Like a lot of younger surgeons, I considered it a very big decision when presented with the opportunity to invest in an ASC. In fact, my initial instinct was to pass on the opportunity. As a 40-year-old surgeon only three years into practice (and after 12 years of either tuition or meager pay in medical school, residency and fellowship), I really didn't feel like I had the financial resources to make the initial investment.
Looking at the business today, I'm confident that this will be the best investment I will ever make. Frankly, it's been a great professional and personal decision. I could not be prouder or happier to be a part owner of the Surgery Center of the Main Line, a multi-specialty facility in suburban Philadelphia. I love bringing my patients here because I know they will receive quality care in a comfortable environment. And the future prospects for the business are terrific.
However, looking back, my initial hesitation was understandable, given my relative lack of business expertise and the many factors to consider. I was dealing with all the common issues young surgeons face — developing a practice, creating professional networks and trying to support a young and growing family.
Let me be clear — I would encourage young surgeons to invest in ASCs, but they should also be thorough in their due diligence. Don't underestimate the upside, but be realistic about the risks. Obviously, patients come first, but you must recognize that this is a business. Ask your peers and colleagues a lot of questions and clearly assess your potential partners (both the doctors and business advisors). Do you trust these people? Take a look in the mirror to consider your personal and professional goals as well as your ability to contribute to a successful business. And definitely don't forget to talk to your spouse!
Opportunity knocks
Several years ago, when the surgery center had been open a couple of years, I had an opportunity to purchase an ownership stake at the initial buy-in rate. Initially, I was very hesitant to proceed. I really thought that the investment was too big for me to make. And there were so many unknowns about the business that I did not feel comfortable saying yes at first. Though the business was doing well, I kept asking myself, "What if it somehow goes wrong due to market forces or political shifts or just bad luck? Would I lose my house? Was I taking money away from my family to make this investment?" I have two beautiful daughters, ages seven and nine. I think about them — and think twice about them — before I do anything!
Rationally, I didn't think the business would fail, but there were still some big ifs. I didn't have the business knowledge or training to understand all the variables. So, even though I had a great deal of respect for the other surgeon-owners, I hesitated for several months, and I did not accept the invitation to become a partner immediately.
This allowed me some time to think about the positive aspects of becoming a partner. Certainly I performed a lot of cases there, and it quickly became my favorite place to do cases and scopes. Thanks to the center's excellent nursing staff and highly efficient overall operations, the environment was very comfortable for my patients. Plus, it was fun. I always enjoyed walking in the door and seeing my colleagues and co-workers in the morning. It exactly met my need for outpatient block time for anorectal surgery and colonoscopies. The fact that it is geographically positioned halfway between my two offices and hospitals makes it convenient, too.
Before making my decision to move forward with the process, I knew I needed more information and insights from knowledgeable people.
Conducting due diligence
I met with Karla German, the ASC's administrator, and Jay Rom of Blue Chip Surgical Center Partners, the management firm who'd been partners in the surgery center since day one. It was clear they wanted me to join, which was gratifying. It was just as clear they were serious about growing the business, which was already doing well. And having seen the business in action I could see why it was successful.
I reached out to several colleagues who are involved with similar centers around the country and asked their opinions. Most said, "Make sure to conduct your due diligence, but these things can be very lucrative." I asked the manager of my private practice to take a look at the numbers. When I shared details, everyone agreed that the business seemed to be on sound footing.
I reviewed financial statements with the administrator and the Blue Chip team. Some of the data was hard to grasp. Like I said, I am not a business-minded person — financial terms such as EBITDA sound like Greek to me. But everyone was patient with me and answered my questions. No one gave me the hard-sell or pressured me to make a decision. Nor did anyone talk down to me. All the scenarios were explained clearly and thoroughly. The more I learned, the more my anxiety was reduced.
I also spoke with a number of partners at Main Line before I took the leap. One of the partners finally said, "Look, there is a very strong team here and a solid operational base. Very successful and senior surgeons have invested. It's highly unlikely that your worst fears will be realized."
This was simple and solid logic, and it reflected my own experience. The place ran like clockwork — Swiss clockwork, in fact — as I'd seen with my own eyes. "Try before you buy" makes sense. It's a very good idea for young surgeons to perform cases at a center before investing in it.
So, after asking Blue Chip 10 or 15 of the same questions again and consulting with my wife a few more times, I decided to take out a loan and become a partner.
What partnership means to me
I had an advantage in that I already knew most of the surgeons and felt comfortable working with them. These were some of the top-performing physicians with great reputations in the Philadelphia area. I am fortunate to call them partners. They welcomed me into the business, congratulating me on my decision to invest. Even though I bought in at a smaller stake than the initial partners, I feel my viewpoints are valued and heard. It's a very collegial atmosphere, which I greatly appreciate.
Still, in the end, it really isn't about the personalities of the other physicians or that everybody gets along famously. It's about the amount of business each surgeon can bring and a collective commitment to great outcomes and a quality patient experience. Given the choice between a nice guy who has no cases and a prickly guy who brings in tons of business and is a solid surgeon, I guess I'd choose the prickly guy — although that might make board meetings more unpleasant.
While the "upside potential" was made clear to me from the very first meetings, I still find the projections surprising. Actually, they're amazing. There are days I cannot believe how profitable this business will be. When I look at how much I invested, and then figure out how much can come back to me if the business does well — it's just extraordinary. And there's every reason to believe the business will continue to do well.
Translating to my personal life, my partnership means a significant financial cushion, the ability to pay back some loans and the opportunity to get ahead of my girls' educational budgets. With this investment, private education for my girls is a lot more manageable.
Bottom Line: A great decision and a bright future
These days, most physicians know that outpatient surgery centers can be terrific environments to treat patients, and that they can be very lucrative businesses, too. Looking back, my decision to invest looks like a no-brainer. But I think many development and management companies and established physicians may not realize just how big a decision it can be for up-and-coming surgeons. It's a major responsibility to take on. There are just so many things to think about.
For instance, it takes a lot of courage and foresight to invest in the development of a new center when there are a) no buildings, b) no employees and c) no patients. If you are considering investing in an existing center, you must consider the other partners and staff, and try to get a clear sense of the numbers and overall state of the business. And you have to ask yourself if you're comfortable becoming a junior partner, if that's the offer on the table. For all of these reasons, "dating" the center before "marrying" it is a very good idea; that is, you should do a good number of cases there before investing.
Obviously, nobody knows what the future will bring. But barring major policy or legal changes in the rules governing ASCs, I would wholeheartedly recommend that young surgeons invest in ASCs. Of course, I'd stipulate that the surgeon must be committed to clinical excellence and bring a solid and steady flow of cases to the center, and that their caseload contribute to a strong mix.
I couldn't be happier with the decision I made. I thought it through carefully, consulted with colleagues, asked lots of questions, did some soul searching and talked to my wife. I have a very good feeling that investing in Surgery Center of the Main Line will be the best investment I will ever make in my life. I'm serious when I say that. And, even better, it's an investment I made for all the right reasons.
Thank you to Blue Chip Surgical Center Partners for arranging this article.