Today's webinar gets started. I am going to be introducing our moderator, who is Andrew Colbert, who is Managing Director for Ziegler. He has started us with our first session, if you were able to attend, the Independent Practice Model and Joint Venture webinar. That was in January. That's also available in the AOE Learning Center. He'll also be moderating our next session, which is coming up on March 20th at 2.30 Eastern. That is Understanding Practice Models, Private Equity, and PSAs. Also moderating our in-person conference session. He's going to be helping us out a lot with those. Now I'm going to go ahead and pass that over to him to get us started. Thank you so much, Jessica, and thanks to AOE for hosting this and providing this platform. My name is Andy Colbert. I am an advisor to independent practices across the country, having spent the last 20 years working with and on behalf of private practices as they consider various strategic alternatives and consider partnerships, joint ventures, affiliations, investments, private equity deals. It's a lot of fun. It's a lot of fun getting to work with all kinds of different entrepreneurial groups. I've really enjoyed this conference series and webinar series culminating up at the onsite event at the annual conference and really bringing a lot of perspectives together from like-minded groups that are growing and thriving in the private practice world. Really excited for our webinar today, which is really a mix of groups that have come together through mergers and affiliations and groups that are more hospital-oriented, either fully hospital-employed or actually owning their own hospital and building a hospital. So I think we've got a lot to talk about today and really excited to kick us off. So I think with that said, I'm going to start with you, Paul, and maybe have you give your introduction and where you fit into the world at Sutter Health. Sure. Paul Bruning. I'm the Greater Silicon Valley Director for the Neuromusculoskeletal Service Line for Sutter Health out of San Francisco. And I've been with them for a little bit over a year and a half, have been with musculoskeletal care since the late 80s. And as far as prior experience, I've worked in private practices, smaller, larger groups, academic health systems, and smaller hospitals. So I'm happy to be here to talk about experiences on the hospital system side. Great. Great. Anthony? How y'all doing? My name is Anthony Brooks. I'm the COO for Ortho Lone Star. I also manage one of the divisions in East Texas. Ortho Lone Star consists of about 172 providers in the Texas market overall, which concludes of six divisions in total. My background, I've been on the hospital side up until about six years ago. I came over to the independent side and enjoyed every bit of it. And so I look forward to the discussion that we're about to have. Awesome. Allison? Hi. Good afternoon. I'm Allison Farmer. I'm the CEO here in North Carolina for Emerge Ortho. We are a large practice. If you've been in North Carolina, we go all along the I-40 corridor from Wilmington on the coast to Asheville in the mountains. We have just over 160 physicians and are the result of a continued growth and mergers of what was previously five separate medium-sized practices. And Chris? Hey. Good afternoon. I'm Chris Roy. I'm business development for the Summit Institute of Spine and Orthopedics. We're a physician-owned hospital, started in 1999 with two ortho providers and two GYN providers. It's a little bit different makeup than the rest of the panel here. Two GYNs still have their practice together. And as about five, six years ago, the two orthos run two separate independent practices. We're a 30R, 10 inpatient bed hospital, primarily orthopedics. But with the docs that are founding docs all busy, we're only about 24% of our capacity. So always looking at new ways to add more physicians to the mix and new service lines. So thanks for having me on the panel. That's great. Well, Jessica, maybe do you want to start us off with some of the polling questions so we can kind of have the audience hit these real quick? So I think there's three questions. The first is, please share what current model you're in. So independent, joint venture, merger, hospital, private equity, or PSA. The second is, how much is competition on your mind as you look into the future? So zero being very little, five being very concerned of competition. And then three being, what are some of the attributes you consider most important to your success? So leadership, value-based care, data, benchmarking, culture, or other. So hopefully everyone can complete those, and we'll come back to this in a couple minutes and see how those results look. I'm going to start with you, Allison. I think you have a really interesting story having been with Emerge now, what, about 10 years, give or take? And you kind of started in a number of different roles and risen up to now leading the entire organization, which is what, over 2,000 total employees at this point? So pretty impressive. Maybe talk to us a little bit about the genesis behind Emerge coming together. I think you were there when it all kind of came together, right? Which was, what, I think in 2016, is that right? That's correct. So maybe give us a little bit of the background around what drove that and what the process was like, and did it take years off your life? Yeah, sure. Thank you. So Emerge started with Dr. Tom Demig, who was the physician president of Triangle Orthopedic Associates in Durham, North Carolina, seeing the future of the fee-for-service agreements with independent physicians need to move toward alternative-based payment models. And North Carolina is a very high government payer mix. We have beautiful beaches and mountains, and people really like to retire here, and we love to serve them and give them good orthopedic care. But with that, we need to run very lean, be very smart in our purchasing decisions, and make sure that our payments are appropriate for the work that we do. So he