Why consolidation doesn't work for ASCs 

As an industry built on independent centers, the ASC market has remained fragmented amid increasing healthcare consolidation. 

Seventy percent of freestanding ASCs are independently owned and operated, according to VMG Health's "Annual Healthcare M&A Report 2022." 

This number has remained relatively flat even as the COVID-19 pandemic exacerbated consolidation in healthcare overall. Seventy-two percent of ASCs were independent from 2020 to 2021, according to VMG Health's "2019 Healthcare M&A Report" and "2020 Healthcare M&A Report."

Independent ASCs are the cornerstone of the industry, many leaders say. Becker's reported on 113 independent ASCs opened or announced in 2021, and leaders say the autonomy and ancillary revenue opportunities they offer physicians make them a reliable investment. 

"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. "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."

Physician groups have seen the opposite effect, according to VMG Health's 2022 report. There were approximately 461 deals announced in the sector in 2021, a 145 percent increase from the 2020 volume. 

Many ASC leaders are concerned with the overall consolidation of larger health systems. This growth is "making care delivery less nimble and flexible," Neal Kaushal, MD, chief of gastroenterology and chair of the department of medicine at Adventist Health in Sonora, Calif., told Becker's

"With smaller entities being acquired by larger ones, whether that be health systems, private equity firms or university-based medical centers, increased standardization can also spell a decreased ability to adapt quickly to changes in the healthcare landscape," Dr. Kaushal said. 

ASC chains are opting for a rapid growth strategy — acquiring smaller ASC chains to amass market share quickly. While big deals are still underway, such as United Surgical Partners International's acquisition of both SurgCenter Development for $1.1 billion and eight Compass Surgical Partners ASCs for $78.1 million in 2021, most chains are looking to acquire interest in smaller companies or are looking to partnerships over acquisitions. 

GI Alliance and USPI, for example, formed a joint venture for two Texas endoscopy centers – both co-owned by GI Alliance's physician partners. Brentwood, Tenn.-based Surgery Partners is joining with ValueHealth to build ASCs and deploy ValueHealth's value-based surgical programs at Surgery Partners' current and in-development locations.

Private equity is also looking to independent centers. For Joe Peluso, administrator at Aestique Surgery Center in Greensburg, Pa., private equity is a solution for physician leaders to better position themselves financially while still maintaining some autonomy. 

"The independent ASCs could become the sweet spot for private equity groups to invest in technology as independent, physician-owned ASCs will be challenged to invest in technology and state-of-the-art armamentarium to accommodate new and expanded procedures to continue to grow and retain patients," he told Becker's

Some leaders, however, think the increasing consolidation will make it too difficult for independent ASCs to be financially viable. 

"It is unlikely individual ASCs will be successful on a stand-alone basis. Integration into larger healthcare networks will alleviate challenges ASCs are facing," Matthew Searles, partner at ASC management and development firm Merritt Healthcare Advisors, told Becker's.

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