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This Episode

Interview w/ Ronnie Pennell

You Will Learn

– What are the different sites of service of clinical practice in terms of reimbursement rates from Medicare?
 – What is a site of service differential? How do reimbursement rates differ at different sites of service?
 – What is the difference between a professional fee and a facility fee?
 – what is the first step toward buying into a surgery center for a pain physician?
 – How should a physician evaluate potential partners to see who may be a good fit as a business partner?
 

Resources & Links

Show Notes

This week I talk to Ronnie Pennell, Chief Operating Officer at Phybus, LLC.  Ronnie and I discuss why ASC’s exist, when buying into an ASC as a pain physician might be a good idea, and other important questions to ask as a part of that process.  If you’re curious about if ASC ownership might be a good idea for you, or you want to know how ASCs function in the context of other clinical models, you won’t want to miss this episode.

Show Transcript

[[this transcript was auto-generated]]

Ronnie: [00:00] Every surgical procedure you do, you generate revenue for somebody other than yourself. So you generate revenue for your anesthesiologist. Whoever owns the lab, you generate revenue for all the pharmacists out there. You generate your level of, you know, you generate revenue because your work. So when we talk ancillary income, we’re saying, how can you somehow appropriately grab part of that revenue?

Justin: [00:25] Hey, this is Justin Harvey. You’re hosted the anesthesia success podcast. My wife is an anesthesia resident and I’m a financial planner and I worked with anesthesia and pain doctors as clients. This podcast is designed to help the anesthesia community informed about their careers, their finances, and more by taking important questions straight to the experts. Thanks for tuning in. This week I talked to Ronnie Panell, Chief Operating Officer at [inaudible], LLC by bus is a company that partners with physicians to invest in and operate ambulatory surgery centers, also known as hscs. The content from this discussion definitely falls into the category of things that you didn’t learn in med school. It can make a massive difference in your career and financial future, especially for pain physicians. Ronnie and I discussed why afcs exist when buying into an ASC as a pain physician might be a good idea and other important questions to ask as a part of that process. If you’re curious about ASC ownership and if it might be right for you or you want to know how ASC is function and the context of other clinical models, you won’t want to miss this episode. Please note that some of the content of today’s discussion addresses important clinical and legal questions. Neither I nor my guests or attorneys or physicians for that matter, so none of the content of this discussion should be construed as legal advice. Please consult a qualified health care attorney before investing in an ASC and now today’s episode.

Justin: [01:45] Hello everyone. This is Justin Harvey. Welcome to another episode of the anesthesia success podcast. This week is another episode coming to you live from the Acep conference. That’s the American Society of interventional pain physicians here in Las Vegas, Nevada, and this week I’m joined by Mr Ronny [inaudible]. Ronny is the chief operating officer of five us LLC. That’s p h y B u s LLC. Five is supports physician owned surgery centers with the management and strategic resources they need to help them run, start and run surgery centers. And he’s here to speak with me today about what is a surgery center, also known as an ASC. That’s ambulatory surgery center. Why should you care as a young physician, especially pain physicians, I’m talking to you out there and what does all this mean for you? What does this mean as far as practice, as far as investment opportunity. I’m really excited to have Ronnie here to speak with us. So Ronnie. Welcome to the anesthesia success podcast.

Ronnie: [02:35] Thank you. I appreciate it. Glad to be here.

Justin: [02:38] so just to tell us a little bit of background starting out, why don’t you tell us a little bit about your career and how you came to be doing what you do.

Ronnie: [02:44] And I appreciate getting the credit to be co founder, but I actually am not. The founder is a gentleman by the name of Rodney Lunn. Rodney L. U. N N. [Lunn]. He is a, been in the surgery center space for three, almost four decades now. One of the original founders of Amsurg. That’s A, M, S, U R, G, largest, one of the largest surgery center development management companies in the country. He started five this 10 years ago. I joined them almost immediately afterwards,

Justin: [03:16] so it almost co-founder

Ronnie: [03:17] Almost, but he started it and he’s a lot smarter than I am too. So, but anyway, I actually, my background before I got into this, I was in the institutional money management business. I actually, worked with a lot of hospital companies all running money for them and my business was driven off of tax id numbers versus social security number. So when I got out of the institutional money management business of which, spent almost 18 years of my life, I wanted to get involved into healthcare. I live in Nashville, Tennessee. Nashville is infamous for the healthcare business. And so, Rodney and I got together and you know, who better to get mentored by then one of the pioneers in the business. So that’s how five has started. We not only our eye surgery center management and Development Company, but we’re also a medical billing company specializing in surgery centers. We built for other, for physician practices and other scenarios as well. But we try to special in surgery center space. We just been there for a long, long time. We know the business within the last decade of doing that. Probably the last three or four. We’ve spent a lot of time in the pain management world and so, become experts in our own right.

