6 trends and observations in ASC M&A

Written by Laura Dyrda | March 21, 2019 | Print  |

There are several players in the outpatient surgery space interested in ASCs.

"For many years we saw buying almost exclusively by national ASC management companies that would partner with independent physicians who had created significant value in their ASCs," wrote Jon Vick, President of ASCs Inc., in a recent Becker's ASC Review article. "Today we see strong demand also coming from private equity (PE) firms, as well as payers and healthcare systems that recognize the value that surgery centers can add to their businesses."

Six trends in ASC mergers and acquisitions:

1. ASC companies are expanding their portfolios. Around 72 percent of the 5,500 ASCs in the U.S. are independent or physician-owned, according to the VMG Health Intellimarker. ASC companies including AmSurg, United Surgical Partners International, Surgical Care Affiliates, Surgery Partners and SurgCenter Development, along with other chains, have around 1,550 centers and many plan additional acquisitions over the next year.

For example, Surgery Partners disclosed it has $80 million to $100 million budgeted for acquisitions in 2019. SurgCenter Development has also been active, adding five de novo facilities this year so far, and the company reported 16 ASCs in development earlier this month.

2. In January 2018, Medical Facilities Corp. entered into a joint venture with NueHealth and acquired seven ASCs from Meridian Surgical Partners for $46.5 million. MFC owns the majority of the joint venture company, called MFC Nueterra Holding Company. Other recent consolidation in the industry includes Surgery Partners' acquisition of National Surgical Healthcare in 2017 from Irving Place Capital for around $760 million. At the same time, Bain Capital Private Equity purchased 54 percent stake in Surgery Partners.

3. Private equity is moving into the space, both acquiring ASC companies — such as KKR's acquisition of Envision / AmSurg for $9.9 billion — and individual centers. In 2016, Kelso & Company also acquired Physicians Endoscopy, a company with more than 60 GI centers and 600-plus partnering gastroenterologists, from Pamlico Capital.

4. Private equity firms are also acquiring specialty physician practices and ASCs, with a focus on ophthalmology, gastroenterology and orthopedics. Recent transactions and partnerships include Frazier Healthcare Partners acquiring Atlanta Gastroenterology and forming United Digestive in December. The month before, Waud Capital partnered with Digestive Disease Consultants and created The GI Alliance, a gastroenterology practice management company.

"To realize the maximum value, centers must meet each individual buyer's criteria, which usually includes being in-network with the major payers for most cases, having multiple younger physician-partners, or partners close to retirement with succession plans in place, and growth opportunities," wrote Mr. Vick. "Strong acquisition candidates should have well-documented growth strategies, be in a desirable geographic location, have a facility that is in excellent physical condition, and that have resolved major operational or legal issues before going to market."

5. Specialty chains are also making key acquisitions, according to information compiled by Physicians First Healthcare Partners. The transactions include CEI Vision Partners' recent acquisition of several ophthalmology practices in Ohio and Virginia Eye Consultants this year, which includes 11 ophthalmologists and four clinical locations in addition to an ASC. CEI Vision Partners is backed by Revelstoke Capital Partners.

Other firms have followed similar trajectories, including Waud Capital Partners-backed Unifeye Vision Partners, which operates a network of 51 ophthalmology and optometry providers. Founded in 2017, the company has made three acquisitions and includes centers in Minnesota and California.

One more example is Century Vision Global, a long-term investor focused on eye practices and ASCs. Although not a private equity firm, CVG's parent company is Eli Global and it seeks to grow organically and through acquisitions.

6. Payers are also acquiring centers and partnering with ASC companies. OptumCare, a UnitedHealthcare company, acquired Surgical Care Affiliates and its 210 surgical facilities in 2017 for $2.3 billion. Surgery Partners also sees payer partnerships in the future, as CEO Wayne DeVeydt reported the company is in talks with a "named payer" that could lead to a joint venture facility; the company has begun recruiting physicians for potential de novo centers as part of the partnership.

Although not an acquisition, SurgCenter Development partnered with Humana earlier this year for 100 of its centers to join the payer's national provider network. The partnership will include access to outpatient total joint replacements at SurgCenter Development facilities.

More articles on surgery centers:
Number of Medicare-certified ASCs per state
7 ASC company key notes
MedPAC recommends ASCs submit cost data, against updating conversion factor: 3 details

 

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