At Becker’s ASC 25th Annual Meeting: The Business and Operations of ASCs, which took place Oct. 18-20 in Chicago, VMG Health Managing Director Kevin McDonough and VMG Health Director Colin Park discussed consolidation trends and private equity interest in ASCs.
Here are five trends Mr. Park shared on consolidation:
- Mega-mergers continue to make headway
- Payer-provider affiliations continue to emerge and expand
- Transactions and strategic partnerships look to leverage non-core and intangible assets, such as brand and reputation
- Margin compression, which negatively influences ASCs’ ability to achieve growth in reimbursement, is leading providers to seek cost containment through economies of scale
- Traditional power-players — such as health systems and insurers — are looking to invest in areas that are traditionally under-weighted, such as ASCs, urgent care facilities or home health care
At the same time, while “overall [payer] volume is staying somewhat stable,” the ASC industry is “seeing a greater percent being government volume versus commercial,” Mr. Park said. Yet “as patients are becoming more responsible with their money there is greater seasonality … and with the rise in high-deductible health plans comes a rise in bad debt,” he added.
Here are three trends Mr. McDonough shared on private equity:
- Payers are looking for areas to diversity and are increasingly investing in the ASC space
- Private equity funding in ASCs has reached near record levels, and the industry has almost $1 trillion in unused capital
- Private equity firms will likely become more interested in investing in the ASC space as more centers open
“As far as what it takes to operate a successful surgery center and the future outlook for surgery centers, the marketplace is clearly signalling that [private equity firms] are willing to pay more for surgery center opportunities, and we are seeing more pressure for acquisition and controlling interest in surgery centers,” Mr. McDonough explained.
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