commenced visiting with the large, medium-sized, independent orthopedic practices in the state, got a lot of attention. There was a lot of strategy meetings, cultural fit meetings, a lot of comparing notes. And over the course of 14 and 15, we found that three groups were ready to go on this journey and were brave enough to take the leap. So we got very good legal direction as well as accounting direction, talked about what we needed to bring together to have a group practice, and make sure that we were completely compliant from that standpoint and integrated enough to meet all the government regulations on that. And so in August of 2016, we came together on one EMR, practice management embedded into that same software, general ledger, and time and attendance HRAS system. So that was a very good decision looking back. That was not negotiable. We also forced everybody to change to eMERGE Ortho. That was painful. We think that we made really good decisions with what I just named off there. Maybe what we didn't go as far as we should have, if Andy, you're asking for the good and the bad. We did not leap to an organizational chart of where we would be post-emerger. Everybody kept existing titles, existing roles. We had a CEO of one of the regions who was a year from retirement. He was a part-time CEO of the new venture. I would not recommend a part-time CEO of a new venture like this. So we put together some very robust committees and got to work. In 2019, we brought on a fifth region, another couple hundred employees, and have continued to grow organically, as well as we've had a couple other fixed asset purchases of small independent practices along the way, including as recently as this month. We do now, almost eight years later, have a single C-suite with executive directors in each of our regions and operational support for them, ASC administrators, as appropriate, and have defined what we're going to share in services statewide as opposed to what we're not. That has been difficult. But we're here. And to answer your first question, I was the CFO of the Wilmington practice, came in, was promoted to CFO of the company in 19, took effect very beginning of 20, if you want to put your dates together on what that looked like, and then has been in this role for about three years. Exciting. And do you guys operate as kind of a divisional merger model where each group still retains their own kind of financial autonomy? That's right. We have five financial walls. Yes, we have five groups of shareholders that are each on their comp plan. We have three on the same comp plan, hopefully one about to join that. So hopefully we'll be at two comp plans by the end of this quarter. But yes, we have very definitive financial walls between each of our five regions. So effectively, it's like five mini entities. And then what do you share across the top that they all get access to and how do you manage that? So we led with legal counsel. So our first shared influence was actually a corporate attorney. So we share that, that has now been added to include compliance, we have a compliance manager. Next in 2017, in very quick order was the business office. So we share everything from when you hit create a claim to issuing a patient refund. That's all shared, credentialing is shared. We merged HR second after that. And then we have just recently started a path to merge IT. And that is probably where we're going to stop. We've gone back and forth on purchasing and marketing just to remove those from the radar this time. That's great. And did you actually merge the actual ownership into one entity? Yes. We have 96 owners. Wow. That's exciting. That's exciting. Well, what a journey. It's been fun. It's been a lot. There's been a lot of sleepless nights, but there's also been some wins. I can confidently say each of the practices is better now than it was before. And it's nice to be able to look back and answer that question. Yeah. I mean, and it sounds like you have grown quite significantly since it came together in 2016. Yes. For sure. That's the sign of a good combination is when the dust settles and the honeymoon's over and people still want to join. That's a good sign. Yeah. Everybody's still working really hard to make sure that moves forward. That's great. Well, Anthony, give us a little bit of the compare and contrast of the Ortho Lone Star story and maybe how it's similar or different from Emerge and tell us a little bit about the journey you guys went on. There's a lot of similarities to what Allison kind of portrayed. This whole thing started before me. A lot of the administrators historically in Texas participate in T-Bones and they had relationships. But this thing actually started once the physicians got together and it became their idea. And so that's what kind of precipitated this. The conversations probably started in 2017, 2018 and then led to this merger. It ended up being 2020 whenever we got on the same, I guess, HR platform, HRS platform. And then we in 2021 went to the same tax ID number and that led to us getting in the same revenue cycle. And then that has morphed into us going down the path of credentialing and accounting and HR and all the other dynamics that come with it. We also, like Allison and Emerge, keep a separation on the financial statements. We're kind of geographically spaced where brand recognition in each one of the areas was kind of significant. One of our groups has been around 100 years. And so that brand synonymy is very important. And so we created divisions of Ortho Lone Star. And so I'd say that's one of the major differences and maybe the steps that we've kind of taken to get to kind of how we kind of come together. We do not have centralized legal yet. Like Allison, IT is on the radar as well as purchasing. So we've kind of taken the same outcome, but kind of taken different routes to get there. Yep. And do you guys do all of your own billing in-house? We do all of our own billing. That was actually the first thing that we kind of combined is our revenue cycle. Got