Ronnie: [04:25] You know, when it comes to the surgery center space and how it relates to pain management. So that’s where we’re at.

Justin: [04:30] Great.

Ronnie: [04:30] That’s why we’re here.

Justin: [04:31] So I’m a young pain position and I’m interested to know, you know, I’ve done some work at a surgery center, but maybe I don’t really understand from an economic standpoint what is the surgery center and how do the, how does the business side of that work? And also from a clinical standpoint, you know, what is the surgery center and how does it differ from perhaps the other sites of service?

Ronnie: [04:48] Sure. So economic standpoint, a surgery center is a place for interventional pain management physicians to be able to do their surgical procedures historically. And on a more common scenario, a pain doc is doing their surgical procedures in their practice. They’ve got a procedure room, they bought a CRM, they bought a table, they’ve got their own staff that they’re doing it at. And all these procedures, other than all the most common procedures in, in pain are done in their practice on an economical basis. The outpatient surgery center space is a facility all in its own and they have a different reimbursement structure. So you can bill not only for your professional fees of which are included in every procedure that you do, but if you have ownership within an surgery center, then you also will take part of billing for the facility fees for that entity. So it’s important to note that it’s not part of your practice, it’s a separate business. It’s not even a PLLC like most practices are. It’s going to be an LLC, you have to go get contracts for it, you have to go negotiate those things. You’ve got to run it separately. Different set of financials. The whole works.

Justin: [06:01] Cool. So maybe you could give a quick example.

Ronnie: [06:03] Okay.

New Speaker: 06:03 Just give us an example of a procedure. This is something that a doctor might do in their office setting and in an ASC. And how do the economics of that work? Talk a little bit about maybe site of service differential.

Ronnie: [06:13] yeah, so it’s amazing to me. the, the amount of physicians that I talked to that are honed in and completely knowledgeable about what you just mentioned, the site of service differential, sad to service differential is nothing more than your payer. Medicare, commercial payer, blue cross, blue shield, Cigna, whomever it is, they’re paying a physician a slight difference add on, let’s call it, for that physician to do a surgical procedure within his practice. So in your procedure rooms right now. And so let’s use a epidural steroid injection for example, because it’s probably the most common procedure that’s being done right now. if I asked, you know, 10 doctors, how much do you get paid to do an Esi, those 10 doctors are going to give me a number and I’ll just grab one out of the air. Let’s call it 300 bucks. And what I asked him that is how much of that $300 is your site of service differential?

Ronnie: [07:10] They don’t know what it is. Most call it eight out of 10 don’t even know what that is. They just know they’re getting paid $300 the reality is they’re getting paid $240 that’s the professional fee, and then let’s just use an example, Cigna also tacked on an extra $60 for their site of service differential, and so they only pay it in one check and that doc thinks, okay, I make $300 it’s he makes two 40 in his professional fee, $60 in a site of service differential. Do that same procedure in a surgery center. Then that using the example that I had, the two 40 in a professional fee stays, you still make that the $60 goes away because you’re now not doing it at your practice anymore, but now you get a facility fee at the surgery center. The surgery center, for example, might be $400 or $350 for that Esi that we just gave an example. So you’re, you keep this to 40 prophy never goes away. That’s your fee for doing it. Cause you’re an MD, the 60 goes away because you’re no longer doing that, your practice, but you gain $350 for a facility fee, had a surgery center. So that’s the economics of it. Why do you do it? There’s a lot of reasons specifically honing in on the financial side is because I can make the facility fee versus not having it at all.

Justin: [08:33] Very helpful. So as far as you know, I’m trying to understand like the revenue. So if I own us a share of a surgery center as part of the business owner, I’m getting a professional fee of that, call it $250 and then say there’s a $350 site of service differential. So I do that. Esi, it’s two 50 plus three 50 what does that 600 total right of that hundred to 50 is coming to me in 350 is the ASC revenue that right?

