Stephen Rosenbaum is CEO of Interventional Management Services, an ambulatory surgery center management and development company.
Q: Why would an ASC management and development company prefer either a majority stake or minority stake in an ASC?
Stephen Rosenbaum: Let's start by discussing majority.
Majority
Typically, the reason a management company is going to want a majority stake is for control. If they have a majority stake of the shares, they can effectively take certain positions or make some decisions knowing they will receive majority approval. Management and development companies can do what they do best (i.e., manage and develop) most effectively and efficiently with control.
Majority ownership and control also allows a company to report the financial performance of a center differently than that of a center with minority interest ownership. From a seller's perspective, giving up control and majority ownership may not be optimal, but it usually drives up the acquisition price. That is the primary reason some owners decide to sell a controlling interest.
Minority
The biggest advantage of an ASC management company having a minority stake in a surgery center is there is room for more partners. At the end of the day, the percentage points of ownership always have to add up to 100 percent — the more one partner owns means there will be less room for everyone else. In a partnership that the management company owns 30 percent, for example, there is 70 percent remaining for your physician partners as opposed to only 49 percent for them in a majority deal.
We have both majority and minority position in our centers. With respect to those centers in which we have a minority interest, there are sometimes different reasons for that position. In some cases we have a minority interest simply so the physicians can have more. In others, however, we have minority interest in order to make room for a hospital partner. You almost have to be a minority partner in a hospital joint venture — there's just not room for everybody to have large portions of ownership.
At the end of the day, the physician-partners need to own enough to influence their environment. If the management company owns too much and the hospital too little then there is risk the physicians will become disengaged.
Learn more about Interventional Management Services at www.physiciancontrol.com.
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