In a recent Becker's Healthcare Podcast episode, we were joined by Chris Bishop, CEO, Regent Surgical Health to discuss what is going on in the movement of ambulatory, including hospitals and surgery centers, and why hospitals are so focused on their ambulatory networks today. A transcription of the podcast is available below, and the podcast can be listened to here.
Scott Becker: This is Scott Becker with the Becker's Healthcare Podcast, thrilled today to be joined by one of the most extraordinary executives in leaders in the surgery center area, and, quite frankly, in the health system area as well. We're joined today by the CEO of Regent Surgical Health, Chris Bishop. We're going to talk to Chris today about what's going on in the movement of ambulatory from hospitals to surgery centers and generally the movement and how hospital systems are taking part in that and what they're seeing, and a lot more. Chris, can you take a moment to introduce yourself and then we'll jump into the conversation?
Chris Bishop: Sure. Thank you for having me, Scott. Chris Bishop with Regent Surgical Health. We're the largest private joint venture operator of surgery centers in the United States.
SB: Thank you. And take a moment, Chris, go back several years, you laid out a plan for health systems to double their ambulatory footprint. How has the market reacted to that? Were you surprised by it? Tell us what you're seeing.
CB: Yeah, it's interesting, Scott. You look back 10 years ago and health systems historically viewed the surgery center market as a proactive defensive strategy, which basically meant, "Oh my gosh, my orthopedic practice is now building a surgery center that's going to compete with us. I would rather join them than compete with them." However, with the advent of true movement towards value based care with consumerism and healthcare, we're really beginning to see heavy adoption by the not-for-profit health systems that recognize their surgical eco system really needs surgery centers as a lower cost, higher patient satisfaction setting for their communities.
SB: And talk a little bit about, so there's been a lot of growth and hospital interest in surgery centers and joint venture surgery centers, and certainly you've been right at the forefront of that. Talk us though through why hospitals are so focused on their ambulatory networks today. What are you seeing?
CB: Yeah. There's a lot of movement. Obviously, with the pandemic we've even seen a further shift. So when the pandemic hit in 2020, a lot of health systems were lightly exploring this shift from the inpatient to the outpatient setting. And even if you go back four years ago, 2018, 2019, you really began to see higher acuity orthopedic care, joint replacements, and spine, in particular, began the process of shifting those cases from the inpatient to the outpatient setting. Again, health systems were lightly supportive of that move. But what happened in 2020 when we faced the pandemic initially there in March of 2020, what we found is health systems were caught in a place where they didn't have enough sites to shift care. So it really forced the health system industry to begin talking to companies like ours to be thoughtful about, all right, we bought these practices, general surgery, orthopedics, cardiovascular, but now we're negotiating contracts with payers that has us beginning to share risk around this surgical care.
So how are we more thoughtful about shifting these cases from a hospital setting into an ASC setting where it's less expensive? The other thing that they were, quite frankly, facing was there were already staffing challenges before the pandemic, but once the pandemic hit, it just really exacerbated an already difficult problem. A lot of health systems have had to shut operating rooms down, because they can't fully staff them. When there are spikes in their micro communities, they'll stop elective procedures so that they can really rededicate their staff on the sicker patients within the hospital in the acute care setting. So I believe we're really beginning to see even those health systems that may be held out for a while really begin to be thoughtful about, what does my surgical ecosystem look like? Where can I better align with those practices in my communities that maybe have already begun building their own facilities? And how do I invest in those? How do I build new facilities, particularly around higher acuity orthopedics and cardiovascular?
SB: So you would say that, overall, COVID increased hospital interest in outpatient surgery centers. I mean, that would be the overall thought process on it, more interest in it. And when people look at these ambulatory networks, they think of hospitals having all these urgent cure sites and so forth. Take one moment on, did COVID increase the interest and why is surgery so important to the ambulatory networks too, not just all the urgent cure sites and those kinds of sites?
CB: Yeah. You could almost make a similar analogy to how people have changed in shopping over the last five or 10 years, Scott. It used to be, you had these mega malls. We would park in a parking garage and walk in and be under a single roof for the next three hours. Now, the rage seems to be all of these sites where you can pull up right in front of the, name the clothier that you or your wife are shopping at, and now they go with an exterior entry to all these different locations. And it's similar with what we're seeing in healthcare in that the days of us walking into a large acute care setting, which is inconvenient. So if I need a colonoscopy, I have to pull into the hospital to park on five, to have my procedure on one, to be discharged on two, and then try to remember what level of the parking garage I parked in versus pulling right up 10, 20 yards from the front door of the surgery center.
So I think what health systems have begun to truly buy into is this concept of patient experience. How can I connect with my patients in my communities and best serve my communities in a more convenient fashion? If I have the flu, I really don't need to go into the ER to get fluids or an antibiotic prescription. I can go to an urgent care center that's close to my house, potentially even in my neighborhood, that's just far more convenient. So it's very similar in the surgical ecosystem in that a lot of the health systems have determined we're losing patients because they don't want to come into the four walls of the hospital where we are treating COVID patients, we're treating other sick people, and that's what we were designed to do. So the better setting for this care is a more convenient smaller 10,000, 15,000, 20,000 square foot location that the patient and their family, quite frankly, can get in and out very easily for that outpatient procedure to be discharged same day.
