Private equity-backed ASC operators are increasingly scaling without buying surgery centers outright, a shift that relies on joint ventures, management contracts and exclusivity agreements, according to an October report from the Private Equity Stakeholder Project.
The report describes a new strategy in the ASC industry in which private equity-backed companies gain traction without actual ownership stakes.
One example of this trend is Regent Surgical Health, which partners with health systems and physician groups to develop, own and manage 26 ASCs across more than 13 states. The company received a strategic investment from TowerBrook Capital Partners in 2021 and has a co-investment and strategic alignment with Ascension Capital.
Regent is the exclusive national ASC partner to St. Louis-based Ascension and has joint venture collaborations with Somerville, Mass.-based Mass General Brigham and Cleveland Clinic. According to the report, these relationships illustrate an emerging model of nonprofit systems turning to PE-backed operators to execute outpatient expansion.
Historically, ASC management company growth was fueled by independent physician groups seeking joint venture partners. That pipeline has weakened, Regent CEO Travis Messina told Becker’s, as health systems employ the majority of physicians and Medicare Advantage enrollment has surged.
Regent’s response has been to lean into health system partnerships and develop centers through joint ventures.
“When we meet a potential partner, they often ask, ‘Why should we pick you?’” Mr. Messina told Becker’s. “We pause and ask what they want to accomplish. Before selling a solution to a problem they may not have, we want to understand their goals.”
In some joint ventures, nonprofit partners retain majority ownership and branding while Regent manages day-to-day operations. In the Cleveland Clinic collaboration, for example, the health system brand remains front facing while Regent runs operations.
Additionally, because these deals are not outright acquisitions, they can avoid regulatory scrutiny commonly associated with mergers, the Private Equity Stakeholder Project report said.
According to the report, exclusivity agreements are another signature feature of the model. Ascension naming Regent its exclusive national ASC partner effectively positions Regent as the gatekeeper for ASC expansion across one of the nation’s largest nonprofit systems.
Regent also challenges a common ASC assumption that physician ownership is required for alignment.
“It’s a perceived challenge that if a physician doesn’t have ownership in an ASC, you can’t get proper engagement,” Mr. Messina said. “But the ability to invest and generate a return isn’t the only motivator.”
Instead, Regent frames physician engagement around operational performance and convenience: quicker room turnover, efficient workflows and scheduling, and a predictable clinical experience.
