The following are eight important questions surrounding ASC value and sustainability.
1. What is the going price for a majority interest in an ASC? In transactions today, we often see valuations seven to eight times the EBITDA-minus-debt range for healthy orthopedic-driven or multispecialty surgery centers that are primarily in network.
2. Is ASC transaction volume up or down over the last year? Over the last several months, it appears that volume is up from last year. There seems to be interest from both buyers and sellers.
3. Are the typical ASC buyers hospitals or ASC companies? The pendulum has swung back and forth over the years. Currently, we would say the purchases are more likely to be national companies, but they can often occur with a hospital partner.
4. Which buyers are most often seen? We often see Surgical Care Affiliates, United Surgical Partners International, AmSurg, Symbion, Hospital Corporation of America and Surgery Partners in transactions for majority interest. There are also a number of companies that buy minority interests, such as Surgical Management Professionals, Regent Surgical Health, Ambulatory Surgery Centers of America, Blue Chip Surgical, ASD Management and others. There are also companies that tend to focus on single-specialty centers such as Physicians Endoscopy and a few pain management focused companies.
5. Will ASCs and ASC companies employ physicians? We think, given the import to ASCs and the increasing threat to independent medicine, that this is inevitable.
6. What are the most important specialties for ASCs? The most important specialties by case volume and by revenue are orthopedics, GI, ophthalmology and pain management.
7. What is the best sign that an ASC is successful? A successful ASC will have sustainable case flow that is not at high risk, a committed group of physicians, a middle-of-the-road reimbursement rate per case and will have substantial in-network reimbursement.
8. What is the worst sign for an ASC? Bad signs for ASCs can include overreliance on one to two physicians, too much out-of-network reimbursement and too much debt.
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