it. So it sounds like you guys led with revenue cycle in really maximizing the payer contracting across the entities, really forming a tin. So that's probably like the lead. And now you're pulling in some of the other back office services to follow. That is correct. And is the goal and what's the vision and goal? Is it to continue growing across the state? Do you expand across state lines at some point in the future? Right now, the goal is just to continue to expand across the state. We have a pretty robust revenue cycle team, maybe making some offerings across different states as it relates to support. Most of all of our divisions have consolidated to one EMRPM platform. And so I think that it has worked very well for us. And so it wasn't a mandate in the beginning, but I think it's created enough economies of scale and balance that we could support other entities that are on these EMRPM platforms. That's great. And have you guys considered expanding outside of orthopedics at all? We've considered a couple of other specialties. We do rheumatology and for infusions and things like that, like a number of other divisions. We've looked at anesthesia, things of that nature that impact things downstream. But whenever you look at the business model going into primary care, things of that nature, and kind of how the services are shared from dollars and collections and overhead thing, it's not something that has been taken to. Yeah. Yeah, it's interesting. Well, Chris, let's turn it over to you because I think you're pulling up the other end of the extreme here with the most entrepreneurial group of all of us. Talk to us about what it's like to own your own hospital and the challenges of that, and obviously operating in a relatively rural environment, some of the challenges around physician recruitment and patient retention. And then I got to imagine just the payer mix and the landscape around payer mix is also kind of challenging in those rural markets. Now, you kind of hit it all there at once, Andrew. It's liberating and frustrating all in the same breath, really. So obviously, there's some advantages to be in a hospital, to be in physician-owned, have an entrepreneurial minded physicians that are wanting to be on the cutting edge of efficient, that don't open 14 trays to do a procedure because they're wanting to make sure that they're delivering a great product at the lowest cost possible. Those are all great things to be a part of. Having a group of individuals that just want to focus on patient care is nice as well. They've kind of stepped away from the business side of it and have entrusted us to be able to run that. And we try and clear the runway so that they can take care of patients. So those have all been huge advantages. And I think you can have those in different settings. The frustrating side of it for us, we are in a rural setting. So that's a little bit of a hit on our Medicare reimbursement. Our wage index is a little bit different. We don't get paid quite as nicely as a big hospital system might get paid for their facility fees. And just being rural and in the middle of the country in Kansas, I don't know if anyone's been over Kansas a lot of it's referred to as flyover country. That's a great place to live and raise a family. There's a lot of cool things to do. But it's not the Bay Area. It's not North Carolina coast. No mountains here. So it is harder to recruit to this area. We have a lot of physicians that want to come back home, that want to be where their mom and dad is when they're starting a family. So maybe they have some built-in help. So those are kind of some big targets for recruiting efforts. We have competitive environment in our town. There's a regional hospital across the street. As I said, we're smaller in size. We're three OR, 10 inpatient bed, primarily a surgical hospital. 92% orthopedic procedures. but with all our surgeons at capacity, like I said earlier, we're about 24% of our OR capacity. Being physician-owned, we can't make any big changes to our makeup. We can't add ORs and beds, we can get rid of the bed, add an OR, a treatment room, things of that nature. So having the exact right mix to be able to deliver the optimal patient care that our area needs is our focus almost 100% of the time. What are the services that we can bring in that help us with our CMS requirements for meeting our 2-2-2 rules and just trying to sustain and be able to stay operational as a hospital? Yeah, yeah. And so you said, I think you said is it, so it's two orthopedic physicians and two OBGYNs, is that right? Correct. OBGYNs don't do labor and delivery any longer. I mean, one has seven kids, one has nine kids, so they don't rush to the hospital anymore to help other people with their children. But they're a small percentage. Those two ladies being as busy as they want to be are about 6% of our volume. So we're not going to grow by getting them busier, it's bringing in another ortho, it's taking in pain management, bringing on spine service line, it's adding things to our makeup. One of the things that we've done to help with our weekend admits since we have to have a, you know, two patient average daily census, we do a program called Breakthrough, where we do medical managed withdrawal for opioids, alcohol, polysubstance misuse, and really help in the recovery community. So that's been very interesting to be a part of just, you want to talk about feeling like you're offering holistic care, add that to the mix. Yeah, that's, and so, and do you have a, like a PCP or hospitalist that rounds on these patients or everyone kind of take turns? We have a physician in oversight, and then we have a nurse practitioner that has a ton of experience in that world that administers most of the day to day care. That's great. And now do you guys have an emergency room as well? We do not, we do not have an emergency room or an ICU. Okay. So most of it is scheduled, scheduled patients, what what percent would you say actually utilize the overnight? Quite a few, you know, and