Danilo D’Aprile 9:51
I think those are really good points. You know, it’s certainly commendable for you and for Mount Sinai as a system to be forward-thinking. In realizing that payer pressures would be targeting the health system and formulating a strategy to tackle that. So it’s certainly commendable. There were two points that you made that I wanted to hone in on real quick, and that was, I just want your opinion on a recent VMG report that came out. It’s health system leader expectations for 2025 there was one key takeaway, and it says that 63% of health system leaders selected outpatient surgery as a potential area where they would consider a joint venture partner. The interesting piece of this is that only 28% of them would consider a private equity partnership. So what are your thoughts about that? You know that important caveat is that while there’s an overwhelming majority that are considering a partner to develop outpatient surgery initiatives, only 28% would consider a private equity backed part.
Brent Stackhouse 11:04
So first, let me address why is such an overwhelming percent of leadership comfortable with working with a third party in the development of ambulatory surgery centers? I think there’s a recognition that ambulatory surgery centers, and I hope this doesn’t sound pejorative, are factories, and their factories in the sense that they are focused on the delivery of a very specific thing, day in and day out, with a real eye towards safety and efficiency. And hospitals, writ large, are not known for being very good at efficiency. And so I think the ability to bring in an outside partner with the experience of building ambulatory surgery centers, which I mean, if you think about it, hospitals don’t add new ORS that frequently, whereas ambulatory surgery management companies build lots and lots of operating rooms all of the time. So you have the expertise around actually developing these things, the expertise of evaluating, buying these things, that is just inherently not the expertise of a hospital of any size. The other part of it is on operational efficiency. And there is often and perhaps a misperception that hospital operating rooms do not turn over as quickly as they could, and that an operating room may see, you know, 15 different cases in the course of a day of eight different service lines, whereas an able to wear surgery center sometimes sees the same case, 15, 20, 50 times in the day. And so that entire team, the entire supply chain management, that Materials Manager, I mean, they’re all super, super focused on doing that one thing and doing it really well, and they’re able to do it very, very efficiently, turn it over. And that inherently appeals to surgeons, because they want to be able to go and have an efficient experience. They want to show up at seven, get their cases done as quickly and as safely as they can, so they can then move on to whatever is next. They don’t want to be waiting around because there’s some sort of snafu of turning the room over from, you know, orthopedics to ophthalmology or what have you so, I think the the recognition that their subject matter expertise that can be brought in and that that helps with the reputation of that asset to appeal to the key stakeholders, which are not only the investors, but also the the users, the physicians themselves, as well as the patients. You know, if, if I had to go in for cataract surgery, I want to go to a place that’s done it thousands and thousands and thousands of times, not the place that’s done it a couple hundred times. And so I think that’s why you see such a willingness. Why are they uncomfortable with private equity? I think there is a terrible stigma over non private equity in healthcare right now. I think there’s a lot of bad press out there, which is very well deserved. But I think the fundamental problem boils down to this. Private equity is a big, vague term. It is someone else’s money and someone else’s money that’s not at a publicly traded company. It has come to be meant as a shorthand way to describe profiteering and healthcare. And so I think when you ask the question about private equity, it’s almost as if you’re asking, Are you comfortable profiteering, profiteering in healthcare? Who is going to answer that? I think if the question was framed as, would you consider taking outside capital, which is really what private equity is, the answer would be different. Now let me tell you about our experience at Sinai, and specifically in working with Merritt, we made that decision in 2018 to go and build a portfolio of ambulatory surgery centers that met the strategic needs of our health system and our various and Sundar clinical departments. We went and did a national request for proposals, and we heard from publicly traded surgery management companies, privately held surgery management companies, regional surgical surgical management companies, the entire spectrum responded to the RFP, one of the things that I’d experienced, because I had a portfolio. By the time we did this in 2010 I think I had about 10 or 11 surgery centers with a variety. Of different management companies of all different shapes and sizes. I had started to see a couple