Ronnie: [08:58] That’s correct. That’s correct.

Justin: [08:59] And that ASC revenue, then it has to kind of trickle down through the, we use that money to pay the person that sits at the front desk, keep the lights on, all that stuff, pay the rent, and then that gets down to our net income at the bottom. Yep. So as a physician, part owner in this ASC, I’m getting the two 50 prophy plus whatever trickles down through the P and l to the bottom line. Is that right?

Ronnie: [09:20] That’s exactly right. Which by the way, it’s no different than you’re doing it at your practice. Right. Because you still have overhead at your practice. You still have staffing at your practice. You have med supplies. When I tell you you’re losing the $60 using the example that we just talked about, I could almost argue that might be a good thing because by the time you have overhead staffing, supply costs and everything else, it’s probably costing you $60 a case. Right. You know, so you get rid of all of that to do it at the surgery center because the surgery center covers all those expenses. Got It. What types of procedures am I doing at a surgery center from a pain doc? The most common, and this is this is changing on an ongoing basis because every day Medicare approves a type of procedure. Usually your commercial payer follow, but the most common in the pain management world is your epidural steroid injections, your Esi eyes, you’re RFAs, your trial stimulators olive, which those three can be done at a practice. If you have a properly built out surgery center with the right, oh are included in that. Then you can also do permanent cases there, your perms from your trials stimulators and those are probably your most common three to four cases.

Justin: [10:31] One thing we didn’t mention is like a hospital based practice. So there we’ve talked about site of service differential, we’ve got the, you know the office that kind of the lowest reimbursement rate with the lowest kicker, we’ll call it Saturday of service and then the surgery center comes in north of that. Where does the hospital fall on this?

Ronnie: [10:44] Oh, they’re there. They’re crazy. So the hospital is HOPD, which stands for hospital outpatient department, Ambulatory Surgery Center. Ambulatory is walk in and walk out and it’s defined most often at 23 hours. So that’s why you can’t stay longer than 23 hours. We don’t have this problem in pain obviously, but in your hospital world, the HOPD departments are typically 40 to 50% higher than a surgery center. So if we use the example of $70 for a site of service differential at your practice, these are all for Esi is by the way, $350 at a surgery center that hospitals probably $600 and that’s why they do it. I mean, you know, that’s why if you talk to a hospital and you say, I want to pull my perms out of there and I’m going to do them at a surgery center, or hospital is going to fight against that because they really want to keep those cases or they’re going to try to encourage you to do cases at their office. They make a lot more money, which is why the whole nother avenue, but health care of problems that we have today.

Justin: [11:46] And so just to break this down at the most basic level so I can understand, health insurance are willing to pay more to the hospital, then they’re willing to pay to an office setting at the very lowest tier in an ASC, in the middle. Why? Why is that? They have better lobbyists. Huh. Interesting. So the bottom line is for the listeners out there who were thinking like, I’m a business oriented pain physician and I want to, you know, get out there and make my way in the world site of service differential is something that’s absolutely critical to understand.

Ronnie: [12:16] Absolutely. And it’s a great place to start. Probably a great place to start to understand what it asks the question. Yup. Ask Your, every one of you out there that are starting practices are young in your practices are building relationships with the local marketing reps for the insurance companies. Ask them to explain to you in your current contract the difference between the pro fees and there in the side of servers per dollar amounts. So, talk about, you know, we just had the discussion a few minutes ago with a gentleman who stopped by who is interested in, he’s a, is a pain fellow right now and he’s very forward thinking, talking about what does it take for me to, to buy into an ASC. He’s about to finish fellowship and he doesn’t obviously have any, a patient base at this point. Maybe talk a little bit about the timeline for what does it look like for somebody who’s an up and coming go getter, we’ll call him as far as establishing their own practice, generating the patient flow required to for an ASC buy in to make sense.

