1. Fear of destroying a relationship with the local hospital. Physicians may hesitate to invest in an ASC because they fear retaliation from the local hospital, Dr. Burkhardt says. “Physicians are used to working in the hospital environment, and they have a perception that they have a relationship with the administration,” he says. “They perceive that if they leave, there will be retaliation against them and their referrals will be affected.”
In reality, he says, this fear is generally unfounded. “It’s very difficult for a hospital to actually affect referrals,” he says. “Once the relationship has been built with the people in the community, people want to go to the physician because they like him.” If a physician has established quality outcomes and good relationships with patients, he or she should feel free to invest in an ASC, knowing that hospitals will rarely invest the time to truly dismantle an individual practice.
2. Unreasonably high purchase price. In order to attract physicians to an ASC investment, the purchase price point has to be reasonable, Dr. Burkhardt says. “I tried to buy into a surgery center where the buy-in was so high that the return on investment would take me 10 years to recoup,” he says. “Even though there were some advantages to coming on board in terms of efficiency and caseload, it wasn’t worth the risk.” He says while the center was well-run and profitable, the amount of shares offered was very low, and the purchase price was high. He says ASCs should consider offering a minimum of five shares to give physician-investors “some real ownership.”
In addition, physicians will be more likely to invest if the investment has a shorter payback period. “The first center I bought in, the share price was $83,000. If you bought two shares and the average payback was $3,500-$4,000 a month, you could realistically have that paid off in 3-5 years, including taxes,” he says. “That’s a number most people can work with, [whereas] a 10-year payback is not reasonable.”
3. Decrease in collateralized loans. Physicians may also be more willing to consider a collateralized loan, or a loan that is backed by third-party assets. Since the assets involved can be property or items with a resale value — such as real estate, automobile, machinery, jewelry and others — collateralized loans give options to physicians whose total assets are insufficient to cover repayment of the loan in the event of default. However, Dr. Burkhardt says banks are much less likely to give collateralized loans than they were five years ago.
Read more about physician investors:
–Compliance Guidelines Related to Selling Units in an ASC to Physician Investors
–Selling an ASC Ownership Interest to Physicians: Overview of Federal and State Laws and Regulations