things. One was that the large, you know, 100, 200, 300 surgery center companies, some of which were private equity held, some which were publicly traded, had a lot of turnover on their team, and that every two, three years, it was a completely different person in my market who is my counterpart. And what I started to see was a lack of continuity, where the person who I was dealing with three years ago made commitments that the person I was dealing with today didn’t feel any responsibility to honor. And so for me, one of the things that I was uncomfortable with is that Mount Sinai has been around for over 150 years. We hope to be around for another 150 years. We are not going anywhere. These large company team members were only spending a short period of time in my market before they moved on either to higher degrees of leadership in that company or moved on to another company entirely. So something was really important for me is that with us having such continuity in our market, I wanted our partner to have that kind of continuity in the market, so there was a sense of ownership over the performance of these surgery centers, not only from a financial and operational standpoint, but also from a safety standpoint, so that we could be comfortable that there was an alignment from a mission standpoint, between us and our joint venture partner, and I’ll tell you, I’ve worked on join ventures outside of Ambulatory Surgery. We have joint venture partners other than Merritt that we work with on other types of care delivery companies. That notion of alignment of mission and alignment of culture is one of the biggest drivers in our selection process of who we work with. And so to bring it back to your question, when it comes to that reluctance around working with private equity, I think there’s an increasing willingness to embrace outside capital. The question is, is, who are the holders of that outside capital? What is their degree of control and responsibility, and how are you structuring your relationship so that if you are working with a company that may eventually be bought by someone else, that there is a structure in the relationship to ensure that whoever comes next will be able to maintain and honor the expectations of that relationship, more so than just the legal terms, more So than just the financial projections, but also the culture between the two organizations. That’s a very hard thing to do. We’re in the early stages of it, so we’ll see if we’ve done a good job in the next several years. But I know that some of our partners are not Merritt necessarily, but I know that some of our partners will eventually be bought private equity companies invest in operating entities with the explicit goal of selling those operating entities. I’m not going to kid myself that they’re going to hold these things in perpetuity. They’re not. So how do we structure our relationship in light of that to ensure that our goals, again, from a safety standpoint, from a financial standpoint, but from a cultural standpoint, are able to maintain that alignment going forward.
Danilo D’Aprile 18:01
Well, thank you for that, because, you know, I think you touched on some really, really excellent points. And number one, how complex healthcare partnerships can be and and I think it does go to the core of what you said, you know, the role of alignment of vision and trust between two partners is key. And we talk about continuity of care a lot, and this is, in a sense, continuity of a partnership where you there isn’t a lot of turnover, and you have consistency, and that’s how you maintain that continuity and that alignment of vision through the partnership. So really good points. Thank you for those answers. I just wanted to move on to another question, which regarding ambulatory surgery centers, and they’ve obviously become a key part of the healthcare landscape that we’re in today. What was the strategic vision behind developing ASC is as part of this partnership. And you know, in terms of Mount Sinai and Merritt, the peak point joint venture, peak point partners, and how does it align with the broader healthcare trends that we’re seeing evolve every day?
Brent Stackhouse 19:15
So I actually think you know your last question really delves into this nicely. When we were developing the relationship with Merritt. We built a surgery center together prior to cyanide changing its ambulatory surgery strategy, so we had a surgery center that was outside of our immediate market. Mount Sinai was a 20% shareholder in it. Merritt was the development partner, so I had a chance to work with you and your team there, before we made that jump to say we want a single, exclusive development and management partner for ambulatory surgery to cover our entire market. When we embarked on that together, that issue of alignment was able to be addressed by building a joint venture, hold co so. We built peak point partners, where Mount Sinai and Merritt are co owners of peak point partners, and peak point partners goes and invests in the surgery centers. So Mount Sinai is not an individual shareholder at Marrison, individual shareholder peak point partners the shareholder which was different than that first surgery