3 factors influencing ASC valuation

A diverse revenue base and demonstrable growth opportunities have the potential to significantly improve an ASC's valuation, according to Matt Searles, a partner at ASC advisory firm Merritt Healthcare.

Mr. Searles discussed several factors influencing ASC valuation during a panel discussion at the Becker's 16th Annual Future of Spine + The Spine, Orthopedic & Pain Management-Driven ASC Conference, which took place June 14-16 in Chicago.

Here are three factors that affect ASC valuation:

1. Diverse revenue base. A high-valuation ASC must have multiple physicians pulling in revenue for their organization, Mr. Searles said. If one physician is bringing in 15 to 20 percent of the surgery center's revenue, that may prove to be an issue for prospective buyers.

2. Demonstrable growth opportunities. "You have to be able to bring something to the table for buyers. If your [ASC's] growth rate is zero for the last three years, that's problematic [for prospective parties] … because they're trying to determine if your center is sustainable," Mr. Searles noted.

3. Multiple specialties. By increasing the number of specialties performed at an ASC, organizations can maintain multiple sources of revenue, making their ASC more attractive to potential buyers. If you have a surgery center with four operating rooms and only one is consistently being used, that ASC doesn't look as profitable as an organization that maximizes its available resources, he said.

Mr. Searles noted that while "the fundamental" practices to increase an ASC's valuation help, one of the biggest factors is that hospitals will likely not conduct joint and spine surgeries in the near future.

"I can promise you joint and spine [surgeries] won't be done in hospitals over the next 10 years. … That plays to our benefit [as ASCs]," he said.

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