there's more and more patients are more and more procedures are going to the, you know, outpatient list and they're not on the inpatient only list. You know, it's a, it's a big question for us. What makes the most sense? Eventually, I think our hands forced for what has to be done on an outpatient basis, but, you know, we, we do, you know, typically keep a total knee for a night, total hip for night, the spine patient, they're usually out within 23 hours, sometimes a day and a half. So it really just, just depends. And, you know, part of that two to two compliance is, you know, having a, you know, two day average stay. So primarily orthopedics, you really have to, you know, watch your mix and what you're doing, making sure you're in compliance at all times. Yep. Yeah. That, that, that does add another layer of compliance. Have you guys considered opening up a separate outpatient only AFC? I think that's a direction we'll go as we add physicians 15 years ago, there are eight orthopedic surgeons in town and right now there's three. So there's a huge deficit and a huge outflow to our nearest larger city, which is Wichita, Kansas, about 45 miles Southeast of us. Yep. Yeah. But it's, I mean, it's, it sounds like providing a really much needed service in the area, which is great. Yeah. I mean, very interesting, Paul, you know, talk to us about how you see the world from your lens, you know, sitting inside one of the largest not-for-profit health systems in the country, in a market that's heavily competitive, right. With some of the most well-regarded academic institutions in the country, you know, Stanford, UC, obviously, you know, you've got a lot on your plate, I'm sure, you know, talk to us what it's like managing what a 90 physician department, how do you recruit, how do you manage, how do you incentivize given, you know, these docs must be getting pulled from all different directions. Yeah, it's a different complexity in terms of the management structure and how things work than an independent practice. And I've been with Sutter now for a little over a year and a half, and it's gone through a major restructure. I was there for two months when they announced the restructure, which is what everybody wants to hear in their first three months of employment. And it took the organization and divided it into five markets, and those are geographic markets. And the market that I'm in is the greater Silicon Valley market. And it goes from southern San Francisco down for about an hour and a half down to Santa Cruz on the Oceanside, through San Jose, up around the East Bay of San Francisco to Dublin and Pleasanton. So that's the kind of area that I have. And within NMS, the entity is 184 providers. In California, hospitals cannot employ physicians. So what it is, the health system of Sutter is broken into those five markets, and each market has a medical group and a foundation. The medical group employs the physicians. The foundation employs everybody else. What is interesting within the Silicon Valley market is there's only one hospital. We have the fewest hospitals, but also one of the largest populations of any of the markets within Sutter. So that's an interesting challenge when it comes to our neurosurgical side and those cases for us. My management as the director is I oversee all the operations for the market. I have a service line executive that I report to that reports to a COO for the market, who reports to a CEO for the market, who then reports to the CEO for the organization. All of us have a dyad partner on the physician side. So I have a dyad for each of the departments that I oversee, neurosurgery, podiatry, PM&R, pain management, orthopedics, sports medicine that I partner with. So there's a tight niche between the physicians and the foundation. We have not mergered or acquired a practice in probably seven, eight years since the last acquisition of a practice. Most of the providers that join us now are coming as individual providers that we're hiring because there's a need. Some of those are new grads. Some of them are migrating over from independent practices or other facilities, because as you said, it's a really competitive market in our area. I'm trying to remember what the other question was. Yeah, no, I think you gave us a great backdrop. I guess talk to us a little bit about how you attract and recruit in such a competitive market and what differentiates Sutter relative to some of the other big foundations that are out there. Part of it is pay structure. Some of the contracting that we do with the physicians and the PSAs that the physicians and the medical group has with the hospital side allows for a relatively decent compensation compared to some other practices in the area. Other aspects that are nice is they have very little management component that they need to do. There's plenty of managers, management, administration around. The different areas are segmented very well, so they can concentrate on doing patient care. If they want to get involved in the administrative side, they by all means can, but a lot of them are in this type of a setting because they do not want that or they're looking for kind of that balance for them that they see that the hospital and the system might be able to provide them. The one thing that is a definite drawback being in a system like this as opposed to independent practice is the incredible bureaucracy that is involved. For me to move processes forward, I've been working on one acquisition of an item for the neurosurgery side for over a year right now because I have had to go through five committees and then the supply chain people kiboshed it and now I had to start that whole process back over again. We have a pharmacy and therapeutic committee that told us that we should stop using VSCO supplements because they're ineffective. That created quite a stir and our physicians didn't necessarily agree with that, so there is some political aspects that are quite a bit more challenging in this type of a setting than there would be in a