Single and multispecialty ASCs: What is the best way to go?

Ambulatory surgery centers can take a multifaceted approach to the procedures they offer, but for some ASCs narrowing their focus and becoming a specialty center has created a highly profitable business model.

Each option presents its own risks and challenges, but when executed properly single-specialty ASCs have an opportunity to thrive and to grow.

Rena Courtay, vice president of operations for the SUNergy region of Surgical Care Affiliates; Lisa Austin, vice president of facility development for Pinnacle III, of Colorado; and Kathy Stout, administrator for the Eye Surgery Center of the Carolinas — another SCA facility; all have single specialty ASC experience.

Ms. Courtay is a regional vice president overseeing three urology ASCs that are shifting from single-specialty to multispecialty. Ms. Austin is part of an ASC development team and Ms. Stout works in a single-specialty ASC.

The urology ASCs Ms. Courtay oversees bring a unique perspective to the issue. The single specialty centers originally had many benefits including the ability to have economies of scale, a streamlined equipment and supply purchasing model and staff was often highly specialized in the single concept.

But over time, the limited specialty also held them back. The center often had capacity to add more cases outside of urology procedures.

"Block time often goes unused as many of these ASCs have only one physician at a time doing cases and flipping rooms," Ms. Courtay says. "If a doctor is on vacation, the time is unused."

Additionally because a caseload is often lighter than a multispecialty ASC, employees are sent home early and have trouble meeting 40 hour work week requirements.

Adding physicians to a single specialty staff is also complicated if it's through a physicians' group. In Ms. Courtay's experience area physicians often do not want to join into a group, or are not invited because the focus is squarely on the center.

The physician partners of the centers Ms. Courtay oversaw, decided its appeal would be wider with a multispecialty approach.

Ms. Austin added that part of the appeal for single-specialty ASCs lies in the valuation. Private equity firms are driving the acquisition model for ASCs and these single-specialty clinics can build value then sell, if so desired.

Single-specialty ASCs also present a unique issue that doesn’t affect multispecialty ASCs. If there was a rift between surgeons and an unrepairable falling-out, the business "could collapse pretty quickly," Ms. Austin said. She added that single-specialty ASCs often have only the medical devices they need for their particular specialty. If they were looking to expand to a multispecialty facility and the equipment needed for other specialties didn't overlap, the ASC would need to invest in a whole new set of equipment. This cost may be prohibitive.

For the Eye Surgery Center of the Carolinas, an ophthalmology ASC, the location has made it a highly in-demand. The center's customer base is an elderly population and the center is located near a retirement resort known for its golfing. The center specializes in a variety of high-demand surgeries from its clientele. As generations age, it continues to see thriving business.

"By concentrating on the more mature segment of the population, the physicians who founded this center were able to concentrate on a specific population that lived in this location in more abundance," Ms. Stout said.

The unique combination of location paired with the development of an ASC to address a common problem in the demographic base has made the single specialty ASC a highly profitable operation that has thrived.

Although multispecialty ASCs have a wider customer base, the single specialty model works and can be highly profitable when the right circumstances exist.

In a 2016 report released by HealthCare Appraisers, 20 ASC management companies gave single-specialty ASCs a valuation of 3.0 to 6.9 EBITDA when they were considering purchasing a minority interest. When considering a controlling interest, that number rose to 6.0 to 7.9 EBITDA, which is in line with the valuation for multispecialty ASCs.

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