center that we did together and different than the portfolio, the legacy portfolio that we had by building that joint venture, hold co it created a ton of alignment, financially, legally, but also culturally, Merritts interests in this market through P point partners are aligned with Mount Sinai’s in terms of governance, financial and from a regulatory standpoint, so we’re able to do things like joint payer contracting, and we’re able to navigate anti trust issues by virtue of using the hold CO and that gave everyone on my team a lot of confidence that we weren’t going to wander down some path that could get us in trouble with the FTC. And we have seen that in other markets where other hospitals have done business with private equity backed care delivery companies, and they have made decisions which have caused the ire of the STC. We were very concerned about that. In this market, we did not want to do anything that would remotely give the impression of us, you know, playing games with, you know, insurance negotiations, insurance contract negotiation, what have you. And so that joint venture, hold co gives us a degree of comfort that we’re able to navigate, you know, rate negotiation without creating any issues around antitrust or collusion or anything else. So that was one benefit and one reason for developing the joint venture. The other is it creates a platform in our market where whatever Merritt chooses to do, whatever our joint venture management development partner chooses to do in other markets, it is outside of our relationship. Everything kind of stops at the hold CO. So ultimately, you know, if our joint venture partner decided they want to go and and sell to, you know, private equity or go public or what have you, or sell to Optum, which seems to be a very popular thing these days, that would soften the impact in our market, in our relationship with our portfolio companies, that that hold co kind of creates sort of an imaginary line of control for our portfolio of the Holt CO and so again, I try to build joint venture agreements that are thinking 15 to 20 years ahead. I joke with our partners. By the time some of these terms come to fruition. I will no longer work here, and you will no longer work here, but I want to make sure whoever comes after me is inheriting a legal structure that foresaw and was able to anticipate some of the things that might come down the line. And so if Merritt chooses in the next 15 to 20 years to go and sell. We were able to structure our hold co operating agreement to protect the interests of the health system so that, you know, these individual portfolio companies couldn’t be sort of sold out from underneath us, or anything like that. So it gave us sort of an additional level of comfort and security that we were looking at a long term relationship that may survive any transactions that might happen with our joint venture partner. The other big one was financial and so as a nonprofit health system, we have bonds, we have credit rating agencies. There’s a lot of concern and scrutiny over the assets and the balance sheet. When you’re trying to build ambulatory surgery centers, it is customary to get commercial bank funding to finance the construction or acquisition of those portfolio companies. If every time we needed to build an ambulatory surgery center, I need to go get the financials of the health system and to get the sign off of the trustees and the treasure of the health system in order to guarantee loans, it would be this unbelievably cumbersome, very, very time consuming process, and potentially may not be successful. And so we built this for profit hold code together. We created peak point partners as a way to create something that had its own credit so they could borrow money when needed to be able to finance the construction, and to be able to guarantee loans and guarantee leases without having to encumber this $9 billion health system that we work for. And so there’s been a lot of strategic benefit there that, frankly, I didn’t even foresee when we were building it, that today has really served us well, and so peak point partners created for us the ability to insulate ourselves for, you know, future circumstances that we can’t anticipate, to be able to be nimble financially, to be able to. Have this portfolio be successful in the short term as we grow quickly, and that ultimately provided some regulatory cushion to make sure that we were able to operate effectively, but also within the context of New York State law and federal healthcare law.
Danilo D’Aprile 25:21
All really good points. And, you know, reflecting on the financial side of the venture, what have been some of the key factors you mentioned some — but what are some key factors in ensuring the sustainability and profitability of the ASCs? Are there any particular strategies you’d recommend to other healthcare organizations that are pursuing similar models, because it’s grown exponentially, especially in the past year, we’re seeing a lot of interest on health systems side to develop these surgery centers with a partner. So what are some of the key strategies that other health system leaders should take away when considering an ASC strategy?