physician-owned, operated, and delegated system. How does it work with regards to the surgeries? If you only have one hospital in that region, are there outpatient surgery centers as well? There are, but we do have quite a few physicians that go to non-sutter hospitals, which is a major point of contention right now. One of my major projects in the area this year is the repatriation of surgical cases. Our sports medicine department does 98% of their cases outside of the Sutter system. Gaining those back into the system would be a huge benefit for us. The physicians have quite a bit of leverage in that case because the system would like to, economies of scale, they're looking at consolidating implants. I know everybody on this panel knows how much physicians want to change the implants that they use and follow what an administrator on the enterprise system level decides for them to use. The providers are using some of that leverage on repatriation saying, hey, if we aren't able to use our implants, why would we come back into the Sutter fold for these cases? Joint venture is an issue in California. With ASCs, Sutter in the Silicon Valley owns three ASCs. None of them are joint ventured, which is another reason some of the surgeons go outside the system. Until recently, that hasn't been a major drive on Sutter's part to repatriate, bring those cases back in. But because of the changing healthcare landscape, the market, reimbursement, there's a big emphasis for pulling those cases back into the system and generating that revenue to help support growth across the organization. Yeah, that makes sense. Now, can physicians in California, the physicians can own the ASCs, they just can't own it in partnership with the hospitals? No, they can own it. You are allowed to have joint ventures. The challenge for us has been the way they want to do the joint venture. Since they're all part of the medical group, that includes then primary care, infectious disease. Any physician that works within the system within Silicon Valley is part of the Silicon Valley or what was actually Palo Alto Medical Group. They have that shared savings and in a similar model to an independent practice where they have the shared margin that they can spread across. The issue becomes as a joint venture, the surgeons want the medical group to be the joint venture party, which means all the primary cares, everybody would be part of the joint venture. It becomes a stark law issue because then if those primary cares are referring to the surgeons that are also part of the joint venture, we have legal issues. So, our general counsel has been working on how best to approach that. You have to spin them out into a separate entity, yeah. Yes, so there's some challenges that occur when you're that large of an organization and you get on the radar of the attorney general for the state rather quickly because of the amounts of money moving. I believe there's new legislation that's just taking effect, I think April 1st this year in California, right? That's going to review all healthcare transactions by the attorney general. It'll be interesting to see how that impacts these types of initiatives. Yeah, California leads the way with some interesting initiatives like their $25 an hour minimum wage for healthcare workers. And that doesn't matter, that's any healthcare worker, your front desk, even what they found out that they didn't realize is the healthcare workers in the Department of Health and Human Services for the state are now $25 an hour minimum wage. Our environmental services, the people that work in the cafeteria, it's adding a significant amount of cost to the labor side. And the independent practices have been able to be excluded from that for a couple of years. But when you're that large health system, they're on top of that for us. Yeah, well, this is fascinating. Well, Allison, talk to us a little bit about in your group, how you've been able to manage the ASC environment, given your market also has some complexity around CONs. Well, so happy you asked. The answer to that question would have been completely different exactly a year ago. So North Carolina is a CON state. We have been successful in a few single specialty ASCs that we own and manage. And then in other geographies where maybe a CON was not awarded to us, or there was an existing saturation of that need, our individual physicians have invested in ones that are managed by other large national companies and JVs with hospitals, et cetera, et cetera. However, due to a decade of work by practices, associations, lobbyists, government officials, last March, North Carolina is on a path for relief with Certificate of Need. So in two years, we will be able to open ASCs in counties with over 125,000 residents. And so that is perfectly aligned with where our offices are. It opens up about 12 counties and we are ready. That's great. We'll be ready to go. You have a sense of what percentage of your surgeries you think you could move to an ASC? Well, we're already doing a lot of surgeries in the ASC. Almost all of them, we've moved appropriately to the ASC. However, we would enjoy 100% ownership of said ASCs. Yeah, that sounds like a great strategy. And then from an ancillary perspective, have you guys pretty much built out the full suite of ancillaries or is there anything you think you still could build out? So we have a very robust therapy ancillary. We can own therapy offices in North Carolina. We have almost 500 employees and about 30 therapy offices. We have continued with MRI and advanced imaging. CON, we'll have some reform on that a year after the ASC. So we still have to apply and be awarded CONs for MRI. We've dabbled a little bit in the remote patient monitoring, kind of gone back and forth with that. And we do have an in-house lab. And so that was something that we were able to scale based on this merger. We would not have made the capital investment in that on each of our own. So I don't see anything huge on the radar. We are continuing with just being orthopedics