The cost of building an ASC from scratch has climbed sharply since the pandemic, driven largely by a jump in per-square-foot construction costs.
For physician groups and ASC operators weighing growth, that shift has made the choice between building new, acquiring an existing center or striking a joint venture more complicated than it used to be.
Terry Bohlke, CEO of Nashville, Tenn.-based Keystone Surgical Partners, has navigated that calculus for more than two decades. Before launching Keystone earlier this year, Mr. Bohlke spent 10 years as the senior executive overseeing all ASC operations, quality, finance, acquisitions and development at Franklin, Tenn.-based Community Health Systems, where he grew the health system’s ASC portfolio from 13 centers to 51.
Mr. Bohlke told Becker’s that the increase in per-square-foot building costs has been dramatic. Despite that, he said acquiring an existing center isn’t always an option — and increasingly, it isn’t the first choice for the physician groups he works with.
“A lot of times there either aren’t ASCs available to acquire, or they’re in an existing partnership, and maybe it’s a group of young doctors and they don’t want to be a part of their father’s ASC, so to speak,” he said. “They want to build their own, and they want to build it new, and they want to build it like they want.”
That preference, paired with rising costs, has pushed Mr. Bohlke toward de novo development more often than not — even though it requires a physician group to commit to significantly higher case volume to make a new center pencil out.
“I’ve been doing a lot of de novo development, despite the cost, but it does take a lot more cases to make it work,” he said. “But as long as the group is big enough, that’s a good way to go too.”
Still, Mr. Bohlke said there’s no fixed formula for choosing between a de novo build, an acquisition or a joint venture. The decision follows what physician partners want and what’s actually available in a given market.
“It really depends on the physician partners and what they want,” he said. “Always try to be as flexible as possible on those.”
That flexibility is central to Keystone Surgical Partners, the ASC development and management company Mr. Bohlke recently launched to help physicians navigate exactly these kinds of partnership and growth decisions.
At the Becker’s 32nd Annual Meeting: The Business and Operations of ASCs, taking place October 29-31 in Chicago, ASC leaders, surgeons and healthcare executives will explore strategies to drive growth, enhance operational performance, navigate reimbursement challenges and prepare for the future of ambulatory surgery. Apply for complimentary registration now.