Ronnie: [13:09] Yeah for young physicians. Really it’s not even young physicians. What makes successful businesses oftentimes is people buying products. And in our space that we’re talking about today, it’s patients that need pain management services. So it goes back to volume and you know, with the young physician coming out of fellowship or a year or two with their own practice, it’s all about how many patients and how much volume you have when it’s to the surgical procedures. And that’s what drives this. You can save money on your expenses and you can run your staffing more efficient and you can run your med supplies and beat up, you know, your vendors and get better pricing and that is gonna move the needle. And it’s very important. And when it comes to running a business, but what moves the needle the most is volume. And so for you, young ones are out there that are looking at, you know, maybe I want to be forward thinking and get into this, drive your volume, get more patients in the door, appropriately order procedures when needed.

Ronnie: [14:14] And then as you see more people and you do more procedures, surgical procedures specifically, then that’s when things like this open up for you. I mean at the end of the day, I’ve said it all the time nowadays, every physician that’s out there should be looking about, you know, how do they grow their revenue streams through ancillary income. Right. And you know, it’s, it’s infamous in the pain space to do labs and it’s infamous in the pain space to do DME and so forth. And so on. Outpatient surgery centers, in my opinion, is every bit as good as all those.

Justin: [14:46] Yeah. And so to be clear, you know, if we’re talking about sort of charting a financial for a pain physician, it was just wrapping up fellowship. The most likely first step is they’re gonna know, be part of some practice or they’re coming in, you know, starting from scratch potentially with a healthy salary and beginning to build that patient base. And then as time passes, they have a lot of happy patients. They’re getting referrals, they’re doing a higher volume. Then there’s this opportunity that unlocks for them to have what we’re calling ancillary income, which for people who have no idea what those words mean, we’re talking about a second stream of income besides your salary.

Ronnie: [15:19] Right? So if I, if you, if you allow me to jump in, I’ve had this conversation a lot, so I kinda got a layman way to explain it and I think people understand it. So every time you do something, you physicians out there do something specifically, we’re talking about surgical procedures. So every surgical procedure you do, you generate revenue for somebody other than yourself. So you generate revenue for your anesthesiologist. Whoever owns the lab, you generate revenue for all the pharmacists out there. You generate your level, you know, you generate revenue because your work. So when we talk ancillary income, we’re saying how can you somehow appropriately grab part of that revenue? And so in the facility space, if you go to the hospital and do these procedures, you’re generating revenue for the hospital. Or if you go to somebody else’s ASC, you’re generating for their ASE. So can you be part of that? So the revenue that you generate, you can take part of.

Justin: [16:10] Right. And let me also caveat right now. you know we talked about stark before. So there’s, what we know is the stark laws which stipulate you can’t self refer business and enrich yourself in ways that are deemed inappropriate and illegal. 100% I am not a lawyer and I’m not going to try to unpack exactly what that means in the context of the practice of pain. But I do want to pause here and say, make sure that if you’re looking at opportunities like these are yelling at pharmacy or an ASC buy in or some kind of referral relationship, it’s great to have a lawyer on your team who can weigh in, who has some healthcare knowledge to be able to say, are we running a foul of stark laws? And the way that this deal is configured

Ronnie: [16:45] One hundred percent, have a good attorney. I am not a lawyer either. Yeah. So I would add to that, that they should call me. Yup. There you go. but on top, right after the lawyer you call Ronnie. So that’s what I would say.

Justin: [16:56] Cool. So if we go back to our example, Ronnie of this best young physician, you’re starting to build up the, the patient base and then they’re looking to take that step to say, I want to capture more of this ancillary income. I have enough volume to be able to do that. And I could, I could, for example, Phil, one day a week at a surgery center with procedures that are required by my patient base. And maybe I call you at that point? Maybe walk me through that process of I come in, I don’t know anything, but I know that I have good volume and I want to partner with somebody who can help me buy into a surgery center

Ronnie: [17:26] Naturally for us. You’re almost asking, you know kind of what’s the process that my company is would do. So what we would do is we would put together a feasibility study for that particular doctor himself and he has good volume but not enough volume to blow the doors off. So we would put a feasibility study together that would look like based off of his volume, what would a surgery center look like and most likely if it, unless he’s killing it, then we might want to say, should we look outside and find other docs and we can define killing it now or different whatever. It doesn’t matter. But bottom line is what we would do as a management company is not only do some projections of possible feasibility studies with other physicians, but we would also do it with the growth of that particular physician himself.

