5 Points on Selling Ambulatory Surgery Centers
1. Surgery centers encounter transition issues with younger generations of physicians. Mr. Chirillo said he often sees transition conflicts in surgery centers, in which a group of founding physicians who are closer to retirement are transferring responsibilities to a group of younger surgeons. Taking on a corporate partner is an effective way to facilitate that transition, he said. "Most of the surgeons out there have a practice and ownership in the surgery center, and they should look for a corporate partner to come in and monetize some of the value they've created," Mr. Chirillo said. "There are driving forces that are specific to the needs of that center and its market. Taking on a partner brings stronger management and financial, legal [and] other resources to the center so that it can take that next step in growth."
2. Centers more often sell to management companies than hospitals. Mr. Searles said he has seen more surgery centers seeking management company buyers than hospital buyers. "In my world, it's been 80 percent management companies and 20 percent hospitals," he said. Mr. Rush added that he has seen a similar balance, with approximately 30 percent of surgery centers seeking hospital buyers. They added that management companies are familiar with the buying process and are able to move more quickly to sign contracts, whereas hospitals take longer because they lack the expertise and may only encounter similar transactions every several years.
3. A surgery center should fall within a certain net income bracket to be appealing to buyers. In order to become attractive to national buyers, a surgery center should have a net income of between $1 million and $1.5 million, said Mr. Rush. "Sustainable earnings are important," he said. "That's when you start to see potential for higher-level pricing of the surgery center."
4. The market is going up. According to Mr. Chirillo, there are now more buyers and a more competitive market in which to sell ambulatory surgery centers, and fewer attractive surgery centers are available. "If you, as a seller, can demonstrate to the buyer that the center will profit with their expertise or implementation of growth initiatives, and that they can take the center to that next step in growth, then buyers will get excited," he said.
5. Surgery centers should add cases to increase multiples. Adding cases and earning additional revenue before going to market can significantly benefit the center's multiple, said Mr. Rush. "One of the biggest things that we'll do [at Ambulatory Alliances] is go in and help surgery centers recruit the last remaining few cases," he said. "You let those cases season, then go to market. It adds a substantial amount of profit to the bottom line, and you can get double-digit multiples."
© Copyright ASC COMMUNICATIONS 2012. Interested in LINKING to or REPRINTING this content? View our policies by clicking here.
To receive the latest hospital and health system business and legal news and analysis from Becker's Hospital Review, sign-up for the free Becker's Hospital Review E-weekly by clicking here.
- Burnout Reported More Frequently in Ambulatory Physicians
- US Endoscopy Releases Respa O2 Delivery Bite Block for GI Procedures
- American Medical Systems Announces 510(k) FDA Clearance for RetroArc Retropubic Sling System
- Vanderbilt University Receives $3M to Expand Anesthesia Training Program in Kenya
- PhyMed Becomes Anesthesia Services Provider for TriStar Skyline Medical Center