Q: With inconsistent reports of how the economy is recovering/expected to recover, what current challenges exist for ASCs interested in developing new projects?
Rob McCarville: The biggest challenge we are finding is in securing financing that is in the “neighborhood” to terms we saw even 12-18 months ago. Banks are requiring much more equity from the investor group as well as more stringent loan guarantees. So, since all other areas of the market have constricted, it becomes more difficult to raise the necessary cash as well as take on the additional debt burden with personal guarantees.
Q: How feasible is it for new centers to start-up? Are turnarounds and joint ventures still the best options?
RM: Committed case volumes that can substantiate profitability (produced by a competent ASC developer/manager) still drive the feasibility of starting up a new center. If you can provide a bank with a realistic five-year pro forma that can effectively service the debt, then your chances for a successful start-up are enhanced.
[Turnarounds and joint ventures] present attractive options because they have a proven track record — although it may not be very strong — for building on an existing framework and providing quicker returns to its investors. Hospital JVs still provide some level of protection when dealing with the payor market as well as knowing they will be behind the project for many years into the future.
Q: What challenges should groups interested in de novo projects expect to face or consider when developing an ASC?
RM: Again, more stringent financing requirements, more competition from other facilities because everyone is doing what they can to keep and/or grow volumes during tougher times.
Q: In what ways has new legislation affected ASC projects?
RM: We’ve had a few of our interested groups put the brakes on while waiting for general market conditions to improve and to see what kind of impact new government legislation will have. Proposed legislation has caused a more conservative approach to new ASC development, but certainly has an opportunity to reinforce the legitimacy of ASCs as the most appropriate provider of outpatient surgery from an effectiveness and cost basis.
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