Are independent ASCs the next private equity target?

 As the ASC industry continues to grow and inflationary pressures persist, private equity strategy will likely begin to shift, according to a Sept. 29 VMG Health report

Inflationary pressure, along with rising interest rates and labor costs, has turned private equity investors towards other deal strategies, according to the report. Investors are looking for smaller deals, where financing might be easier, or eyeing add-ons small enough to purchase without debt. 

Private equity has already been eyeing ASCs for the cost savings they can offer without sacrificing quality. Private equity firms have ownership stake in two of the largest chains by market share, AmSurg and Surgery Partners. Additionally, private equity has been increasingly investing in cardiology and orthopedics, two fast-growing ASC specialties. 

Private equity strategy shifts could drive transactions among independently owned ASCs, which make up 70% of the market, according to the report. VMG Health also expects private equity to eye "smaller add-on deals aimed at consolidating several ASCs in an area."

These transactions are also attractive to physician-owned ASCs because the larger growth infrastructure could allow physicians to focus on patient care. 

This investment could also accelerate ASC industry growth, which is already expected to grow at a compounded annual growth rate of 3.9% to $131 billion by 2031.

"I predict venture capital and private equity money will help spur the rapid growth of ASCs in the next three to five years," Vivek Mohan, MD, a spine surgeon at with Orthopaedic Spine Institute in Hoffman Estates, Ill., told Becker's.  "Within 10 years, many surgery centers will likely be consolidated either regionally or nationally to maximize profitability and streamline delivery models for each pathway — joint replacements, spinal fusions, etcetera. Surgeons need to be vested in ASCs now to come out ahead at the end."

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