Brent Stackhouse 25:58
So the biggest — there are two things that have been eye opening and unexpected in the development of this as a reminder, our legacy portfolio of ambulatory surgery centers was almost exclusively doctors who are not employees of our health system. They worked for large group practices. They worked independently. Some worked for other hospitals, competitors of ours, and so because they were owners in those surgery centers, and they had a lot of autonomy, they were all focused on the goal of productivity, safety and the financial return, because they put their own money in and they wanted to get a return on that investment. When we started working on the strategic growth plan of Ambulatory Surgery, the goal is to start working with Mount Sinai doctors, Mount Sinai surgeons and Mount Sinai’s patients in these ambulatory surgery centers. And what I didn’t recognize was that culturally, physicians who work at academic medical centers are different, often than independent community docs. The motivations are different. The needs are different, their priorities are different. And that’s not, you know, to say inherently bad or wrong, quite the opposite. It’s just different. And so I found that we’ve had to invest more time around scheduling than I ever anticipated, and that aligning the scheduling systems of the hospital with the surgery center was absolutely critical, because the friction that exists by which a academic medical center doctor has to go through to the bureaucracy of the scheduling team to be able to move patients from one setting to another is totally different than for a community doctor who can just, you know, talk to the front desk and say, I’m doing this today. And so we had to reprioritize. What the goals are? We too invest a lot of time in navigating the bureaucracy of the health system. And again, I don’t want bureaucracy to sound pejorative. We’re a $9 billion organization with 155 locations and 42,000 locations and 42,000 employees. We need bureaucracy to ensure the safety of our patients. We need bureaucracy to ensure that we have alignment across this massive organization. So I think bureaucracy is often used as a pejorative term. I don’t mean to imply that here those bureaucracies exist, and I think it required a lot more time, energy and effort than we envisioned. And you know, I think we’re still working on today how to perfect the communication between the ambulatory surgery team and the hospital teams, where they are pulled in a lot of directions and are fundamentally under-resourced, and therefore require a lot more hand holding and a lot more support in order to be effective. The other big thing that I think was sort of unexpected in making this transition from the original, sort of legacy platform to this new strategy in the joint venture with Merritt in the development of Ambulatory Surgery, that I think was somewhat unexpected was that the profit motivation that we saw with community doctors is not the number one priority for our employed physicians, and that there was resistance among some members of leadership to allow their physicians to have ownership in These businesses. And I think that has been something that we have continued to work through on every single surgery center that we’ve developed any time we’re working with a department or working with an office or working with a hospital within the Mount Sinai Health System, to really understand what their needs are and what their concerns are, to ensure that there is alignment, so the individuals who are using the surgery center understand what the goals and the priorities are and use it effectively. And that isn’t necessarily because they’re going to write a check and they’re going to be focused on the return on that investment. That could be for any number of other reasons, and so I think we’ve had to invest a lot. Time in the development of surgery centers to ensure that all of the stakeholders needs and goals are being met. Whereas, I think historically, with their legacy portfolio, it was very straightforward. They were coming in, they were writing a check, they were going to have a place that they could go, that they knew they’d have block time, they knew the team, they liked the coffee, and that they would have a return on that investment, and that is just not the case with an academic medical center, and requires a lot more hand holding in the development phase.
Danilo D’Aprile 30:27
Yeah, so I want to expand on that topic, because traditionally, speaking, you know, employed surgeons are not allowed to have ownership in ambulatory surgery centers. I know from personal experience working with another company, it certainly was a hard stop and absolutely not allowed for surgeons to have any sort of equity stake in a JV ASC. So to that point, and I know you mentioned earlier and alluded to the fact that, you know it is a great recruitment and retention strategy on the health system side. But what would you say to a health system, considering this type of, you know, endeavoring into a an ASC strategy, who has employed physicians, who is looking at their financials and is reluctant to offer employed physicians the opportunity to invest because they don’t want those cases being moved out of the hospital. What would you say to them?
Brent Stackhouse 31:28
Yeah, so I think, I think there are two components to it. I think one is a concern around the cannibalization of cases, and I think the other is the concern around your employees having ownership in a shared asset. And I think it’s important to sort of bifurcate those two concerns, because they’re fundamentally different. So when it comes around the cannibalization of business, I think it’s an absolute legitimate one. And when I was mentioning earlier, when you set off on this strategy, you have to recognize that the timelines for these ambulatory surgery centers are long. It takes a period of time to get regulatory approval. It takes a period of time to build them. It takes a period of time for them to ramp up and to sort of their operating capacity. Unfortunately, during that period of time, things change within the hospital, strategies change. Members of leadership change. And so what we saw was, you know, we set off on a goal in 2018 that came to first in 2021 and by 2022 we had people who are new to the organization saying, Well, why did we do this? And so there’s been continuity on the Mount Sinai Ventures team. So it’s very easy for us to, you know, remind people what the original business plans were and what the goals were, and to be able to demonstrate how we’re still meeting those goals or aligning those goals, even though aspects of the system strategy has changed. And so that documentation, that communication, I think, is really critical to ensure that institutional memory is not lost around why these decisions were being made. When you’re looking at an opportunity for an ambulatory surgery center, and it’s in your market where you have existing facilities, whether those are office based procedural rooms