Building a Physician-Hospital Joint Venture Overseas: 6 Points on Regent Surgical Health's Irish Partnership
On Feb. 28, 2012, Regent entered into a 10-year agreement between Hermitage Medical Clinic, one of Ireland's premier privately owned hospitals, Accelitech, the leading developer of Stereotactic Radiosurgery (CyberKnife) Programs in the U.S., and Ireland’s leading neurosurgeons and radiation oncologists. "The partnership between Hermitage Medical Clinic and the local surgeons is the first physician/hospital joint venture of its kind in Ireland," according to Eamonn Fitzgerald, CEO of Hermitage Medical Clinic.
Here are six points on the company's partnership with Accelitech, Hermitage Medical Center and the Irish neurosurgeons involved in the deal.
1. Regent's first answer was "no." Regent was initially retained to facilitate the development of a privately held inpatient hospital dedicated to the diagnosis and treatment of neurologic and neurosurgical disorders. The company's original task was to give the physicians a "reality check" and determine if the proposed hospital venture, as designed, was worthy of investment given Ireland’s challenging economic environment and highly regulated permitting and construction process, coupled with a highly evolved national insurance program that provides coverage to 48% of the population.
As the unbiased third party, Regent leadership reviewed physician practice patterns, related surgical volumes, payor mix and revenue projections. The collective data was then reviewed and downloaded into Regent's database. The outcome of Regent's first and most important task was to tell the physicians, "No." Despite the physicians' best intentions, the numbers simply did not work, and an alternate strategy for a much-needed service needed to be designed and implemented.
2. Breaking new ground with a physician/hospital joint venture. The majority of Ireland's private hospitals are "privately" held by local investors. Partnerships and joint ventures between physicians and hospitals are relatively unheard of in Ireland, and Regent believes this is the first joint venture of its kind to be established in the country. "Ireland's current healthcare delivery system does not align the interest of the physician with those of the hospital. Historically, physicians would try to do a project only to be met with resistance from the hospital or the payor community. Conversely, hospitals would try and implement programs in absence of the physician, which is a recipe for failure," says Michael McKevitt, senior vice president of business development for Regent Surgical Health. "There had never been a pure project whereby a private or public hospital had elected to partner with an existing group of specialists around a specific service line and related technology."
"Due to the originality of the arrangement, Regent and Accelitech invested lots of time gathering insights from the physicians and the payor community prior to moving forward with investment," adds Mr. McKevitt. "Based on our experience in working with hospitals and healthcare organizations, our role is to educate stakeholders on the strategic need to provide the highest standard of care at the lowest cost. Thus insuring both physicians and hospitals to not only survive but thrive in a challenging economy."
3. Getting insurance providers on board. As stated, 48 percent of the population in Ireland is enrolled in the government's health program, and the other 52 percent of the population is privately insured, with one insurance company (VHI) insuring the vast majority of patients. Regent and Accelitech, on behalf of the proposed partnership, needed to quantify demand for a dedicated neurosurgical service. "We did an inventory of the neurosurgery and radiation oncology physician community and then set out on the task of meeting with physicians nationally to gauge interest and support," explains Scott Milligan, chief development officer for Accelitech. "Concurrent with our efforts, neurosurgery leadership, directed by Danny Rawluk, MD, was required to meet with VHI clinical leadership and educate them on the merits of a dedicated neurosurgery program and the expansion of covered services." Knowing that the proposed service would ultimately reduce the cost to provide care, each of the country’s insurance carriers expanded coverage to its enrollees.
Mr. McKevitt says Regent was surprised by the high level of private insurance present in the Irish marketplace. "The existence of private insurance made it possible to create a private service around neurosurgery," he says. "It's more similar to the U.S. than some of the other European markets. From a process standpoint, this project may have moved faster for us had we not elected to meet with the insurance providers to verify coverage and the expansion of services. One can never assume coverage, and we had to provide clinical evidence that the proposed service was fundamentally sound from a clinical and financial perspective, especially for those cases that require CyberKnife technology."
He says that in an environment where a handful of payors dominate the market, any problems with reimbursement will have a significant effect on profitability.
4. Outpatient surgery is necessary in Ireland and beyond. "One of the most surprising things about Ireland was the absence of outpatient surgery centers," said Mr. Mallon. "There are no freestanding surgery centers in the country. I think we also found that there are significant inefficiencies in the healthcare system, given the economic condition of the country and the weight of paying for the government programs."
Mr. Mallon says one of the biggest questions in Irish healthcare today is: How do you control the cost of healthcare when you have a long waiting list of patients? He says the simplest way to reduce healthcare costs in this scenario is to reduce access to physicians. "This ignores the fact that the easiest way to reduce the cost of care is to build freestanding ambulatory surgery centers that are clean and efficient," he says.
5. The distance creates some challenges. Scott Milligan, chief development officer for Accelitech, says that one of the most significant hurdles for his company will be the implementation of the CyberKnife Stereotactic Radiosurgery System in the surgery center. "The biggest challenges we face are training of staff and various health specialists to utilize the equipment and bring the program live," he says. "It's not like we're flying to Toledo, where there's a small gap in distance."
But he says despite challenges with implementation, there is room for significant growth for CyberKnife in the Irish market. "It's an extremely underpenetrated market with a lack of technology," he says. "From that perspective, you would expect there to be a higher demand in a location in Ireland than we would see here in the U.S."
6. The joint venture creates a strong foundation for growth. So what's ahead for the Regent partnership with Accelitech, Hermitage Medical Center and neurosurgeons? "We are fortunate to have Hermitage Medical Clinic as our partner in this venture," says Joyce Deno-Thomas, senior vice president of clinical operations. "Since opening in 2007, HMC has established itself as a leader in providing a higher standard of care to the Irish community. It is a tremendous facility with an exceptional staff; we are simply building upon a foundation of clinical excellence."
Regent is accessing current clinical capabilities from which a timeline for implementing expanded neurosurgical services will evolve. As part of the expansion, Hermitage will provide a dedicated operating theater with the latest technology. Additionally, the neurosurgeons are organizing themselves into a separate group practice model with the intent of increasing patient access and individual productivity. Collectively, the physicians will be partners in Neurosurgery Ireland, which will have its own identity in the market and be incorporated into a larger neuroscience program.
Learn more about Regent Surgical Health.
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