Will there be much change for mergers and acquisitions in the healthcare landscape this year?
Eric Gleichman, chief development officer for Nueterra Healthcare, says things will look much the same.
"The larger ASC development and management companies will continue to acquire existing ASCs and/or develop new ASCs in their strategically targeted areas, or as targets of opportunity present themselves," he says. "There will be additional consolidation of ASC development and management companies, and health systems and hospitals will continue to acquire local ASCs, generally for the purpose of keeping physicians from competing with them in their market."
Next year, in 2016, is when a real shift could begin. Healthcare providers are feeling the pinch to eliminate waste, increase efficiency and become more cost-effective over the past few years from payers and federal government incentive programs. Many hospitals have taken advantage of the "low-hanging fruit" to eliminate the obvious waste, and as pressures continue to mount it will be more difficult to find savings and ultimately costs will be passed on to payers and employers.
"At some point, [employers] will start (and some have already) cutting back benefits and passing more and more of the costs to employees/patients," says Mr. Gleichman. "I think we will see payers and self-insured employers looking for solutions, and mandating the use of lower-cost providers."
Here are Mr. Gleichman's six predictions on the future for ASCs:
1. Health plans will mandate procedures be performed in ASCs. As the lower-cost setting for healthcare, ASCs will be attractive for payers looking to save wherever possible. "I think health plans will begin to mandate that procedures that can be performed in the ASC setting must be performed in an ASC or at least will cap reimbursement regardless of setting to ASC-type rates for ASC-appropriate procedures," he says.
2. The list of ASC-approved procedures will grow. With technology advancement at the helm, payers will be more comfortable approving cases at the ASC, especially when there is a significant cost-savings. "As this happens, consumers and payers will dictate that surgeries take place in the most medically, and cost, appropriate setting," says Mr. Gleichman.
3. Transaction multiples will be higher in the mid-term. The same large ASC development and management companies are competing for individual ASCs and small ASC chains. "That fact, coupled with health systems buying up ASCs will likely drive transaction multiples higher in the short to mid-term, due to supply and demand," says Mr. Gleichman. "More consolidation will lead to higher prices for ASCs that do come on the market."
4. Competition will drive better quality. With more consolidation, the quality of care provided at ASCs will be better. "Most of the larger ASC chains are also generally viewed as high quality providers of patient care and do a remarkably good job with outcomes and patient satisfaction," says Mr. Gleichman. "As the larger players acquire more and more ASCs and implement their proven clinical protocol and policies and procedures, we will see an already high quality industry get even stronger with outcomes and patient satisfaction."
5. Multispecialty ASCs will continue to be the most valuable centers. Multispecialty ASCs have been traditionally prized because their risk diversification and ability to accommodate high-value cases, picking up the slack for low value cases.
"We believe the market will pivot here this year and going forward," says Mr. Gleichman. "Again, as we look at costs associated with healthcare, we need highly efficient ASCs to keep costs down. We believe multispecialty ASCs will continue to be valuable."
6. Independent ASCs are still possible. While more physician groups are looking for hospital partners to share in the success — and risk — of their surgery centers, independent ASCs and those without an official hospital partner still have a place in the industry. "For all of the cost driver reasons discussed previously, lower cost alternatives will be not only viable, but highly attractive to payers and employers," says Mr. Gleichman.