or hospital outpatient departments or inpatient hospital resources, it’s really important to be clear on what the goal of that ambulatory surgery center is. Is it taking low acuity business out of the inpatient setting, out of the hospital outpatient department setting, and bringing it into a lower cost of care in order to be able to meet the goals of the payers in your market, of the patients in your market who are looking to be able to get access to care for a lower cost, and therefore you are more competitive than the other entities by virtue having the sample Tory surgery center. That’s the case, then you need to be very good at documenting how that occurs over time. The problem, and where these two issues are linked is that if your employed surgeon has ownership in the surgery center, they have a financial incentive to bring every eligible case into the ambulatory surgery center. That is fundamentally good for the surgery center, but as your question implies, may not be good to the bottom line of the health system in the short term, and so you need to be judicious about the provider selection, and you need to know that this is going to occur. And you need to be really clear on why. When you set out on this strategy, you’re comfortable with that occurring. So in Mount Sinai, we knew would be moving orthopedic cases out of the hospital setting and into the ambulatory surgery center, which would then free up those operating rooms for higher acuity care, of which we have ever growing demand for. Therefore, we were back filling that movement of cases out of the hospital into the ambulatory surgery center, and this is why we were all comfortable with it, and why we ultimately made that decision. Now, unfortunately. Three, if a global pandemic happens and all of your elective cases go away, and everyone starts looking and saying, wait a second, we now have room in our ORs. Why did we move all the orthopedic surgeries out of our hospital and into our ambulatory surgery center? Then that’s a tricky conversation to have. Now, there’s certainly justification of it. And with the recovery from the COVID pandemic, we’ve been able to realign our vision from the original strategy. But there were certainly moments where people were saying, why did we do this? And clearly we were not anticipating a massive dip in surgical demand as a result of the pandemic. So where we started this business and where I think I’d make a recommendation to people who are considering this is to look at how ambulatory surgery is able to create markets for you where you don’t have one. And so I think it’s very tricky to create policies and to create alignment and to create a culture to navigate that fear of cannibalization. And so one thing that we did early on was we began building ambulatory surgery centers in markets where we didn’t have facilities, and so we have a network of Internal Medicine primary care doctors across the greater New York region, where we don’t necessarily have specialists. We don’t have facilities, so we certainly don’t have surgical sub specialists. But as those primary care doctors grow their business and demand increases. These patients are not willing to travel long distances to where our facilities exist, therefore we build ambulatory surgery centers in those markets where we don’t have facilities in order for us to actually create a beachhead around surgical subspecialties. Therefore we work with community doctors to initiate the development of these surgery centers. So we have a platform that is profitable to help them meet their goals as surgeons in their markets, and then that creates a venue by which we can start moving our demand for surgery into those voluntary surgeons offices, who can then use our regional ambulatory surgery center, and then eventually we can start growing our own surgical specialists in that market, because now we have a facility where they can go and do surgery. So that strategy is one that everyone in my health system is comfortable with. There is no risk of cannibalization. It is now creating a new market for us and leveraging the existing community resources of those community based surgeons as and leveraging, you know, Mount Sinai’s reputation, Mount Sinai’s commitment to quality, to give patients a place that they feel safe going for their care that may be an hour or two hours away from the nearest Mount Sinai Hospital, and so that’s how we’ve navigated the cannibalization question on the physician investor question. You know, again, it’s a conversation around policies and it’s a conversation around culture, and we have certain departments where those doctors are not owners in that surgery center, but there is an alignment in terms of the goals and the mission, and there was a comfort level, from a business standpoint, that Barret and Mount Sinai had that when we thought 5000 colonoscopies were going to happen in our joint venture endoscopy center, there was no question whether or not those endoscopies would occur there, even though the GI doctors weren’t necessarily owners, and that took a lot of work between the organization and my organization to get comfortable with it, and it spent a lot of time together, working with those gastroenterologists to ensure that there was that alignment of vision, even though there wasn’t that necessary, you know, financial alignment, where we worked with departments that were comfortable with The physicians having ownership again, recruitment and retention, I think was a big part of the driver of why those departments were comfortable having a policy around physician ownership. But I think as we communicate a lot across Mount Sinai, we need to be careful that if all of a sudden, Mount Sinai strategy changes in five or 10 years. And for some reason, we want to move away from ambulatory surgery. And let’s say, for some reason, we decide that office based surgery is a better setting. That you’re going to have a problem if your employees have ownership in a business that you no longer are prioritizing strategically. And so that level of communication is really important there, so that everyone understands that if we are going to make an investment, then you better be comfortable making a 10 or 15 year commitment, because anything less than that is going to create a lot of instability and potentially a lot of personnel issues if all of a sudden, your employees feel like they’re being abandoned on a investment that they made if they had the understanding the health system was going to be aligned in perpetuity. And so because of that, how we’ve navigated is we are very cautious and very thoughtful about where we make these investments and where we start these developments. And we’re doing. In places where we know that there is a long term vision, there’s a long term commitment, and if there isn’t, then I think we’re very, very reluctant to move forward, because the last thing we want to do is create unforeseen conflict between us and our employees as CO investors and as business partners, five or 10 years from now.