Ronnie: [18:14] He may say, listen, this is how many I’m doing today, but over the next 12 months I’ve got somebody else coming in, I’m going to hire somebody. I’ve got this much estimated on my growth, whatever it is. So that’s what you’re doing at the end of the day. Again, it’s all based off of volume itself and it’s all based off of control. That’s what I mean there we, we’ve been talking the economic side, but there’s many other reasons why to build a surgery center. I mean you get control, you know, and if you have somebody else’s facility or hospital, they’re in control. You’re not, patient outcomes. You get to oversee, you get to be able to do the convenience depending on where it’s being built. You know, it’s one of those scenarios. So there I can go down a long list of why they want to do it. It’s all driven based off of partnering with the Right Program, partnering with the Right Company, finding the right attorneys to make sure you’re going down the right avenue and working hard. Yeah. Building a good busine ss.

Justin: [19:05] Yeah. And so if I engage you and I, and we’re walking through this process and you say, you know, you’re doing good, but you don’t have sufficient volume to be doing five days a week, if we’re jammed at the surgery center, maybe we’re bringing another physician partners, what does that process look like?

Ronnie: [19:19] My company would go out to the market. We’re going to use you because you know the market. I mean, so I’m sure you’re involved in the local organizations. I’m sure you talk to the docs that do what you do around the town. So we’re going to involve you because you’re kind of the nucleus of it. But we’re going to do all the leg work. We’re going to go out and find the doctor. We’re going to do presentations. We’re going to probably put some numbers together. We can do it through dinners, we can do it through meeting folks, whatever it is. At the end of the day, the goal is to bring other people using your example of that, I’ve got, you know, enough volume to do two days a week. So what do I need to do with those other three days a week? We have some centers that you just shut down.

Ronnie: [19:58] You know, you only do cases two days a week, three days a week. Ultimately though, you want to be able to be open as much as you can for a lot of different reasons. And if your volume doesn’t dictate that we want to go find others that can come do that, they can come in and be part of your surgery center, not your practice, but be part of your surgery center and pending on what they bring to the table is which you can offer them inequity within the surgery center. You don’t even have to do that either. I mean, if some docs just don’t want to be owners, they just want to do your cases at which is even better because then you get the revenue. Don’t have to give it any other way.

Justin: [20:31] And so what does that mean specifically that what you just said?

Ronnie: [20:34] So, just because you’re doing cases at a surgery center doesn’t mean you have to be an owner, right? So if I’m an owner of a surgery center and I have an option on one hand bring in two docs that I’m going to have to sell 30% of my surgery center too. But on the other hand bring in two docs that they don’t want to have any equity whatsoever but they want to bring all their cases. Yeah, I really want the other hand more than one, you know, because then again, I still own all of the surgery center and I don’t have to, you know, split the the net revenues and they would conceivably want to do that because they like the lighting and the staffing and the facilities and so they want to bring people there for a better patient experience. I would absolutely say he said not only experienced but outcomes and convenience.

Ronnie: [21:13] I mean, you know, you might, you might have a practice on a fourth and broad and on on a fifth and broad is another surgery center that they’ve got, you know, time that you can use for your, say your cases there. That’s not happening in this space, in this specialty nowadays. Because instead of going to somebody else’s place, they just create procedure rooms and do it in their own office. So we don’t have a lot of that in this space other than permanent procedures because those can’t be done at your practice.

Justin: [21:42] Got It. So if I’m doing 3000 ish procedures a year, it was kind of the number. Yeah, we were using before. If I have a surgery center share, am I taking from the 3000 so the total number is still kind of the same, but you know maybe 300 of them are now ASC.

Ronnie: [21:57] No, I mean he says and then it’s 27 and 300 is that how that now? I mean, no, I mean that’s not what you want to happen. At the end of the day, if you’re doing 3000 surgical procedures in your practice, you want all 3000 of them to go to your surgery center. Okay. So how does that work? If I have an office and I’m doing business there, I just, I’m essentially using it as little as I reasonably can. The Surgery Center or your practice? The practice. Well, again, these are really stepping a little bit outside of my expertise, but I’ve been in the business long enough that I can give you a certainly an opinion. What drives procedure count is seeing patients the more often that somebody is seeing patients in the practice, the more volume that they’re going to get at the surgery center. In our case of his example.

