Is time running out for small ASCs?

Although the ASC industry remains fragmented, some leaders are worried about the viability of independent ASCs amid an increasingly consolidated healthcare landscape. 

"I am focused on the consolidation of health systems, capital equity firms, private practices and third-party payers purchasing practices and ASCs," Matt Kraemer, administrator of Northern Arizona Healthcare in Flagstaff, told Becker's. "These types of collaborations and alliances may create difficulty for patients to gain access to an perceived out-of-network or preferred provider organization, specifically with surgical interventions in the ASC setting."

The ASC industry has slowly begun to consolidate in the last few years. Roughly 70 percent of ASCs remain independent, leaving "room for further consolidation at the individual-facility level," according to a Jan. 26 report from VMG Health. The number of ASCs under partnership by a national operator saw an increase of 1,752 in 2021 to 1,804 in 2022. 

Consolidation in some capacity could be necessary for many ASCs to meet margins. ASCs often struggle to compete with larger health systems and practices for patients and contracts and are facing high inflation rates, Medicare reimbursement cuts and higher overhead costs and staff wages.

"Consolidation trends in ASCs for 2023 will continue to focus on affordability," Joe Peluso, administrator at Aestique Surgery Center in Greensburg, Pa., told Becker's. "Healthcare costs have continued to escalate, rising at a faster rate than inflation, impacting accessibility and affordability for families and businesses, which is not sustainable."

The five largest ASC companies — Dallas-based United Surgical Partners International, Nashville, Tenn.-based AmSurg, Deerfield, Ill.-based SCA Health, Nashville-based HCA Healthcare and Brentwood, Tenn.-based Surgery Partners — saw an increase of around 500 centers since 2011. 

In November 2021, Dallas-based Tenet Healthcare, parent company of USPl, said it would acquire Pismo Beach, Calif.-based SurgCenter Development and its more than 90 ASCs for approximately $1.2 billion. In June 2022, USPI and United Urology Group formed a partnership for 22 ASCs. In May 2022, Surgery Partners announced a partnership with ValueHealth to expand access to high-value surgical care. 

Some chains are focusing on physician practice acquisitions over smaller ASC grabs. Eden Prairie, Minn.-based Optum, parent company of ASC chain SCA Health, made six major deals in 2022, totaling more than $8 billion — including acquiring Newton, Mass.-based Atrius Health for $236 million, Houston-based physician group Kelsey Seybold for $2 billion and Dallas-based Healthcare Associates of Texas for $300 million. 

Some leaders are worried about facility-level burdens that come with acquisitions by ASC management companies.

"From the ASC management perspective, I see significant growing pains in setting up management and communication systems, integrating the hodgepodge of an ASC's existing software applications with the management company, for example," Alfonso del Granado, administrator and CEO of Covenant High Plains Surgery Centers in Lubbock, Texas, told Becker's

The labor-intensive manual reporting completed by management companies could bleed into "time that administrators need to focus on service quality and growth and increase bureaucratic workload upstream," he added, which could contribute to consolidation slowing. 

Outside of the growth by major ASC chains, some leaders are looking to a new trend of partnerships between and among independent physicians and independent community hospitals. 

"These models provide opportunities for physicians to have a majority ownership interest in the ASC versus the traditional models of highly capitalized national organizations, private equity and large integrated healthcare delivery systems having a controlling majority interest and also employing some physicians," Mr. Peluso said. 

Leaders predict specialties such as gastroenterology, orthopedics, ophthalmology and ENT will be prime targets for consolidation. 

Private equity gastrointestinal groups grew by 28 percent in 2021, according to a report jointly published by consulting firm Fraser Healthcare and pharma research firm Spherix Global Insights. 

"Despite the increased interest rates and inflation, private equity-backed medical groups and other consolidators have an optimistic outlook about opportunities in the next 12 months," Alejandro Fernandez, CEO of Synergy Orthopedic Specialists in San Diego, told Becker's. "... In a competitive landscape where consolidators are competing for acquisitions, those who can provide value by creating growth opportunities, income repair with ancillaries, efficiency in operations and improving market rate payer contracts will win in the long run."

Other leaders do not predict much consolidation at the facility level. The number of freestanding ASCs has remained relatively flat even as the COVID-19 pandemic exacerbated consolidation in healthcare overall. 

"Independently owned, single-specialty [ASCs] will have a competitive edge as more institutional buyers of healthcare realize the cost savings of moving cases out of the hospital setting and into ASCs," Doug Geinzer, founder and president of Las Vegas-based High Performance Providers, told Becker's in May. "The quality gains will become apparent from the staffing models provided by these specialty surgery centers, offering surgeons more autonomy and the ability to develop a true team environment, not one assigned to them by hospital administration."

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