Danilo D’Aprile 40:17
All really good points. And you know, I think we can both agree, peak point partners has been successful. It’s been a successful venture, and it continues to be successful as we grow the portfolio, the AC portfolio, across the greater New York area. Do you foresee any plans to expand the partnership any further? You know, what are the next steps for Mount Sinai ventures in Merritt Healthcare?
Brent Stackhouse 40:43
Yeah, absolutely. I mean, you know, I think number one Mount Sinai, because of the success we’ve had with Merritt in the development joint venture ambulatory surgery centers, we’ve begun to do joint ventures with other management companies in other service areas. I mentioned anesthesia, and we’re looking elsewhere across the care delivery ecosystem to figure out where we would be better suited to partner with the subject matter expert and to bring in outside capital in order to ensure growth and operational efficiency, in order to enable the health system to focus on its key priorities, orthopedic, optimological, oncological, neurological, tertiary and quaternary care, where I see growth in our relationship with Merritt on ambulatory surgery, I think it’s not only horizontally, where we continue to look at building or buying surgery centers across the market, where there’s a strategic value to the health system or a financial one, but also thinking vertically in terms of as this portfolio grows and as we have more and more companies in it, there are certain economies of scale that are achieved that would make sense For us to potentially bring in services in house, rather than to outside vendors. I’ll give you an example revenue cycle management. As we grow Merritt inherently has expertise in surgical revenue cycle management, it would make sense to develop a central business office to handle that across the portfolio, rather than working with a variety of vendors, when, again, that subject matter expertise exists in house and the scale exists that enables us to build it together. I think there are other places that we could be looking and again, not that this is on any sort of strategic roadmap, but we contract with linens companies. We contract with it, consultants. We contract with staffing agencies that potentially, if we have 1015, 20 ambulatory surgery centers, would make sense for us to just do ourselves. And if you look at the large joint venture companies, whether that’s Optum, SCA or USPI or surgery partners, they have all sorts of resources internally that when we only have three or four surgery centers you contract externally from. So I see us growing vertically in that way, and I think there’s a lot of exciting opportunities for us to be able to increase our margin and save on costs and leverage our own expertise by bringing some of those businesses in house. Okay?
Danilo D’Aprile 43:24
And you know, the healthcare landscape is continuing to change at a rapid pace. How do you foresee innovation impacting future ventures in the healthcare space, especially around outpatient care models like ASCs?