Ronnie: [22:46] So I’ve often seen business models developed where a practice, you know, has nurse practitioners seeing patients and if the surgeon is at his surgery center doing procedures, and that’s just use an example, and again I apologize, but let’s use an example. Let’s say on Wednesday next week, the doctors that are listening to us right now, they’re, they’re going to do procedures at their practice that they’re Wednesdays, their surgical day. Okay. If they own a surgery center and they went to the surgery center and did that, I think the question I had is would have my staff do well, what does the staff do on Monday and Tuesday and Thursday and Friday they see patients and it’s nurse practitioners that are seeing those visits. So my suggestion would be they do the same thing and now all of a sudden they’ve got one more day of seeing patients, which likely is going to bring more volume on the surgical side. They don’t, they can, but I don’t necessarily think they should be shutting this their practice down. They can, you know, again, I, I got a preference that’s, I’m in the surgery center space. I’m not in the practice, you know, practice consulting business. Right. I just kind of learned a little bit about it.

Justin: [23:49] So, as far as ASC ownership, you know, how, how does this work? And it’s probably varies by state and state laws and things, but if I partner with five s and I am a pain physician and maybe there’s two or three others where maybe it’s a multispecialty you guys do multi specialty. Okay. So if there’s a, maybe a few of us that are a few different specialties, how does that work as far as like buying in, putting money down, getting alone equity and all that?

Ronnie: [24:12] Yeah. So, if you’re working with five is where a minority player in this space and minority defy defining minority player versus majority player is our sweet spot is owning 10 to 20% of the surgery center, the minority interest. And there are other businesses out there that own 51% or more. That’s the majority were a minority player for several reasons, but mainly because we want to see the physician have that opportunity sometime down the road when they sell their surgery center to whomever that they’re going to get the big hit, you know, they’re going to be able to sell 51% to somebody that buys it for eight an eight multiple of what the value of that surgery centers. So, if we were 51% owner on out of the gate, then they would never get that opportunity. So that’s the main reason why we’re a minority owner of that we would do, to answer your specific question is we would go, let’s just assume that you know, a group of you guys already have enough volume to own your own surgery center.

Ronnie: [25:10] We would work with local contractors and we would work with our architects. if you’re in a certificate of need state, then we would work with the con committee and we do all the work. We would build a center with local contractors. We would then get the center license and accredited. We would then get the center contracted with the payers because this is not an easy thing. We would hire the staff, operate the center, get it running. The goal for us is that physicians come and do cases and be doctors where the business folks, we get a management fee to do that and we’ll do the management and the billing and you as a physician can do as much or as little as you want when it comes to that side of it. But most were finding you know, just want to come in and do their cases and they want to be updated on an ongoing basis with financials and profitability and they want to know what’s going on with their staff. And that’s how we work with local financing companies. Most of it is financed through a bank and the business itself will pay the loan off. So it’s not like we have a $2 million cost to build out a surgery center and we’re all having to write checks for $2 million, right?

Justin: [26:18] So if we’re starting from scratch and you, you say, okay, I’m the golden child and I’m doing crazy volume as a pain physician, maybe there’s one other and we’re going to do a surgery center with you. And you say, you know, we identified a site, we’re going to do a new build. You literally are like talking to contractors and an architect and you’re going to build a space and then you’re going to do all of this legwork. And, and what I’m doing is I’m going to move as much of case volume to this surgery center as I can. And I’m also responsible for getting financing. So I’m going to put some money down and then I need to get a loan for the balance. And that loan goes to who?

Ronnie: [26:55] It goes to the business. So we will create a business and the business goes and gets to the loan because the business doesn’t exist, right? Because the business doesn’t exist. There’s not going to be an institution out there that loans the business just to them the money. That’s where we as owners step in myself, are my five s and then the physicians, whomever it is. And we would go in and personal guarantee, whatever the loan amount is, the dollars, then go to the business to build it by equipment, staff it, run it for the first few months until the dollars start to come in. And then the business itself will also pay the loan back, right?

Justin: [27:35] So when I’m getting this financing, am I signing on the dotted line and like using my house as collateral as a physician?

Ronnie: [27:42] Well, most physicians personally guarantee it, right? So they don’t, you know, I mean, if, let’s say whatever their pro rata portion is, if you own 30% of the surgery center, then you’re only owning 30% of the loan, right? And if you personally guarantee it, then they’re going to get that dollar one way or another. Right? So if you got a lot of dollars sitting in good investments, then they’re going to go get those or they’re going to get it from your house.