and pain management, have strayed away from other specialties, have actually pulled back and divested from some other kind of parallel specialties and pulled back to more just orthopedics and pain in our strategy. And as far as completely new ancillaries from scratch, no, we're really just following our opportunity for ASCs in the next two years. That's great. And do you envision at some point you start to extend across state lines? That's exciting. Obviously, those payer contracts might not carry over, but you can still bring a lot of the back office leverage. That's exactly right. Yeah. Yeah, that's great. Anthony, talk to us a little bit about what you've learned through your process and maybe bringing all these groups together and the challenges. What, if anything, might you do differently or things that you've learned that you maybe wish you knew when you started the process? Well, I'd say for the organization as a whole, I think we've learned the variation in how markets kind of drive certain things. I mean, we're in all the major metropolitan areas except San Antonio. And so with that being said, there's cost differences from staff and employees that divisions pay retrospectively overall. So that's kind of changed how we do our managed service organization as to kind of where we go and source employees and things of that nature. I think we probably would have picked up on some of those trends a little bit faster if we'd have known. I think the relationships that each division has specifically with their organizations, meaning their hospital ownerships and things like that, it kind of limits us, I would say, kind of how we can grow and expand our ancillaries, like we can't do certain things because of JD relationships. I don't think it holds back any division specifically, but it ultimately doesn't allow for the level of expansion that we possibly could have otherwise. We've not embarked on ASCs to that nature because of the fact that four of the divisions have hospital relationships that are very strong. I mean, some of the top hospitals in the country year over year in Beckers. And so I think that some of those things kind of ultimately as things progress, I think there is opportunity. We're not a certificate of need state. So ultimately, you know, the competitive nature of what goes on around the markets is very strong. And so I think those are kind of some of the things that you kind of got to be aware of. Yeah, yeah. I mean, if you had unlimited capital right now, where do you think you would make investment? I think for us, you know, depending upon kind of non-compete issues and things of that nature, it would probably be in the ASC space. I mean, we do a lot of business and a lot of volume. But, you know, some of the legacy relationships, you know, the hospitals have been, you know, these relationships have been good for these providers, but selfishly, you know, there's a lot of revenue to be had in that swing. You know, going to that and being wholly owned, you know, as large as we are, we're seeing kind of how much these relationships with these payers can grow. And so in leveraging some of that through that, you know, side of care. Yeah, yeah, no, that makes sense. I mean, now, in some of these instances, are they physician-owned hospitals or for the most part? All of these are physician-owned. Yeah, all are physician-owned. All four have respective relationships with physician-owned hospitals. JVs with the large entity in the system, in the respective market. Got it, so they're, yeah, so they're enjoying some of the benefits of that physician ownership, but then it's the question of at what point do you kind of get ahead of where the puck's heading and kind of move to an outpatient surgical model? Yeah, that's interesting. I mean, you and Chris are kind of in the same boat on that one, thinking through, you know, how much do you kind of enjoy the fruits of that physician-owned hospital versus kind of invest in the AAC, knowing that you might take a little bit of a rate cut to begin with, but perhaps it's more of a long-term, you know, stability opportunity, right? So I think- Yeah, and I think it'll happen once, if the hand is ever forced, you know, but it just hasn't been forced like that here in Texas. You know, a lot of these hospitals have, you know, suites where they can turn them on tomorrow and be an AAC through those JV relationships as well. And so I think, you know, there's certain dynamics that are at play, but I think that's one of the things, if I had a, you know, the ability to wave a wand and make some things happen, that's what I would do. Yeah. Yeah, Chris, from your perspective, if you had unlimited capital, where would you put it right now? I think just structuring our backbones a little bit better. So as we're looking at what are the growth areas we can hit, none of it matters if we're not great at collecting what we should be paid. And, you know, when you talk about just basic things of, you know, how long stuff's hung up in AR, some of those business office functions, just kind of broadening our abilities there to just have a great experience. There's a lot of technology that because of our makeup, we can't take advantage of. So when the orthopedic practices are independent and treated as a separate entity as a hospital, the hospital investing dollars in front end, you know, patient communication, and marketing and things like that, doesn't make a lot of sense because they got to be at the ortho level first, right? So kind of marrying those, whether it's through, you know, PSA structures or MSO or whatever the case may be, where we can have just some more insight to what's going on at those practices and help them out a little bit better. And I think those are the things that would be exciting as we're bringing in new physicians that aren't attached to either of those clinics right now, what are the things that we can do a great job of helping them out so they don't have the administrative burden on their hands so they can pass the buck