'Time to bring in the suits': Will independent ASCs fade away?

Some ASCs are having to forgo independence, looking to hospital and management company partnerships to handle skyrocketing operating costs.

For Jayesh Dayal, MD, an anesthesiologist at Rockville, Md.-based White Flint Surgery, "remaining independent is becoming impossible."

"We have absolutely dismal rates, no scope of negotiating anything at our scale — with the insurers or the vendors — and the personnel costs are out of control," he told Becker's. "For 2024, we have started talking to national chains, private equity firms and hospital systems to partner with so that the rates get better, the cost of disposables and implants get better and the day-to-day operations and RCM are optimized."

The ASC market largely remains independent; about 70 percent of ASCs are independent as of 2022, according to a report from VMG Health. 

But despite ASCs' fragmented nature, the industry is consolidating. The number of surgery centers under partnership by a national operator increased from 1,752 in 2021 to 1,804 in 2022, according to the report. Additionally, ASC giants United Surgical Partners International, AmSurg, SCA Health, HCA Healthcare and Surgery Partners collectively have added more than 500 centers since 2011.

Outside of rising costs, some ASC leaders also say consolidation will compound staffing issues for independent centers. 

"While demand for higher pay has catapulted for most industries in this country, we have and will continue to see drastic pay changes [increases] and longer days due to demand in the ASCs," Ken Schaff, administrator at Brentwood (Tenn.) Surgery Center, told Becker's. "Unfortunately, this will be bad news for independent ASCs, as the centers that are consolidated with large ASC partners and/or hospital systems will have the advantage of deeper pockets and larger pools of staff.

This could escalate, as some healthcare leaders believe independent ASCs are the next target for private equity firms.  

Inflationary pressure has turned private equity investors toward other deal strategies, such as eyeing add-ons small enough to purchase without debt. 

"Due to excessive regulation and monopolies, independent healthcare providers will vanish." Jose Rivera, administrator of The Villages, Fla.-based Tri-County Heart Institute, told Becker's. "Private equity will continue the takeover alongside hospitals. Health insurance will continue to pay less. The shortage of medical professionals … the future is not bright with what is going on today."

Private equity already has been eyeing ASCs for the cost savings they can offer. Private equity strategy shifts could drive transactions among independently owned ASCs, according to a separate report from VMG. VMG Health also expects private equity to eye "smaller add-on deals aimed at consolidating several ASCs in an area."

"The days of in-house billing, long-term relationships with one's team, the independence to run your own outfit, are sadly gone," Dr. Dayal said. "It was fun while it lasted, but it's time to bring in the suits — like the hospital days of yore. "

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