The following article is written by Tom Mallon, CEO of Regent Surgical Health.
This month, Regent Surgical Health turns 10! At the end of April, 2001, I assembled a team of colleagues to present a business plan to the GTCR Venture Capital firm. We had seven or so individuals seeking start up funding for acquiring existing ASCs and building de novo ASCs and small surgical hospitals. We knew the minimum investment of the fund was $50 million, but several teams had recently raised investments of that magnitude and GTCR had invested in the ASC space before so we felt there was a reasonable chance for success.
Alas, it was not to be. However, I did receive a call from Mike Karnes, GTCR's chief administrative officer, a friend and former boss who had arranged the meeting. He asked if I would consider a smaller investment and business plan based on a bootstrap, belt and suspenders approach. I said of course, that is how we built Same Day Surgery, (a surgery center management company that I had helped found) into a five facility company from 1995-1999. I shared that this was my preference if I could attract a group of like-minded employee/owners. At that point, Mike said he would invest with me when I was ready and would start immediately to help as he could to build the company part time and eventually even full time if it succeeded.
That gave me the confidence to buy a lot of Southwest Airline tickets to places I had never been to before. Cheyenne, Wyo., Santa Barbara, Calif., Alamogordo, N.M. and Marietta, Ohio, were places where we found like-minded partners for turnaround surgery centers and de novo projects. I started working out of my home office chasing opportunities that came to me through my work with a small venture fund and with Same Day Surgery. While Same Day had a local base and a majority owned model, I learned that the opportunities were national and the minority owned model was easier to sell and, I felt, fundamentally more fair to all concerned.
The first project we signed was the Surgery Center of Southern Nevada (SCSN), a to-be-built center with empty operating rooms in a Kindred long-term acute care hospital in Las Vegas. The development person for Kindred introduced me to Jeff Simmons, our first employee and, today, our chief development officer. Jeff had just completed an assignment with a startup company and was working for Kindred in a consulting role. He impressed me with his intuition for the deal and his ability to work with physicians. Our hope was to build 10 to 15 centers in Kindred facilities.
Unfortunately, our initial efforts to syndicate SCSN were stymied first by the events of 9/11 and then by the liability crisis in Las Vegas.
Our first interruption came on 9/11. I was preparing to leave the house for the airport when I saw the second plane fly into the twin towers. My wife and I sat in our living room and mourned the loss of life and the loss of our way of life. After the planes started flying again, I was on the first flight from Midway to Las Vegas a week later. For six consecutive weeks, I made the trek to Las Vegas. Each week the hotel room got cheaper and the gift in the room got larger. On the seventh week I took my wife, expecting an empty Vegas strip and empty shows and restaurants. What I found instead was that the dam had burst as the gaming instinct of Americans overcame their fear of air travel. We spent four hours in the airport waiting for security to process the crowd on the way home. Airplane travel had changed forever.
Our second interruption concerned the liability crisis in Nevada. While Las Vegas was one of the fastest growing cities in the country, the medical community was in turmoil. Juries were out of control, awarding lottery sized awards to patients. Surgeons, frustrated by the soaring cost of medical malpractice coverage, were moving out of town. We recruited 15 partners in the fall of 2001, but before we finalized the syndication and started building in the summer of 2002, all but one surgeon dropped out. We replaced them with the largest neurosurgery group in the valley and with four independent pain practices. These individuals were not what you would call "friendly" competitors. We worked together for five years before we sold our interest to the physicians.
Those are some of my memories from our first year. Jeff and Mike are valued friends and partners. Our business was built adding capable people with each acquisition. We bootstrapped our way into a successful business that now includes 18 facilities nationwide, serving over 45,000 patients a year and attracting 400 physician partners. We wouldn't be where we are today without the continued support of our facility partners and our hardworking staff. As I look back on the first year of our business, I'd like to thank each and every one of you for the work you do each and every day promoting the clinical and financial excellence that makes us a success. We don't "own" success, we "rent" it and the "rent" is due every day! This is certainly true in our industry and our business.
Learn more about Regent Surgical Health.
Read more from Regent Surgical Health:
- Reductions in ASC Private Reimbursements and Flat Revenue Drives New Surgeon and Hospital Alignments
- 7 Common Patient Complaints About Surgery Centers – and How to Prevent Them