ASCs get creative to thrive amid consolidation

ASC administrators are watching market consolidation trends closely and planning their next move.

"As many organizations are reeling from the financial impact of the pandemic, there remains strong activity in practice acquisition or the creation of strategic partnerships," said Andy Poole, CEO of Monticello Community Surgery Center in Virginia's Albemarle County. "ASCs need to evaluate their position in their market and best position their center for ongoing success."

The pandemic accelerated the volume and complexity of procedures performed in the outpatient setting, but that doesn't mean hospitals are eager to acquire centers. Many are either developing their own surgery center networks or partnering with physician groups on joint-venture ASCs.

"The increasing healthcare costs, coupled with the ASCs efficiency and high patient satisfaction, as well as opportunities for physician ownership and innovative strategies and surgical improvements, will lead to more joint venture ASCs in 2021," John Stewart, CEO and founder of Physician Advisors and Total Spine & Wellness said.

Raleigh (N.C.) Orthopaedic Clinic, a privately owned midsize group with two ASCs, developed a collaborative relationship with the local hospital system to become part of its referral network. CEO Brian Bizub said the practice works closely with hospital administration to promote growth of both entities.

"Raleigh Orthopaedic Clinic's position is greatly different than other highly competitive markets, so our 100-plus-year organization, physician reputation and willingness to work with a hospital system continues to allow for the organization to stay independent and profitable as a midsized physician-owned practice despite the challenges that every private practice is facing today," he said.

Others haven't developed a close relationship with hospitals and may need an injection of capital before thinking about growth. Andrew Lovewell, administrator of the Surgical Center at Columbia (Mo.) Orthopaedic Group, sees private equity making a bigger splash this year after pulling back during the pandemic.

"Private equity or nonprovider-driven organizations are continuing to develop diverse investment portfolios by taking an interest stake in healthcare organizations," he said. "As healthcare costs continue to rise, and the opportunity for narrow network or high value networks with steerage develop, I think that private equity will continue to take a larger stance in the healthcare markets across the country."

He also sees mergers and acquisitions between physician groups accelerating to form "supergroups" of 100-plus physicians.

"With large payers demanding a reduction in cost and site of service shift, many large orthopedic groups across the country have started to do this already," he said. "Hospitals have been combining forces to generate a larger catchment population or service area for quite some time. It's nothing new, but the formation of supergroups across the country could create some large market disruptions."

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