on that and just take care of patients. So I think just strengthening our infrastructure to be able to do those things would be the most practical place to spend dollars. That's great. Let's talk a little bit about value-based care. So Paul, you know, you're in a market that's got a ton of capitation, right? And a lot of fully capitated models. How are you guys thinking about, you know, those types of value-based care arrangements? Do you guys participate in capitation arrangements? Do you guys have your own Knox Keene? How do you guys think about that? We do, and we have our own Medicare Advantage capitated model and trying to compete with Kaiser. It's a growing area for us. So value-based care, the providers that we have aren't necessarily too advanced on that or too interested in some of those things. They'd rather kind of see things slow down. Our administrative side, contracting side, we're working with various entities to try and develop some more integrated plans with them that are more than a race to the bottom, like a BPCI or a CJR-type program. We'd like to see more holistic kind of things that we're looking at. And with the healthcare system, you can do that. If we're looking at just the neuromusculoskeletal side, value-based care, it's going to be a while before it really fully develops into what we have. We were looking at some markets nearby that are losing money on Medicare total joints. We're not right now. So the incentives for us to get pushed into more of that value-based care are different out in our area. We just don't have the same drive for that outside of more of the holistic capitated patients that we have. Yeah, but there must be a subset of your population where you're just getting a fix per member per month? Yes, yeah, we do have a certain number of people that are within our own HMO plan, similar to a Kaiser plan, but that is a relatively small segment for us still. Kaiser really owns that market. And we have a relatively high Medicare volume, but we also being in my market in particular is a relatively high commercial base because in the Silicon Valley, when you're looking at Palo Alto, Sunnyvale, we have Google and Microsoft, Facebook, a lot of those that are even self-insured. Our value-based care is more direct to the employer contracting that we're looking at. That's great. Allison, what are you guys doing? What are you guys doing around shared savings type arrangements? So this is something that's moved from kind of strategy to tactical implementation in 2024. So last year, Merge Ortho announced a collaboration with Ortho Carolina called The Hive. It's a three-party joint venture with SCA Health that is obviously part of Optum. They're bringing the data analytics, claims management, kind of scorecard, forward-facing results aspect of what we've built. And obviously, Emerge and Ortho Carolina are bringing the clinicians and the infrastructure. So North Carolina is very unique. Between the two practices, we see almost 60% of the orthopedic spend of North Carolina. So that has positioned us to be able to start a path to take risk on a population level on the MSK spend. And both practices are very intentional in making sure all the employers and insurance companies of North Carolina are completely educated on what's going on here. I know my hospital friends probably won't like what I'm about to say, but it is drastic. The outcomes related to financial benefit of independent orthopedists compared to those that are embedded in the hospital system. And we are on a path to make sure that is crystal clear and stay tuned for announcements over the next couple of years to come. That's exciting. That's exciting. Is this kind of the first of its kind that you're aware of in the country? Yes, that we do have the JV with SCA. We realized that is a for-profit global company, but it will be the first of its kind that is not primary based on external capital. Wow, that's exciting. And do you find that of your size and scale is capital a deterrent to growth or you feel like you have what you need? We have what we need. I mean, we've got great banking relationships, like exceptional banking relationships. It's not like there's any limit to access to capital. It's just that capital is very expensive. It takes a lot of collaboration for everybody to sign on the line with a personal guarantee if it's something outside of our practice. We also, just as any orthopedic practice, have 30-year-olds that are ramping up with hundreds of thousands of dollars of student debt to people who are looking for external investments and places to put money, to people that are ramping down and are looking to sell the house and move into a post-retirement static income environment. So it would be hard for us to take a huge venture like that, divide it by a certain denominator and have that be an even growth. So we've found external vehicles like this partnership with OrthoCarolina. We are also in a partnership with OrthoIndian ProLiant Surgeons to other large practices in the United States with Pelto Health Partners. That is an external investment to build value with independent orthopedists. And where those can be more healthcare companies, Emerge Ortho is primarily a physician practice, practicing medicine and on fee-for-service arrangements. That's great. Last question I'll tee it up for anyone is, is anyone or any of your groups doing anything interesting in AI? So I'll lead because I don't have much to share. We spent a lot of time in 2023. Oh my gosh, so many hours on demos with numerous coding tools, some authorizations tools. We have some dictation platforms that offer a bit of it. I get mixed reviews on those, but that's fine. I've mixed opinions that are giving me those. I did not personally see anyone ready for Emerge Ortho to go all in on that front. I am watching and intrigued by some of the imaging functionality I'm seeing out there. I think that's incredibly exciting. I personally love my dermatologist. She's one of my best friends, but to be honest with you, if somebody's