Brent Stackhouse 43:39
So, you know, it’s interesting. I get inundated with entrepreneurs approaching me to try to implement their solutions in our ambulatory surgery portfolio. And on the one hand, we’re really well positioned because we are nimble and we’re small to test and pilot and try these solutions. Unlike the health system, which, you know, has a million priorities and is very challenging to adopt innovative technologies if it isn’t a part of the core priorities of the health system. And so, you know, an example is artificial intelligence solutions for scopes to help with detection of polyps in diagnostic colonoscopies. I think it is interesting. I think it could create some differentiation in the market between us and the other endoscopy centers, but at the same point in time, I’m not confident if we have the infrastructure to appropriately assess the safety and the quality of those solutions, to be able to make sure we’re picking not only the best solution in the market, but also the safest solution, and I don’t necessarily mean in terms of patient safety, but in terms of like cyber security as an example. You know, are these solutions able to interface with the. Electronic health record that we have at the surgery center, and so as a big academic medical center with this absolutely massive amount of resources for research, I would think the academic medical center is better positioned to evaluate and choose what is best of breed in the market for a particular type of solution. But at the same point in time, we have a nice little sandbox where we could potentially pilot that. And so I think one of the things that we need to work on and figure out is, what is the relationship between that robust research apparatus of the health system with the nimble focus of the endoscopy center or the orthopedic surgery center, where we can pilot these things. I will, you know, tell you that a lot of our doctors have come and said, Hey, there’s this really exciting thing. We should try it here, because they know it would be really hard and time consuming to get Sinai to try it at, you know, one of our operating rooms on the main hospital campus. I’m very reluctant at this moment to adopt those solutions, but I think there’s an opportunity for us to create that relationship between the research and the evaluation professionals at the health system with the facility that’s able to adopt quickly. And again, have you know solitary focus like to know that you’re only doing total joint replacement or total knee replacement every single day, day in and day out, is a great place to pilot something, but I want to make sure that the quality and the safety and the cybersecurity risk is being managed by people who have that subject matter expertise, and I don’t feel like we have a big enough apparatus across the portfolio of ambulatory surgery centers to do that today. So I think there’s this really exciting opportunity for us to sort of marry the resources of the health system with the portfolio of ambulatory surgery but I think it’s something that needs to be done very thoughtfully and very consciously, cautiously, and we can’t kind of go haphazardly into it. So for now, I am watching and waiting. I will tell you at some of my other portfolio companies that’s part of the legacy portfolio, where we have a small ownership interest and we don’t have any sort of governing control, there’s been a real willingness among those community doctors to pilot solutions, whether that’s virtual reality or artificial intelligence or even in patient payment processing. And, you know, I look to them to see how those go. I’ve seen some successes, I’ve seen some failures, and I think there is a way to do it and a way to do it well, but we’ve not focused our attention yet on how to exactly figure that out.
Danilo D’Aprile 47:43
Really good perspective on that. I think it’s really interesting to think that the surgery centers could potentially get to a point where, you know, we are, on behalf of the hospitals, trialing new equipment technologies, you know, AI driven technologies for the hospitals, but through the ASCs, I think that’s really good perspective. So with only a couple minutes left, I do have two more questions for you, Brent, and one is that you’ve had a front row seat to this transformative project from a leadership perspective, what would you say were the most rewarding aspects of being part of this collaboration between Mount Sinai, and I think it’s the team, and I think it’s the people.
Brent Stackhouse 48:27
You know, I’m very fortunate to work with the experts and professionals at Merritt. It’s really a pleasure being able to work with people who have the same values. Our two organizations are really good at prioritizing the patient first. You know, I worked in investment banking before I came into healthcare, I did not come into it for the money. I came into it because I really wanted to feel that at the end of the day, I did something more than add to the bottom line. And so there is something really miraculous about how we’re able to build a place that sick people go and they leave feeling better like that’s incredible, and they’re putting so much of their faith in us to have created a place that is safe, that is exceptional at our job that has a team of people who are the best at what they do, whether that’s managing insurance, which is big and cumbersome and scary and has a real impact if not managed well, whether that’s cleaning medical instruments to ensure that they are safe and sanitary for the next patient, or if it’s the actual people who are laying hands on patients, from our nurses to our surgeons and our scrub techs. And so to know that when we’re working together and we’re facing a challenge, and we’ve certainly had them over the years, that at the end of the day, we’re both trying to achieve the same thing, which is to make sure that we create a place that people can go to, and day in and day out, get cured. That’s really, really rewarding. And so I feel very fortunate that I get to work with you and your team on that, and that our two organizations really see eye to eye, and regardless of whether or not, you know, we’re negotiating with a landlord, or, you know, getting into it with a vendor over, you know, some payment, or, you know, some issue that happened during the construction process, or what have you. At the end of the day, we’re all trying to achieve the same thing, and that collaborative environment has just been really, really, really rewarding. The other thing I’ll say is that, you know, these organizations like Mount Sinai are very, very large, and have a lot of goals that they’re trying to achieve and a lot of needs that they’re trying to meet. And it’s really exciting to be able to focus on our projects and be able to see them come to fruition so quickly. And I think there’s something really rewarding about our ability to have a vision and an idea and within literally months, make it a reality. And that has been really fun and really exciting. And so I think for people in my position, the ability to get things done in a short amount of time when you are a part of a much larger organization that has to move more cautiously and is unable to be as nimble. For me, has been really enjoyable, and one of the reasons why is transition from, you know, for profit. You know, investment banking, world into public health and into healthcare has been really enjoyable because I get to see the fruit of the work in a short period of time. And I don’t think a lot of people who work in healthcare and certainly in public health often be able to be able to appreciate that
Danilo D’Aprile 52:02
Well, thank you. Thank you for that. Brent, I think I’d certainly echo what you’ve said, and especially when it comes to being patient centric and patient first. And we always strive to do that. That’s certainly a shared goal that we have finally, I know before I had asked you to share, you know, any strategy recommendations for other health systems from a financial perspective, but as a general perspective for healthcare executives and Health Systems considering joint ventures and ASC development, what advice? What? What small piece of advice would you give based on your experience with this partnership?