SB: And take a moment on, we've talked a lot and so much of the growth of surgery centers has revolved around either hospitals and health systems or private equity driven practices and chains, what about the opportunities for physicians? Are there still great opportunities for physicians in surgery centers?
CB: There really is. It's fascinating, a lot of the mega groups are, really, you look at these large orthopedic groups across the country, some of them are partnering with groups like ours while other groups have reached the size and scale that they can start to build out their own ambulatory surgery team, their own urgent care team, their own physical therapy teams. So what you're really beginning to see is the days of the two, three, five, man practices are, quite frankly, numbered, because they just cannot access the resources that they need, particularly around IT. It sounds like we've been saying this for 20 years, that healthcare is the last industry to really leverage IT. But we're in a very high spend, high investment stage right now within healthcare to really leverage the power of IT to help us make better informed decisions.
So I believe you're going to see a lot of the practices really begin to take on outside capital from the private equity groups and either partner with groups like ours or really try to determine, are we large enough and do we have the scale and resources and, frankly, the talent, the people talent, to build out our own surgery center infrastructure. And so that's probably a competitive dynamic that both Regent and the health systems will face over the next five or 10 years.
SB: And another question for you, Chris, I've known you for a long time, you're one of the most talented people that's ever come through the surgery center industry, how do you work now on aligning interest of the hospitals, the surgeons, Regent? How do you assess that? How do you do that? How do you make sure that it happens? I mean, I've never seen somebody as talented as you do this kind of stuff, but talk to us conceptually about how Regent are helping people try and do this to align interest amongst those three core parties?
CB: We're all very familiar with the cats and dogs analogy with physicians and health systems, and the reality is, the finish line for those two parties really isn't as far apart as you might think it is. It's high quality patient care. That is something that both of them can absolutely agree upon. Where the disagreements seem to come into play tends to be more around how you get to that finish line. And the physicians think they have a unique or preferred approach. The health systems often are thinking large ecosystem or healthcare system delivering care to the community. And so it may not be immediately obvious why a health system might be leaning left when the physicians absolutely believe they should be leaning right.
So what we really do is invest a lot of time in listening and trying to understand what the motivations of the two parties are and then help them bridge that gap, try to identify, "Hey, of the 10 things that both of you stated were critically important to you, do you realize eight of them you're actually aligned on? And these other two over here, frankly, health system, I think this is an unreasonable approach. And vice versa, docs. I think you have an unreasonable approach on number 10 here. So if we can help you find a middle of the fairway solution on these last two issues, you're actually much closer to a collaborative alignment or a partnership here than you may think."
SB: Thank you. I know that your firm has seen record growth in the last couple years in a number of joint ventures put together with hospitals and physicians. Just an amazing thing to watch. Can you take a moment, Chris, on what's new in the surgery center sector? What are you seeing? What are some of the new trends? I mean, obviously, the big migration of total joints and total hips and knees to surgery centers, but what else is new? What are you watching closely?
CB: It's interesting. In fact, we're just finalizing our Q1 board deck right now and looking at our same store growth versus that of some of the companies that we compete in, in the industry that report publicly. And what we're finding is all of us, this is a rising tide that's lifting all boats right now. I'm very fortunate and very blessed to be in this space at the moment, but where we're really seeing the heaviest growth, it's really around joint replacements. Scott, as you're aware, I started my career in the medical device industry 25 plus years ago and that's where I initially learned orthopedics before transitioning over to Health South in 2000 where I began to really learn the surgery center business. And so you fast forward to today and two years ago, I did a webinar that talked about 75% of joint replacements would eventually be eligible for the surgery center setting.
COVID hits, doctors begin to really materially expand their inclusion criteria for joint replacements, and today you're really seeing some docs in that 80% to 90% of their patients being eligible for joint replacements in surgery centers, sending patients home same day. I really think the cardiovascular space is an area that you're going to see material growth in. I think it's about four years behind where joint replacements are. We've got a few under construction, we've got several under LOI, and I believe this is an area that the health systems are even serious about taking their employed cardiovascular physicians and shifting those doctors for those clinically appropriate patients into an ambulatory setting.
SB: Chris, just phenomenal. I've watched you through the 25 year career. I guess it pleases me that you're aging so much slower than I am. You're obviously doing something right. Congratulations on the success of Regent Surgical Health, it's been just remarkable to watch, and continued success and good luck. Again, Scott Becker today on the Becker's Healthcare Podcast joined by Chris Bishop, the Chief Executive Officer of Regent Surgical Health, who has just done a phenomenal job leading Regent Surgical Health, which has grown by leaps and bounds. Chris, thank you for joining us.
CB: Thank you for having us and thank you for the support of our industry over this last 25 or 30 years. Truly appreciate it.
SB: Thank you very much.