reviewing my skin and we're talking about our kids and she's distracted, I'd much rather there be an overread by a computer just to throw it out there. I wouldn't mind the computers over reading images as well. I think it's a great thing to compliment the provider decision-making, just makes us better. But we had it on our plan to invest in a coding tool and it just, we didn't see anybody ready yet. This wasn't, it wasn't there. Yeah. Yeah. Anything Paul, you guys are doing on the system side? Yeah, I agree with what Allison was saying that there's some uses for it. You have to kind of look at what is your goal with using AI and do you really want computers making some of these decisions and taking away some of that interaction with the physician, but can it do some of the low level functions for us? Absolutely. We're using it in terms of chat on our My Health Online app. So it can go back and forth with patients to start with, to get information, to get them headed in the right direction. We're using it for scheduling and we're not all in on it, but we're definitely investigating more growth in that area. And we're going to see quite a bit more AI within Sutter in the next two, three years. Stanford's kind of pushing us on that one. They're really big into AI at this point in time. That's great. Well, I think we're almost out of time and I want to finish with just a couple kind of words of wisdom, maybe some pearls that you guys have. Maybe Anthony, let's start with you, 30 seconds on, for the independent group out there that's considering where to go, what advice do you give them? I'd say really evaluate what your goals are and how that compares to who you're going to partner with. That's one thing here in the state of Texas. I think with the six divisions that came together, all the goals were aligned. And I think that's what kind of spearheads things and makes things go a lot quicker than what you thought. Because in the onset, as much as we integrated, we've integrated to this point, that wasn't the ultimate goal. I think it just morphed into more because of how trusting and how well we were aligned. And I think those are the big components that I'd say is make sure that your goals aligned at the end of what you're trying to accomplish. Thanks, Chris? Yeah, I think the main thing is knowing why you want to be what you want to be and make sure you're all together on how you're going to get there. If you want to be an independent ortho for the rest of your life and don't care to grow a practice and want to be your solo guy, then you're probably going to look to stay that way and maybe throw impediments in the way of doing anything else. If you're wanting to expand practice, expand offering, expand services for the community in which you live, then figure out what you need to put in place to do that. I think just know your why. Paul, what about you? What's your advice for the independent group? Should they just come join the health system or should they stay independent? No, I think you need that variety. I don't think there's a one size fits all. It's all about healthcare and providing care to patients. And there's different models, different ways to do it, different practices. It depends on what the physician wants. If a physician wants to be an independent practice and they enjoy that, they enjoy a little bit more on that entrepreneurial side, they enjoy the administrative aspects, absolutely, that's where they should be. If they want to join a hospital because hospitals can offer some things that are different, so be it. I think there's a place for everything and everybody that way. And it should be more about the healthcare. And this is probably something that would surprise some of the folks on the panel, not Chris, but my employer might not like is one of the things that I think that separates it that needs to be changed is the pay structure and the reimbursement structure. Site neutral payments is something I am 100% behind because that's what creates a lot of the issues for us in terms of true patient care, the payers, value-based care. All of those things could be solved by moving towards a site neutral payment. We're in a building, one of my clinics is in a building off campus. There is a private orthopedic practice in that same building. Not sure why we're in the same building, they're on the first floor, we're on the third floor. By way of roundabout, I can back of the napkin math say that we're paid almost twice what they are for doing the exact same thing. That to me is why we have a broken healthcare system and why Medicare is struggling. We could solve some of those things. And I think we just have a lot happier patients, a lot happier providers, and a lot happier market. Well, that's definitely food for the next one. Allison, what's your last part of this? Just to bring home what Paul just said, I have an MRI downstairs and I can see through that window, a hospital across the parking lot. And it is three times more for the exact same MRI across the way. So self-insured employers are paying that, your Medicaid, state funds are paying that and Medicare is paying that. Well, really appreciate it, Allison, Paul, Chris, Anthony, you guys are fantastic. Jessica, thank you as always for collating this and thanks to the whole team at AOE. Really great discussion. Please tune in for the upcoming webinar in March on examining private equity. And then of course the April culminating event at the Evolve conference. So really, really exciting times and great to bring all these perspectives together. Please feel free to reach out to the panelists. If you guys hear with any follow-up questions, feel free to reach out to me or Jessica and we'll just keep the dialogue going. Thanks so much. Thanks everyone for joining us and thanks for hosting Andy too. Thank you. Thanks.

healthcare industry

independent practices

partnerships

joint ventures

physician practices

value-based care

capital investment

shared savings arrangements

AI in practice management

practice models