorado's Orthopedic and Spine Center to Expand Surgery Center
Question: What drove Health Inventures to diversify its business, and where did you start?
Christian Ellison: Chuck Peck became our CEO in the beginning of 2011, and his strategy was to diversify our business beyond ambulatory surgery development and management — to really evolve with the needs of our hospital and physician partners. Health Inventures has been focused almost entirely on physician/hospital joint ventures since 1995, which is longer than any other surgery center company in having that exclusive focus. When we looked at what we do really well and what will be important to our customers in the future, we viewed it not as running surgery centers, but as really helping doctors and hospitals work effectively together in long-term partnerships.
We started looking at other areas where we can leverage our ability to do that. One area is the hospital surgical environment — really helping hospitals optimize the performance of their inpatient operating rooms, providing consulting as well as interim management services. Another area within that bucket is working with hospitals on optimizing their anesthesia relationships. A lot of them are paying subsidies to anesthesiologists, which is usually caused by inefficiencies in the OR or supply and demand of anesthesiologists. We are helping hospitals and physicians work through that.
Q: In what other areas are you expanding?
CE: The second area is physician services, and it probably falls into two areas. One is physician/hospital integration, which means working with doctors and hospitals to find ways to work together more effectively. In some cases that means direct employment, and in some cases it would take the form of some other model. The other area is helping physician practices run more effectively from an operational perspective, and that would apply to hospital-owned physician groups and independent physician practices. Those services would include consulting as well as long-term management.
The third area of expansion is human resources. We've always had a human resources company that employs staff in our surgical facilities, and we are taking that to the market and selling it to other small healthcare businesses, physician practices or surgery centers that we don't operate. We will help them by providing outsourced HR services. That service will provide value because we're more than your typical professional employer organization; we understand the healthcare business.
Q: When did Health Inventures start offering these services?
CE: We officially launched them last summer, when we went live with our new website. We've been marketing these services to varying degrees over the past nine months. We do have customers in each of these areas beyond our core ASC business, so it's been a slow, deliberate ramp-up over the last nine months, and we're taking hold now in the market.
Q: How did you go about introducing these services to the market? Did you start with existing customers or pursue new territory right away?
CE: We first introduced this to our existing customers. They know us and they trust us, and they're willing to take a chance on us doing different things. We run three surgery centers for OhioHealth, and they just contracted with us to run their 11 sleep centers, so we've been able to leverage our relationship with that health system. Once we contacted our existing customers, we started marketing more aggressively to the marketplace.
We've gone to past customers, where we had good, strong relationships, and we're also taking on new customers. We had our first perioperative consulting engagement back in the fall of 2011 with a new customer to the company. We signed the first long-term physician practice management contract with an orthopedic group in the Northwest this spring.
Q: What challenges have you experienced so far in launching the new service lines?
CE: I think it's been a little bit of a challenge from a marketing perspective to help potential customers understand the link between the surgery center business and some of the other services. We believe the healthcare market is evolving to be very service line-driven, and we really view Health Inventures as a surgical services company.
We want to work across the spectrum, whether it be in the surgeon's practice or the hospital or the surgery center. With the potential for bundled payments on the horizon, it's essential to be able to manage your cost and coordinate care among different venues. I think it's been difficult for some customers to make that leap easily.
Q: Why do you think a surgery center management company is well-suited to managing these other service lines?
CE: I think it comes down to two reasons. One, the ability for doctors and hospitals to work together effectively is going to be critical to each of those entities' long-term success. It's really unavoidable. We've got a long track record of developing and running successful physician partnerships. As it relates to consulting, a lot of our competitors are consulting firms, and the advice they give is often theoretical. We actually do have experience running physician-led organizations, and we have a track record of delivering results and seeing what works and what doesn't.
Learn more about Health Inventures.
Related Articles on Transactions and Valuation:
Sansum Clinic Proposes Ambulatory Surgery Center
Construction of Pennsylvania's Reading Hospital Surgical Center Delayed
Colorado's Orthopedic and Spine Center to Expand Surgery Center