Alegent Lakeside and Bergan Mercy ASCs, Omaha, NE

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Project Snapshot

Project Type: Hospital-Physician Joint Ventured ASCs

Region: Central

Project Size: Temporary: 8,445 SF Multi-specialty HOPD, 2 ORs Permanent: 16,100 SF Multi-specialty, 4 ORs, 1 procedure room

Project Services:

  • Strategic Planning
  • Feasibility Analysis
  • Financial Planning
  • Facility Development
  • Transition Management
  • Operations Preparation
  • Operational Management

In early 2005, Alegent Health engaged Health Inventures (HI) to perform a feasibility study for joint-venturing (JV) outpatient surgery services with physicians at their Lakeside and Bergan Mercy Medical Center campuses in Omaha, NE. HI conducted extensive physician interviews to educate physicians about the JV process and gauge interest. Based on positive feedback from the interviews and HI’s financial forecasts, it was determined that a JV was feasible.

The degree of physician interest showed enough case volume to occupy two new facilities. However, HI determined the most immediate opportunity to establish a JV was to convert an existing two OR HOPD to a free-standing ASC  in a medical office building (MOB) on the Lakeside Campus.
The conversion process included obtaining licensure and certification to operate as an ASC. This facility would operate for 18 months while a new facility with four ORs and one procedure room was built in the same building. This created an immediate opportunity for hospital-physician collaboration instead of  waiting for the construction of new facilities.

Throughout the summer and fall of 2005, a steering committee with representatives from HI, Alegent Health, interested physician groups, and legal counsel met regularly to determine the terms of the operating agreement and the governance structure of the JV. Meanwhile, valuation firm performed a third-party valuation of the existing ASC. Based on financial projections and this valuation, HI and deal counsel developed a Private Placement Memorandum (PPM) and Subscription Agreement and opened the “offering” for physician investment.

The offering closed in December 2005. Two major surgeon groups and 19 individual physicians invested in the facility for a total of 31 physician users/owners. Alegent maintains 51% ownership in the new LLC that leases operating space from Alegent in the MOB.

The owners appointed a management board (MB) and clinical operations committee (COC) as the principal decision making authorities. The MB has equal physician/Alegent representation and the COC is physician-controlled. The board contracted with HI to provide third-party operational management and development (design and construction management) services.

In September of 2007, the physician owners moved their cases from the upstairs ASC to the newly constructed facility on the ground floor of the MOB. The high subscription rate of the offering and cash flow from the existing facility provided adequate funding for the construction without any term debt financing. Only a line of credit was needed when the facility opened.

HI is using the same “temporary” facility strategy at the Bergan Medical Center Campus with the existing HOPD. The Bergan project will be a three-way joint venture between physicians, Alegent, and HI (via an Alegent/HI shared management company model). The Bergan HOPD was converted to a joint ventured ASC and became operational in the spring of 2008. The joint venture will operate in this facility for up to two years while a new ASC is constructed on the top floor of the new medical tower on the Bergan Campus. This expedient solution will again allow Alegent to immediately engage physicians without the lag time associated with new development.

In addition, HI is contracted to provide: all staff (via an agreement with an HI subsidiary), procedure coding, and central billing office functions for the ASCs.

Accomplishments:
• Health System Partnership
• Speed to Market
• Outpatient Surgery Center – Temporary to Permanent Facility

 

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