Step by Step Guide to Recruiting Orthopedic and Spine Surgeons. Table of Contents. Decision to Recruit Surgeon Partners

Transcription

1 Performance, Efficiency, Achievement, Knowledge Step by Step Guide to Recruiting Orthopedic and Spine Surgeons June 10, 2010 Christopher L. Suscha Vice President of Business Development Table of Contents Decision to Recruit Surgeon Partners Market Research 2 Decision to Recruit Surgeon Partners 1

2 Decision to Recruit The decision to recruit new physicians to the partnership typically derives from understanding the competitive conditions faced by a surgery center. Strengths, weakness, opportunities, threats (S.W.O.T.) Two primary decision points Proactive and Reactive 4 Decision to Recruit Proactive Expanding market demographics Growing physician practices New physicians entering market Complimentary specialties Diversify specialties (shift from single to multi) Recognize demographic shift of ASC partnership Excess capacity Anticipate changes in reimbursement environment Trend in specialties migrating to outpatient setting Spine Ortho 5 Decision to Recruit Reactive Loss of partners Retirement Relocation Case volume decrease Change in referral patterns Unexpected change in reimbursement environment 6 2

3 Once the decision has been made to begin the recruiting process, it is important to build a thorough valuation of the stock being offered. Of the various valuation theories to chose from, the discounted cash flow method provides a clear picture of the centers performance along with underlying assumptions. 8 Summary five-year projection model 01/31/10 Year 1 Year 2 Year 3 Year 4 Year 5 Net Revenue $2,001,801 $2,042,037 $2,083,082 $2,124,952 $2,167,664 $2,211,234 Salaries and 598, , , , , ,900 Benefits Supply Cost 228, , , , , ,382 Other Operating Costs 287, , , , , ,261 Management Fee 122, , , , , ,674 EBITDA 764, , , , , ,017 Changes in Working Capital: AR Balance 251, , , , , ,693 Days in AR Capital Expenditures 30,631 1,281,246 31,874 32,515 33,169 Debt Service 44,383 (949,431) 300, , ,569 Free Cash Flow $720,938 $438,200 $440,483 $442,240 $443,438 EBITDA Margin 38.2% 37.8% 37.2% 36.6% 36.0% 35.4% Total Volume 1,902 1,921 1,940 1,960 1,979 1,999 9 Assumptions Volume - 1% increase in existing case volume Net Revenue - 1% increase per year Salaries and Benefits - annual increase of 3% Supplies - annual inflation increase of 2% 3

4 Summary discounted cash flow Free Cash Flow Year 1 Year 2 Year 3 Year 4 Year 5 EBITDA $771,094 $774,576 $777,578 $780,070 $782,017 Changes in Working Capital 24,857 (4,561) (4,652) (4,746) (4,841) Capital Expenditures (30,631) (1,281,246) (31,874) (32,515) (33,169) Debt Service (44,383) 949,431 (300,569) (300,569) (300,569) Free Cash Flow 720, , , , ,438 Discount Factor Present Value of FCF 639, , , , ,257 Terminal Value Year 5 EBITDA $782,017 Exit Multiple 3.00x - Multiple from Operating Agreement Terminal Value 2,346,050 Discount Factor Assumes that exit occurs at the end of year 5 Present Value of terminal value $710,099 Discounted Cash Flow Analysis Total Present Value of FCF $1,531,073 Present Value of Terminal Value 710,099 Enterprise Value 2,241,172 Add: Cash 10,000 Less: Debt 87,164 Equity Value 2,164,008 Number of Shares 100 Per Share $21, Market Research Market Research SWOT SWOT analysis helps better understand the competitive landscape. This process will provide insight into the specific factors shaping the provider community. Hospitals Surgery centers Physicians Population Growth trends Practice concentration 12 4

5 Market Research Other Sources Other sources to identify recruitment targets include: Current physician utilizers at center Administrators Surgical supplies/vendor representatives Other industry relationships/networks Referrals and databases will create your initial target physician market. 13 Market Research Sample market research information Fort Wayne, IN 14 Market Research - continued Sample market research information Fort Wayne, IN 15 5

6 Identify top-tier list of potential partners based on: Professionalism good reputation Quality positive patient care and outcomes Culture operational philosophy of current physicians and staff, as well as, goals of surgery center Understand the value proposition Significant investment for both the ASC and physician partner Return on investment Efficiency and convenience Better patient care and outcomes 17 Build the relationship by investing time Steady communication Face-to-face presentations Mail Phone Be an advocate of the recruitment process Understand and anticipate the challenges and seek to find solutions to the various obstacles Be trustworthy and demonstrate integrity Be persistent 18 6

7 Once preliminary agreement has been reached with a physician partner, invite the physician for a trial. Physician must be credentialed at the surgery center Have the surgical coordinator create a preference card so on the day the physician arrives, the staff is prepared in advance so the day goes smoothly. 19 Accommodate new physicians scheduling needs by requesting that current partners be as flexible as possible with their block time and scheduling. The goal is to ensure that the transition from the hospital to the surgery center is as smooth as possible. If the trial is successful and there is consensus among all stakeholders, move to executing partnership agreements. 20 In Summary Develop a well conceived plan Front-end preparation Diligence and persistence Goal is long-term value creation in an efficient, cost-effective environment. 21 7

8 Questions? Christopher L. Suscha Vice President, Business Development Meridian Surgical Partners