3 ways to value ASCs

At the Becker's ASC Review 13th Annual Spine, Orthopedic and Pain Management-Driven ASC Conference + The Future of Spine, Todd Mello, MBA, founding partner of HealthCare Appraisers, discussed how to value ASCs.

First and foremost, Mr. Mello said, valuation is a forward-looking process, though it uses information from the past.

"What we're going to do is perhaps use historical data and we're going to try to use that data as a method to predict what we think is going to happen in the future," Mr. Mello said.

There are three ways in which appraisers can value ASCs: the income approach, the market approach and the cost or asset approach.

The income approach converts an anticipated future economic benefit into a single amount valued at the present. This approach is mainly used when a business is profitable, Mr. Mello said.

The second method of valuation is the market approach. In this approach, ASCs are valued based largely on surrounding facilities. Mr. Mello said one can think of real estate valuation to understand the market approach.

"The appraisal comes out and says what other similar houses have sold in and around your house. Then they start making adjustments. You have a pool so you have more value. They have a finished basement so they have more value. [This method] looks at what is happening in the marketplace," Mr. Mello said.

Thirdly, there is the asset or cost approach, which Mr. Mello said is mainly utilized for startup centers or perhaps for an ASC that is recovering financially.

"If your center is a startup center and you're just syndicating today and getting things going, you want to do a projection and a feasibility analysis as to what your center could generate over time," Mr. Mello said.

More articles on ASC issues:

Staying state-of-the-art: The investments that ASC administrators most recommend
7 tips for ASCs to ace the accreditation puzzle
The financial pulse of your ASC: 4 essential thoughts on revenue cycle management

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