Becker's ASC Review

11 ORTHOPEDICS The debt philosophy for 2 large orthopedic groups By Laura Dyrda O rthopedic practices have options on how much debt to take on as they grow. What is the strategy for some of the largest orthopedic groups in the country? Becker's sought to find out at the 21st Annual Spine, Orthopedic & Pain Management-Driven ASC + e Future of Spine event in June. A panel of leaders including Nicholas Grosso, MD, president of Bethesda, Md.-based e Center for Advanced Orthopaedics, and Adam Berry, CEO of Summit Orthopedics in Minnesota, shared their organizational philosophies during a keynote session. Note: the responses below are lightly edited for clarity. Question: How often do you manage debt in the practice? How do you look at debt? Because one of the challenges that comes with private equity can be a lot of debt in the changing margin environment. Dr. Grosso: Within CAO, the clinical entity, we've negotiated a deal with a large bank for a lending facility of around $32 million. We can do loans to our member divisions for up to whatever we feel comfortable doing, and we'd use a formula based on their [accounts receivable]. We'll loan them without any personal guarantees, just non-recourse loans up to a certain percentage of their AR, and we've been able to use that over the last 10 to 11 years to help groups do build-outs, acquisitions and things like that. We haven't had to have any of our surgeons take recourse loans, so they haven't had to do any personal guarantees. We've never run into where we think we have to enlarge [the lending facility] because over the years groups borrow, they payback and the facility gets replenished and we've not ever felt the need to increase that. Mr. Berry: In Minnesota, people pay off their mortgages way faster than they need to and never get to the 30 years. We've very conservative in that regard. When I first came to the organization, you always had to tap into the line of credit at the end of the year. You're talking about year-end bonuses, you're talking about all of those kinds of things. We haven't touched that in over seven years. We want to stay away from having debt or have as little as possible. When we go out and build new facilities, we have not gotten into the ownership of real estate. We've said instead we want to redeploy our capital on the clinical assets that we're going to have as an organization. When we do a new surgery center or facility or otherwise, we'll take out the debt at the different interest levels that have fluctuated, but we have not gone excessive. A couple of years ago, when private equity was very much the hot ticket item, one of the components there was a debt recapitalization that some of the private investors, or the investment bakers, wanted to sell you on, which was to go out there, leverage your own company up, invest in yourself and take out a huge amount of debt and then just pay yourselves back overtime. It always sounds good at the time, but then that's when interest rates were really low. Our group did not want to do that because they didn't see the benefit of it, and it's a good thing because now when you see these interest rates, what you would've been paying, we're glad that we're staying debt-free. n CMS proposes removing MRI lumbar spine for low back pain measure, outpatient pay bump By Carly Behm C MS' proposed 2025 ASC and hospital outpatient prospective payment system rule includes the removal of the MRI lumbar spine for low back pain. CMS suggested the removal starting in the 2025 reporting period, citing studies that "performance or improvement on the measure did not result in better patient outcomes," the July 10 proposal said. "This finally represents some sort of self awareness for the CMS opaque rule makers," Brian Gantwerker, MD, of the Craniospinal Center of Los Angeles, told Becker's. "For years, physicians have been asking 'Why?' and 'Does this really help our patients?' For over a decade and change we have been clicking boxes and obliging CMS' capricious and unrestrained approach to interfering in patient care with unfounded mandates and quality measures that don't affect quality. I applaud this effort and again call for CMS to produce a white paper showing how all of these quality measures' have affected patient care and outcomes." CMS' proposal also includes an updated outpatient prospective payment system rates for hospitals meeting applicable quality reporting requirements by 2.6%. That decision is based on a projected market basket percentage increase of 3% and reduced by a 0.4% point productivity adjustment. "What is lacking in the proposed payment adjustment is physician service payment increases," Dr. Gantwerker said. "Year after year, taking into account inflationary adjustments and CMS' cuts to physicians, doctors have had to seek employment and close their practices. This payment adjustment further hastens consolidation by enriching hospitals and leaving physicians to fend for themselves." The proposed rule will have a 60-day comment period ending Sept. 9, and the final rule will be issued in November. n

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