5 Points About the Current ASC Acquisition Market
Mr. Rush, MHP, MBA, is the president of Dallas, Texas-based Ambulatory Alliances, an investment banking firm that focuses on surgery center brokerage and physician recruitment and syndications.
Here are his five points for buyers and seller in the current ASC market.
1. Buyers are looking to invest in ASCs. It's an interesting market for buying and selling ASCs, Mr. Rush says, and there's more money chasing less attractive deals than in the past.
For "tier one" centers — which he describes as multispecialty centers with multiple physicians carrying the case load and little bad debt — it's a seller's market.
Many prospective investors are looking for centers to put money into, especially as the end of the year draws near.
"It's the end of the year and maybe reality hits buyers and sellers," he says. "Today is a good day. I have buyers tell me they have $2 million left in their fund that needs to be spent by the end of the year. People out there need to get things done."
The rush to purchase centers as 2013 approaches could be because people are in good moods from a profitable year or in distress from lack of profits and looking to make some changes, he says.
2. More types of investors are emerging. Traditional buyers of ASCs include management companies, physicians and hospital systems, and now more commercial payors are getting into the ASC business, Mr. Rush says.
Payors have purchased surgery centers in the past, but now they are becoming more active in the market. Hospitals are also becoming increasingly active partners.
Insurance companies, such as Kaiser Permanente and Hallmark, are proving the model can be effective, and more payors are interested in the investment.
3. The market is maturing. In the current maturing ASC market, fewer tier one centers exist for most geographical areas because physicians or hospitals have already bought up these centers. The result: More "tier two" and "tier three" centers are being considered for investment than in the past.
"There are still very attractive centers out there, but it might be a spine center with only two groups of doctors doing the work," Mr. Rush says. "Some would classify this center as tier one, but it's not the traditional definition."
Investors know it's not a perfect market anymore, he says, and have expanded their targets to include surgery centers with drawbacks, such as more debt, fewer types of cases, out-of-network contracts or only a few physicians driving the revenue.
He warns that sellers need to have realistic expectations, though. Physicians often have unrealistic expectations for what their center is worth to outside investors.
To manage expectations and prepare their centers for sale, sellers are increasingly seeking outside help to improve these lower-tier centers for purchase. Mr. Rush has been enlisted to improve centers' recruitment and clean up operations so the ASCs are in better positions to be sold to higher-paying buyers.
4. Spine centers are in demand. Spine ASCs and multispecialty orthopedic centers are highly sought after, as spine procedures continue to move into the outpatient setting.
"I've even seen surgery centers attaching sleep labs or overnight rooms where patients can be discharged from the surgery center and put in the sleep lab for observation," Mr. Rush says. "People are more comfortable with more complex procedures [being performed in ASCs]."
Spine centers are also attractive to buyers because of the significant reimbursement rates garnered by spine procedures.
5. Surgery centers are still good investments. The ASC ownership market is strong, for both physicians and other types of investors. The ambulatory model is still growing as more procedures move from inpatient to outpatient settings.
"[ASCs] are the future," Mr. Rush says. "Ambulatory centers and ASCs are in a great position for growth. They cost a lot less and the access is higher and more efficient."
Surgery centers are one of the safer commercial investments because of how much control owners have, he says. Surgery centers do not need to be open every day for investors to experience large returns on their ASCs.
"Some markets are oversaturated, but if you run an efficient program, you'll make money," he says. "It comes down to having efficiencies and having a commitment to making [the center] pay for itself."
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