Dr. L, whose full name wasn’t disclosed to maintain anonymity, discussed four topics:
1. Variable and fixed expenses. “One variable that’s regional is the real estate. The more fixed costs are the equipment because those are more national types of costs,” Dr. L said. “Depending on the specialty of the center, that also impacts the type of equipment you’re going to use. If you have a lot of orthopedists and neurosurgeons, a lot of their equipment and hardware is pricier than [what] the [OB-GYNs] are going to use.”
2. Single-specialty startup costs. “We initially were a single-specialty GYN, and our startup cost just for the equipment [was] upwards of $200,000 to $300,000. The physical shell [was] upwards of $200,000, and depending on how much you want to make your surgery center look like a spa, the facelift costs could be significant. For ours, it was approximately $2 million [for the] renovation. Adding that all together, that’s [around] $2.5 million for a single-specialty.”
3. Adding specialties. “Since we’ve been in practice, we’ve introduced other specialties — general surgery, urogynecology and urology — and, luckily, a lot of instruments they use are similar to what we already have,” Dr. L said. “That [enabled] easier integration. As more specialties are introduced and equipment needs change, costs are going to go up.”
4. Securing funding. “We had a small business loan that we applied for. The rates might be different than what they were 10 years ago. I believe at the time when we first did the original renovation, our rate was [around] 5 to 6 percent, but it was a variable rate, so it did change with time,” he said. “All of the partners individually had to sign for the loan to guarantee it.”
More articles on transactions/valuation:
Why hospitals & health systems are increasingly seeking ASC ownership: Avanza Healthcare Strategies’ Joan Dentler explains
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