1. Initial review of candidate centers. When the company hears of an ASC up for sale, Blue Chip representatives may perform a quick assessment of the center and its local market. They look for centers either losing a little money or making a little money but not flourishing, Mr. Rom says. He explains the flourishing centers are looking to sell a majority interest, but Blue Chip strictly buys a minority interest with the goal of turning the center around. Conversely, centers with high losses are usually not good candidates. “We have to see an avenue to recovery,” he says, such as taking on more physicians or renegotiating contracts with providers.
2. More thorough review. “If we want to go further, we’ll negotiate key terms of the transaction and sign a letter of intent,” Mr. Rom says. “Then we’ll do a more intensive market analysis and start negotiations with potential physicians to bring on board.” Blue Chip often finds the center needs more surgeons or perhaps new specialties or procedures. The company may also identify process issues. “The ASC may be way overbuilt or cases may be handled inefficiently,” he says. Blue Chip looks at the center’s status with payors. Does it depend on a lot of out-of-network volume? Are in-network contracts realistic?
3. Starting the turnaround. Once Blue Chip becomes minority owner and takes over management, it can start carrying out the changes it envisions. “We work very closely with the physicians,” Mr. Rom says. In addition to bringing in more surgeons, the company may ask physicians and staff to shorten case times or reduce the number of days the center is open. It may make an asset purchase of the ASC, terminating all managed care contracts and allowing Blue Chip to start fresh with new contracts, rather than waiting for them to expire.
4. Completing the turnaround. The turnaround can last a year, with the center starting to see positive results in six months. Blue Chip adds three to four ASCs a year and currently co-owns 12 centers. When the center has a strong bottom line and thus has gained value, the physician-owners may decide to sell and Blue Chip sells with them, as happened with one of its ASCs at the end of last year, Mr. Rom says.
Learn more about Blue Chip Surgical Center Partners.
Read more insight from Blue Chip leadership:
– 6 Points on the Future of ASCs
– Case Study: Direct Access Colonoscopy Program Increases ASC Colonoscopy Compliance Rate