Justin: [28:09] Okay. So to be clear, what this is is a business opportunity where you potentially are, you know you’re personally guaranteeing a big number on this surgery center in order to get it up and running in order to push as much business to the surgery center as you can generate revenue in that surgery center and with that revenue pay off the loan that you took out that was personally guaranteed so that eventually fast forward five years, you’ve got a very profitable surgery center that has a high volume that has paid off a loan fully. And then what happens is as the ASC keeps making money, that money then becomes yours to keep.

Ronnie: [28:41] I would agree with everything you said. I would change a little bit of the wording and say that, you know, usually our goal is to look at it around year two that you’re at steady state and making them money. So even with the debt of the surgery center, even with the interest in all the things that, that it’s paying off, you’re still making enough money to put dollars in your pocket.

Justin: [29:02] Right. Okay.

Ronnie: [29:03] You don’t have to wait until it’s paid off before you’re making any money.

Justin: [29:06] That’s right. Right, right, right. Yeah. And that’s assuming that you’re making the required payments on the loan. I guess we’ll

Ronnie: [29:10] those those come out top, that’s an expensive, that just like, just like housekeeping is an expense at the surgery center, so as paying the debt off.

Justin: [29:19] Sure. Makes Sense. So you know, you’ve done a lot of these. what do you see characterize the ASC? Is that do really well?

Ronnie: [29:29] Volume we’ve talked about several times is already probably be your driving force is to make sure you have the appropriate amount of volume. If you are doing a hundred cases a week, whatever those cases are, then bring a hundred cases a week to the surgery center. Don’t only bring 20 okay. I mean, so volume is key. Probably the driving force of success of a surgery center is volume, right after volume is, certainly a strong management company. I mean a managing the center, managing expenses, managing vendors, managing your payer contracts. I mean, there’s so much to go into running a business appropriately. You need the folks that know what they’re doing. Other than that, if I was to go down the list and I haven’t, so I might be a little bit off.

Ronnie: [30:10] Don’t let your eyes get really big. You know, don’t go to the grocery store when you’re hungry because you buy too much. So when you’re building a surgery center, I mean, listen, you’re, you’re doing procedures and you’re getting them in and you’re getting them out so you don’t need the Taj Mahal. You don’t need a place that sitting on the corner of fourth and broad like we talked about, because it doesn’t matter. You can have it in the back alley for God’s sake because again, patients are going to go where you send them, you know, they’re not driving by a nice flashy surgery center and saying, oh well let me go there and do my procedures. They might drive by your nice flashy practice and say, I need to go stop there. But then when they do that, you’re going to send them to the surgery centers. Don’t overbuilt, you know? So the three biggest things right off the top of my head, I’d say is volume, solid partnership, you know, with your management company and don’t get overzealous.

Justin: [30:58] Yeah. Have you been a part of any, deals, any, you know, starting up an ASC where there was strife among partners and there was some sort of, they had to either work it out or it blew up?

Ronnie: [31:10] Yeah. Well, not none that have blown up fortunately enough. we’ve had some struggles. Physicians have strong personalities, so if it’s a group, it’s usually not a problem because everybody is already part of a group. If it’s a multiple groups coming together to build one surgery center. Yeah. There’s problems, you know, are people carrying their own weight or are they not? Do they want to use a certain type of CRM versus a different type of CRM? You know, somebody likes a staff member or somebody doesn’t like a staff member. So yeah, there’s issues, but that’s where that solid partnership and the management company comes in because we handle those scenarios. You don’t have to,

Justin: [31:47] is there any difference in the cost of buying into a surgery center between the different specialties? Like am I more valuable as a, I don’t know, like a neurologist versus pain versus Ortho? Maybe if I’m out like Ortho and I can really drive a lot of traffic, you’re going to give you a better deal to get in or something like that.

