Why ASC deals spiked after a lull in early 2019 — 3 insights

Nick Beale, director at Hammond Hanlon Camp, keeps a close eye on ASC transactions. He shared his observations on the topic with Becker's ASC Review.

Note: Responses were lightly edited for style and clarity.

Question: What factors drove ASC transactions to rebound in the second quarter of 2019?

Nick Beale: As surgeries that have traditionally been considered inpatient procedures continue to shift into outpatient settings — to both reduce costs and appeal to patients' preferences for outpatient care — we've seen increased interest and competition in this space. Both health systems and private equity sponsors are making big bets on ambulatory care. Factors driving health systems' interest in ASCs include the desire to widen their continuum of care to stay competitive from a size perspective and reap the benefits of an integrated network from a technology and acuity management standpoint. Meanwhile, private equity sponsors are seeking to build platforms around this concept, which could be suitable acquisitions for health systems down the line.

Q: What does the rebound in transactions signify? Why is it important to watch?

NB: Ambulatory investment, including investment in ASCs, continues to be viewed as a critical strategic move among healthcare organizations, especially large health systems, Hammond Hanlon Camp research shows. Last year, [Dallas-based] Tenet Healthcare Corp. increased its investment in an ASC chain even as it divested other assets. Meanwhile, a recent poll shows 48 percent of hospitals and health systems plan to make additional ASC investments.

What do you expect ASC transaction activity will look like in the next quarter and the remainder of the year?

NB: Transaction volume should continue at a steady pace, as the latest CMS proposals continue to increase the list of reimbursable procedures, such as whole hip and knee replacements, as well as the amount of reimbursement for procedures performed in outpatient settings. But operating an ASC is not without challenges. Some independent ASCs face increased difficulty recruiting physicians at a time when hospitals employ 44 percent of physicians. Additionally, lower profit margins mean ASCs must be highly efficient, perform well on quality and provide an excellent patient experience, all while keeping costs low. They also must be skilled in using data analysis to determine which services best meet the needs of the market.

Would you like to participate in future Q&As? Email Angie Stewart: astewart@beckershealthcare.com.

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