In March of 2005, Alegent Health engaged Health Inventures (HI) to perform a feasibility study for joint-venturing outpatient surgery services with physicians at Alegents Lakeside and Bergan Mercy Medical Center campuses in Omaha, Neb. HI conducted extensive physician interviews to educate physicians about the joint-venture process and gauge interest. Based on positive feedback from the interviews and HIs financial forecasts, it was determined that a joint-venture was feasible.
The degree of physician interest warranted enough case volume to occupy two new facilities. However, HI determined the most immediate opportunity to establish a joint-venture was to convert an existing two-OR HOPD to a free-standing ASC located in a medical office building (MOB) on its Lakeside Medical Campus.
The conversion of the HOPD to ASC process included obtaining licensure and certification to operate as an ASC. This facility would operate for a year-and-a-half while a new facility with four ORs and one procedure room was built in the same medical office building. This created an immediate opportunity for hospital-physician collaboration rather than waiting a long period for the construction of one or two new facilities.
Throughout the summer and fall of 2005, representatives from HI, Alegent Health, interested physician groups, and legal counsel from Kutak Rock formed a steering committee and met regularly to agree upon the terms of the operating agreement and the governance structure of the joint-venture.
Meanwhile, Value Management Group (VMG) was retained to perform a third-party valuation of the existing ASC. Based on financial projections and VMGs valuation, HI and Kutak Rock developed a Private Placement Memorandum (PPM) and Subscription Agreement and in the winter of 2005 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 percent ownership in the new LLC. The newly formed LLC leases operating space from Alegent in the medical office building (MOB).
The owners appointed a management board and clinical operations committee as the principal decision making authorities. This management board has equal physician/Alegent representation and the clinical operations committee 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 cash flow to fund the construction without any term-debt financing: Only a line of credit was needed when the facility opened.
HI used the same temporary-facility strategy at the Alegent Bergan Medical Center Campus with the HOPD. The Bergan project, a three-way joint-venture between Alegent, physicians and HI, was converted to a joint-ventured ASC and became operational earlier in 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.
Learn more about Health Inventures.
