As private equity continues its aggressive expansion into the ASC industry, questions are mounting about the long-term trajectory of consolidation.
Marc Greenberg, MD, an orthopedic surgeon based in Baltimore, Md., joined Becker’s to share his growing concerns about what happens when the consolidation cycle runs out of road.
Editor’s note: This interview was edited lightly for clarity and length.
Question: In the next five years in regard to consolidation in the ASC industry, what are your biggest concerns?
Dr. Greenberg: I think the biggest thing is: What is the endgame of private equity? You have all these large-ish, consolidated companies purchasing or owning ASCs, and they need to get their profit out in five to seven years. You can go round one, round two, you can consolidate, but at some point, someone bigger needs to purchase these.
I’m curious if we just end up with large public companies formed solely to hold ASC ownership. Who’s going to be the biggest fish? At some point someone needs to be bigger than a couple billion-dollar company, and there are only so many of those, especially in such a fragmented industry. And where it’s very surgeon-dependent in terms of how profitable something like that could be. At some point you run out of surgeons who can be profitable in an ASC — let alone finding someone who can purchase 300, 400, 500 ASCs and standardize that.
This is the same with physician practices. Private equity is buying them up, but they need to sell them to someone. I think the worst outcome for physicians is that it just becomes some big real estate investment trust, basically.
