Ownership models across the globe

John Fox (Australia)

• Day surgery centres/units – free standing or intra-hospital. Is there a preferred model?– Douglas McWhinnie (United Kingdom)

• Emergency operations in day surgery centres/units– Raafat Hannallah (United States of America)

• Day maternity units supported by maternity motels – is this an option?– Allison Carr (Australia)

• Outsourcing day care for public patients– Paul Jarrett (United Kingdom)

Ambulatory Surgery in the Future – Models and Controversies

Ownership Models

Private vs Public

Rule Out Some Places Around The Globe

Across the Globe - Ethiopia

• Standard unit for exchange was the “chicken”

• Surgeon • The assistant • The anaesthetist

– all got paid handsomely in terms of scrawny chickens.

Ethiopia

Ownership Models

• Structural

• Financial

Structural Models For Day Surgeries

• A day surgery facility within a hospital so that it essentially no distinction between the day surgery and an overnight stay patient.

• The day surgery as an attachment to a hospital or other facility where there is a cross-flow of patients and equipment and staff.

• The stand-alone unit• The stand-alone day surgery unit with associated hotel

accommodation • The stand-alone day surgery with an overnight stay

within the facility, the “extended” day surgery

Financial Models For Day Surgeries

Ownership

• Corporate entity funds and builds a facility– if there is a population – proceduralists – no competition

• Building facilities that are owned and run by the doctors themselves.

Financial Models For Day Surgeries

Ownership

• Corporate entities (US)

– Private Equity Investors (long haul)– Venture Capitalists (short term)– Specialist DS development corporations

Financial Models For Day Surgeries

Ownership

• Building facilities that are owned by the doctors

• Building facilities that are owned and run by the doctors themselves

The CHDS Model

• Advantages

• Disadvantages

• Compare to other models

The CHDS Model

• Business Entity

– Funds and runs the day to day DS activities

• Building Entity

– Funds the construction and maintenance

• The CHDS Model – Not a new idea– McHardy– Refined Articles

• Other Models

– Mismatching Of The Ownership Of The Two Companies

The strongest recommendation if you are going to set up a facility,

ownership is important and to match the shareholding in the company with the business.

To Build the Building

• To identify a group of like minded• Fund and buy the land• Articles of Association• To design the specific purpose facility• To fund the building – loans• To fund the fit out• Fund the holding costs (building phase)• Sustain the facility – startup phase

The Articles of Association

• Absolutely critical• In advance

and importantly

• the exit strategy has to be fair for all parties.

• experience from other facilities where an incorrect exit strategy

The Group

• Proceduralists• Cooperative• Team players• Avoid those who are non-cooperative• who won’t work at their own facility

• the team work approach does work• and after a very short while, in building terms,

the rents starts to pay the loans

Income

Expenses

*** Profit ***

CHDS Performance

Setup costs and Starting losses

• Guarantees

–Death

–Taxes

–Large Setup Costs

–Initial Losses

Net Profit/(Loss) After Rent & Income Tax

(600,000)

(400,000)

(200,000)

-

200,000

400,000

600,000

2001

2002

2003

2004

2005

2006

2007

2008

Net Profit/(Loss)After Rent &Income Tax

CHDS Income Analysis

***Income ***

Expenses

Profit

Fees Billed

-1,000,0002,000,0003,000,0004,000,0005,000,0006,000,0007,000,0008,000,0009,000,000

2001

2002

2003

2004

2005

2006

2007

2008

Year

Fees Billed

INCOME CHDS (per annum)

Fees Billed

$8,068,095 in 2008

Income

**** Expenses ****

Profit

Cainlee Unit Trust

Rent

Income (Fees)

CHDS

Expenditure Considerations

• Rent

• Salaries

• Utilities• Insurance• etc

Rent + Outgoings Stream from CHDS to Cainlee

Total Rental + Outgoings

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2001

2002

2003

2004

2005

2006

2007

2008

Total Rental +Outgoings

$1,528,755

$ 1,208,002 Rent only

Draft Budget

Income 08/09

$ 9,660,872

CHDS Expense Analysis

Budget 2008/2009

SalariesConsumables

AdminAdmin

Green = Other Admin

Combined Model

$ 6,890,771

Paid to Shareholders

CHDS

CAINLEE

Income (2000-2008)

$ 43,680,325

Combined Model2000 2008

Accumulated distribution $ 6,890,771

Paid to Shareholders

CHDS

CAINLEE

Income

$ 43,680,325

Accumulated Rent $ 9,255,941

CHDS Accumulated Profit

$ 714,302

Goes to pay the shareholder loans

Summary and Recommendations

• It is huge volume of hard work – Organisation– Structure, – Funding, – Design – A Significant Amount Time And Cost Impost

– Would I do it again in a “heartbeat”.

• Seek advise and because you can save yourself a lot of heartache getting the fundamentals right from the beginning.