Selling Your Surgery Center to a Strategic Partner

For over 20 years ASCs Inc. has successfully assisted physician-owners of hundreds of surgery centers and surgical hospitals to achieve their goals by aligning them with the best strategic partner and advising them on how to obtain maximum value for their ASC asset. Virtually every engagement is unique and by clearly understanding the objectives of our clients we create a strategy that ensures that our clients will have the right partner that will help them achieve their goals.

The strategies we recommend and implement include obtaining high value competitive bids from leading ASC management companies and Private Equity Firms, or alternatively forming a 3-way partnerships with the right ASC management company and a local hospital so their centers can benefit from higher-paying hospital contracts while retaining the efficiencies and economies of a surgery center, with a professional, profit-oriented management partner. Or, for low earning centers the recommended strategy may be to sell a minority interest that will enable them to increase profits to a point where they will then realize a significantly higher value. Whether it is getting the highest price, identifying partners who can improve contracting, recruiting physicians, improving management processes or the myriad of other factors that result in highly successful centers, ASCs Inc. has the expertise and experience necessary to help you best navigate this process and create the absolute best outcome for your center.

7 Reasons to Sell Your Surgery Center to a Strategic Partner

How to Increase the Value of Your ASC

Each year many ASC physician-owners seek to sell interests in their centers for a variety of reasons. The reasons range from exit strategies for retiring partners to attracting a strategic partner that will improve the financial performance of the center and increased distributions to the partners, or just to take some money off the table while selling prices for ASCs are high. Whatever the reason for the sale, there are steps you can take beforehand to significantly increase the value of your center and make it more attractive to multiple buyers so they will compete to invest and thus increase the selling price.

Since the value of your center is directly tied to your center’s profitability, anything you do to improve your center’s bottom line will increase the value of your center. Here are strategies that, if successfully executed, will accomplish this:

  • Are you negotiating new contracts when old contracts expire? Do not allow “evergreen clauses” to automatic extend existing contracts — lost revenue
  • Compare health plan contracts to each other to determine which health plans are below market rate and take action to renegotiate.
  • Determine rates for high volume cases by specialty at your center and compare health plans rates to Medicare — should be at least 200 percent of Medicare.
  • Carve-outs for implants at cost or cost-plus — especially for orthopedics, podiatry and GYN specialties — will greatly improve profitability for these cases
  • Carve-outs of high volume cases from grouper rates will ensure greatly improved profitability of these cases
  • Identify targeted specialties for your center to eliminate a shotgun approach
  • Use center’s resources for introduction to targeted specialties and physicians, referrals from current partners for targeted specialties, and referrals from supply vendor representatives.
  • Have shares available for newly recruited physicians as incentive to maintain loyalty to center — may need to do syndication in near future.
  • Develop forward-looking proforma and term sheet to show prospective partners the value of their investment in the center
  • Maintain accurate financial statements that reflect your cost per case by specialty – have a tool to monitor your cost
  • Create a weekly report to monitor hours per case, supply cost per case, and overtime to reduce operations costs
  • Adjust daily case schedule to consolidate rooms to reduce staffing cost
  • Overlap nursing staff in two shifts to cover afternoon cases to eliminate overtime
  • Coding is key to reimbursement — use a professional coder especially for orthopedics and podiatry
  • Monitor delays in billing of claims — coding
  • Research, correct and/or eliminate delays in operative reports beyond four to five days
  • Determine collectability of accounts over 90 days and take action
  • Monitor accounts with no payment transaction over 60 days — re-bill accounts every 30 days to reduce delays in payment
  • Become member of a group purchasing organization (GPO) to realize significantly lower costs, especially on implants
  • Standardize implant vendors to one to two vendors for each specialty to get preferred vendor pricing for volume
  • Obtain implants on consignment to lower implant inventory
  • Implant carve-outs ensure implant cost is captured in health plan reimbursements
  • How will your ASC business be valued?
  • What criteria go into valuing your ASC business?
  • Value of a minority interest vs. a majority interest
  • How will your out-of-network cases impact value?
  • What multiples are being offered for similar centers?
  • What will be offered for your center?
  • What is the value of your ASC/MOB real estate
  • How to increase the value of my surgery center’s real estate
  • Who are the buyers?
  • How to market?

Successfully executing these strategies and knowing the answers to these questions will enable you to negotiate from a position of strength. If the strategies above are successfully executed you will greatly increase your center’s profits and the value of your center. Since centers are valued based on a multiple of earnings, every $1 increase in profits results in a $7 to $8 increase in center value.

To maximize the value of your center and to have a choice of strategic partners, we seek partnership proposals from at least three to four of the 20-plus ASC management companies [and the local hospital]. This allows you to select the partner(s) that will best help you achieve your goals and gives you negotiating leverage to obtain the highest price and best terms.

The Time To Sell Is Now

Have you ever wondered, how to sell your surgery center? Or how to value your surgery center or endoscopy center? ASCs Inc is a specialist in the sale of a surgery center. We have special expertise in physician-owned surgery centers, the valuation of them, and can bring you potential buyers. We differ from realtors or other brokers of surgery centers in that we have the most experience nationally in this physician-owned surgery center niche, and understanding the unique needs of physicians, their liquidity and cash flow. We have potential buyers who want to invest in those surgery centers we work with. So if you’ve ever considered how to sell your surgery center real estate, this is the best time of all to do so. Contact us and we can explain how the sale and leaseback of your surgery center real estate can maximize the value of your surgery center real estate in 2020.

You can take advantage of the current advantageous environment for selling a portion of your center. The market for ASCs & ECs will change; it is only a matter of when. ASCs Inc. has assisted in development, merger, valuation and acquisition transactions for over 500 physician-owned ASCs, endoscopy centers and surgical hospitals since 1984. If you would like to discuss your situation and goals in complete confidence please call Jon Vick, President of ASCs Inc. at 760.751.0250 or by e-mail at [email protected] We are looking forward to discussing how ASCs Inc. can assist you in achieving your goals.