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How ASC chains adjust for out-of-network when acquiring new centers

When companies acquire ASCs, they typically adjust the pricing for out-of-network centers, according to HealthCare Appraisers 2018 ASC Valuation Survey Results.

The three models companies typically use to adjust pricing for out-of-network centers include:

• Convert revenue to in-network for modeling purposes and then determine value or price: 73 percent
• Apply a higher risk factor or discount rate to the projected out-of-network model: 7 percent
• Adjust valuation multiples downward: 20 percent

The magnitude of the adjustment can be anywhere from 0.1 to more than 2 multiple. Most, 62 percent, reported the adjustment at more than 2 multiple, while 8 percent saw an adjustment decrease of 0.1 to 0.51 multiple. The remaining 31 percent reported the magnitude of reduction wasn't applicable.

The report also shows 47 percent of respondents say an ASC with 20 percent of its revenue out-of-network exceeded their tolerance risk while 20 percent reported no threshold for out-of-network.

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