5 Current Trends in Surgery Center Acquisition and Operation

Here are five current trends affecting ASC acquisition and operation, according to data from VMG Health's 2011 ValueDriver ASC Survey.

1. Successful ASCs were most attractive for acquisition last year.
ASCs with a proven history of success were most likely to be snapped up by ASC operators in 2010, though struggling ASCs also enjoyed a fair amount of attention. Forty-four percent of ASC operators said they preferred to target ASCs with a proven history of successful performance, with 37 percent said they would look at underperforming ASCs primed for a turnaround. De novo ASC development was the least popular option, with only 19 percent of operators saying they preferred the strategy. De novo development has experienced a drop in recent years due to market saturation, limited access to capital and limited availability of new physicians.

2. ASC acquisition is expected to increase in 2011.
Prominent ASC operators expect ASC acquisition to increase in 2011, with 63 percent of respondents saying that acquisition will experience a boost. Thirty-one percent believe movement will remain relatively stable, while 6 percent think acquisitions will decrease. Over half of operators said they plan to target ASCs in their own market, but not exclusively; a quarter said they will be reaching into new markets for potential centers. The operators believed that management companies provide significant benefits to ASCs, including help with new physician identification and recruitment, improved efficiency, partnership re-syndication and improved managed care contracting.

3. Current operators practice more due diligence in ASC acquisition.
When asked how the ASC acquisition market has changed over the last five years, ASC operators most commonly said that ASC operators perform higher levels of due diligence on acquisition targets. Companies cannot afford to invest time and capital in an ultimately failed venture, so financials and center operations are scrutinized closely before an offer is made. Operators said more operating and management companies are looking to partner with health systems than five years ago, perhaps due to declines in reimbursement and the leverage provided by a health system partner. Operators also believed ASCs with substantial risk characteristics were more likely to receive a lower price offer.  

4. ASC operators may close their underperforming ASCs. The down economy has introduced a time of bankruptcy and closures for failing ASCs, and 2011 may be no different. Fifty-three percent of ASC operators say they are considering the closure of underperforming ASCs, slightly more than the 47 percent who said they were not considering closure. Fewer companies are considering merging existing ASCs to boost efficiency and returns — 63 percent said they are not. This closure may be driven by several trying trends for ASCs over the next five years: market saturation, integration of physician groups with hospital systems, reimbursement challenges and sluggish economic recovery.

5. Growth in hospital-employed physicians will pose a significant risk to ASCs. Most ASC operators agree that the increase in hospital-employed physicians will pose a threat to ASCs, as hospital employment often prevents physicians from bringing cases to or investing in non-hospital-affiliated ASCs. A whopping 87 percent of operators believe hospital employment will be a challenge over the next few years; 13 percent remain optimistic and say it will not.

Read more about ASC transactions and valuation issues:

-Deerfield Beach Outpatient Surgery Center Opens in Florida

-Pennsylvania's Erie Shriners to Convert to ASC

-Massachusetts Hospital to Break Ground on Surgery Center Despite Permit Appeal

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