Ronnie: [32:04] So at development stage, the cost is whatever the development costs are. So certainly, you know, your biggest expense, Edison at a pain surgery centers or see on, I mean other than what does that direction CRM, that’s their radiation machine that they do that. And it ranges from 85,000 to $145,000 depending on what kind of you’re getting and so forth. And so that’s probably your one time big other than, you know, the build out cost and all the things that come along with it. But the one one piece of equipment that costs more than anything else, that’s probably that. And so when you’re building a pain center, you might have, you know, a certain cost depending on how big and what equipments so forth. So on. If you’ve got orthopedic docs, they might have half a million dollars in equipment alone in one oh law. and so naturally the cost of buying into that center at development stage is going to be a lot more than a pain management is.

Ronnie: [33:01] But it’s not because their orthopedic or it’s because they’re paying. It’s because the things that come along with an orthopedic center versus a pain center. Got It. And just so I understand, if we’re starting a new multi specialty ASC, say we’ve got a neurologist and a Ortho and pain, we’ll just keep it simple. Okay. Are we each giving you or contributing the same amount of money to the business for the same amount of equity? You can, certainly, it’s probably easiest way to do that. You know, but we’ve done them in many different ways.

Justin: [33:31] Is that something that the partner physicians would work out among themselves or do you quarterback that discussion.

Ronnie: [33:35] We quarterback it. I mean, again, they can, again, it depends on who you’re talking to. Oftentimes what I’m finding out is that when it becomes, you know, listen, if it’s a tough conversation, let’s find somebody else to be the mediator and handle that conversation. If it’s an easy conversation, we’ll handle it. No problems. You know, it’s one of those things. So tougher conversations is when somebody wants to tell somebody else that they don’t add as much value. So therefore you should only own 10% of the centers that have 20. Right. and those I find ourselves involved in more often than not because we have to explain that.

Justin: [34:07] Sure. Yeah.

Ronnie: [34:08] But understand this to the guys that don’t own as much, they’re not risking as much either.

Justin: [34:14] They’re only taking on the risk of whatever debt that was brought on by the surgery center of whatever ownership they actually oh yeah. So it makes sense. So this has been, I’ve learned a ton in the last 30 minutes. Thank you very much for your time today, Ronnie. I, in closing, is there any advice that you’d give somebody who’s considering either a new build ASC or maybe buying into an established ASC? Like what are the landmines I need to look out for? What are the things that I absolutely make sure need to make sure I do my due diligence on to, to make sure I’m making a good decision?

Ronnie: [34:44] So obviously because I’m in the business of surgery centers, I had to advise them to call me. Right. so I’m sure you’ll pass on my information. I will include in the show notes. Do that. Yep. And I think the first thing to do is to make sure that, you know, you’re talking to somebody that knows what they are doing and that they’ve done them, they’re successful at it. I think it’s critical when you talk about those types of things because to be real honest with you, we spend probably the same amount of time talking people out of buildings, surgery centers than we do to build surgery centers.

Ronnie: [35:12] And, I think that’s important to note that, you know, everybody doesn’t need to have a surgery center. That’s just the way it is. On the flip side of that, you know, if you’ve got the capabilities of doing it, you’ve got the volume, then partner with the right group and I think you’ll be good. Great. If you’re looking to go from developing a surgery center, building one, two, maybe just buying into one, then there’s a strong likelihood that they already have a management group involved. And then so get involved with that management group and ask them some details. If they don’t have a management group involved, then I’d encourage you again to come back to me and call me because then I can at least guide you through some correct questions, and you can ask the right things to the right people.

Justin: [35:54] Cool. That’s so great. Well. Ronnie, thank you very much for joining me today on this podcast. First said, it’s been a pleasure getting to know you and hope you enjoy the rest of the conference.

Ronnie: [36:02] Thank you very much.

Justin: [36:05] Hey Justin here, this may shock you to learn, but I am actually not a fulltime podcaster. I also run a financial planning company called quantify planning, where I work closely with anesthesia and pain docs to build and implement customized financial plans. If you’re interested in working with a financial planner who knows many of the ins and outs of your profession, shoot me an email or head on over to quantify planning.com for more information. If you’re a resident or fellow, I can also offer you a free student loan analysis if you’re interested, but there might be a waiting list, so check out the link over there to see if you’re interested in learning more about the topics we discussed today. Head over to anesthesia, success.com join our community of residents and attendings and others to ask a question or get more free resources. If and only if you liked this episode, please leave us a review and subscribe. Thank you very much for listening to the anesthesia success podcast.

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