Brent Stackhouse 52:43
If lots of advice for those who are trying to build this kind of partnership, I see sort of four things. I think, first of all, communication is absolutely key. And as I mentioned earlier, strategies are set, and then everything around the strategy changes. And so I think it’s really important that the people in my position have regular access to executive leadership and invest the time to be able to communicate progress regularly. You know, every time I have a board meeting for Mount Sinai ventures, I always start by explaining why we’re here, and what we’ve done just to make sure that everyone in the room remembers what those strategies were when they were originally set. And so I think the communication component of it’s key. I think the other thing is really important is that the person in my position is incented appropriately. And I worry for my counterparts at other organizations where they are financially incented based upon the financial performance the portfolio company that it becomes harder for them to meet the needs of the health system parent. As a board member and president of the surgery centers, I have a legal fiduciary responsibility to these businesses. Individually, I am not an officer of the Mount Sinai Health System. I do not have a legal fiduciary responsibility to them, but they are my employer. They are my boss. So finding that balance between the goals of the health system and the success of the portfolio company is really tough, and the only way that balance can be struck is through constant communication with leadership. And I think specifically what I mean is there are going to be conflicts, and you want to make sure that the person in my position is able to work collaboratively with leadership to resolve those conflicts. And what you don’t want to happen is the person in my position to either keep those issues to themselves for fear that it’s going to create problems for them with their employer, or don’t bring the issues to leadership of the health system because it’s in the financial best interest of the portfolio company not to. So and I think that incongruence is very, very tricky to manage, and the only way it can be managed is through transparency and constant communication. And I’ll tell you, you’re not a big health system. It has a lot of issues and a lot of priorities, and when things work well, people have the luxury to ignore it. Our portfolio has done really, really well, both financially and operationally, we’ve met a number of our goals. We’ve grown tremendously, and we’ve been very fortunate in that, unfortunately, I need to spend a lot of time reminding leadership that just because it’s going well doesn’t mean I don’t need their attention, and so making sure that you have that venue and it’s set, and all the key stakeholders are there and are aligned in understanding that the goals of the joint venture portfolio are the goals of the health system is really important. I mean, I think just from perspective time, I think really those are the two sort of biggest lessons learned over the period of time here. You know the cultural thing we talked about in terms of alignment between the health system and the joint venture partner. And I can’t underestimate that, but I think we’ve discussed that sufficiently already. But I think, you know, those are the big drivers of how to be successful here, and what I would leave my counterpart at another health system who’s trying to go and replicate what we’ve done here with the kind of three things that they should really prioritize when they’re thinking about embarking on this.
Danilo D’Aprile 56:26
All right. Well, Brent, thank you so much. I really appreciate your insights. You have shown a tremendous amount of experience in this field, and then you’ve been a great partner, and I want to thank you for that, and thank you for coming on the show today. I am inviting you to come back to the podcast at some point, because I’d really like to take another episode and dive into, you know, the operational aspects of our joint venture partnership and how operationally things have evolved and grown, but for now again, thank you. I want to thank our listeners, and please stay tuned for more health talk, insights, podcasts.
Outro 57:17
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