What’s new in ASC strategic partnerships in 2018?
What’s new in ASC strategic partnerships in 2018?
Why do some centers command values well above other similar centers? How can you realize maximize value for your center?
Demand for centers has increased.
ASC management company and local hospital interest in investing in all types of surgery centers continues to be very high, with multiple buyers competing to buy centers. After over 30 years of management companies investing in ASCs and making significant profits by helping the centers grow and become more profitable, local hospitals and private equity firms are showing a heightened interest in participating in physician-driven ASCs as these continue to be the high-quality, low-cost providers. Currently there are over 50 potential buyers seeking to invest in a shrinking supply of desirable (i.e. two or more operating rooms, Medicare certified, etc.) centers. What is new is that there is more demand for ASCs, more competition to acquire centers, and multiples that are the highest we have ever seen. Multiples for majority interests have risen to an average of 7-8 times EBITDA, and in some cases even higher.
Who is the best strategic partner for an ASC seeking to sell an interest?
The best strategic partner for any given center is a partner that can help the physician-owners realize their financial and non-financial goals. These typically include helping the center increase profitability and distributions while maintaining the highest quality and efficiency.
The leading ASC management companies can bring strategies that directly impact the bottom line. Depending on the center’s location, contracting situation, and maturity, it is common to see a “lift” in contract reimbursements and substantial savings in supply costs, plus net revenue growth. Cumulatively these can contribute to a very significant increase in profits and distributions.
A hospital partner can also bring advantageous benefits including access to better paying contracts, referrals of cases, supply contracts, and market strategies, such as managed care plans, that can be beneficial to an ASC. However, hospitals usually use a valuation method that results in a lower value for an ASC and there is often an element of mistrust in the impact a hospital will have on how a center is operated and managed.
How have an ASC’s options for a partner changed?
The most interesting option available today is a three-way partnership between physicians, a hospital and an ASC management company. Previously hospitals wanted complete control so they built their own centers and competed with physician-owned centers. Now hospitals need a low-cost, high quality provider to complete their managed care marketing strategy and physician-driven ASCs have proven to be the low cost, high quality provider. In a three-way deal the physicians get the best of both worlds: a hospital partner with better paying contracts and a management company oriented towards quality, efficiency and profitability.
How do ASC owners get the highest price and best partner?
In most cases the physician-owners will be selling their first ASC, and they will be dealing with buyers who have completed dozens or hundreds of transactions and whose goal is to buy at the lowest competitive price possible. Here are 5 key steps to getting the highest price and best partner:
• Engage a consultant with significant ASC transactional experience who knows how hospitals and ASC companies assess value and who has a track record of increasing ASC values.
• Prepare a compelling information package that highlights the history of the center and quantifies future opportunities (contracts, supplies, cases, specialties, new partners, etc.) that will increase profitability.
• Solicit competitive partnership proposals from the leading local hospital(s) and leading ASC management companies, and use the proposals to maximize the value with the most desirable partner(s).
• Select the strategic partner that has the best track record in achieving their physician-partners’ long-term goals. In a 3-way transaction, first select the best ASC management company and let the management company bring the hospital on board as a minority partner.
• Enjoy the future with a strategic partner that shares your values and interests in having a high quality, efficient and profitable ASC.
South Bend Orthopaedics enters into partnership with OrthoAlliance
SOUTH BEND, Ind., March 8, 2023 /PRNewswire/ -- ASCs Inc. is pleased to announce that one of the leading orthopaedic groups in the Midwest, South Bend Orthopaedics (SBO), has entered into a partnership with OrthoAlliance. The partnership will enhance SBO's success and comprehensive approach to delivering specialized bone, joint, and muscle care to more patients throughout northern Indiana. "Our entire team at SBO is excited to join OrthoAlliance, which [...]
Becker’s 19th Annual Pain and Orthopaedic Conference Takeaways
Representatives of ASCs Inc. recently presented at the Becker’s 19th Annual Spine and Orthopaedic Conference held June 16-22, 2022 in Chicago. The following article includes excerpts from two presentations: Jim Freund, Managing Partner of ASCs Inc. was on panels addressing Is it the Right Time to Sell? What Happens Next? And ASC Management and Transactions: Big Trends for 2023 Jason Winokur and Stephanie [...]
Florida Urology Center Enters into Partnership with US Urology Partners
PALM COAST, Fla., July 7, 2022 /PRNewswire/ -- ASCs Inc. is pleased to announce that Florida Urology Center and Physicians Ambulatory Surgery Center has entered into a partnership with U.S. Urology Partners. "Florida Urology Center's mission of providing quality, affordable and compassionate care to its patients was the basis on which we founded our practice and our surgery center," states Dr. Greg Parr, a founding partner. [...]
Is your healthcare organization considering a strategic transaction? 7 Qs with Jim Freund of ASCs Inc.
Healthcare transactions increased in the last year, with physician medical group deals jumping 119 percent year over year, according to a PwC report. The COVID-19 pandemic stressed many smaller physician-owned practices, and costs to run ASC businesses aren’t likely to drop any time soon. Many physicians are looking to merge with other independent physician groups, sell to a private equity firm or to [...]
Selling ASC & MOB Real Estate: The 2022 Outlook and Mistakes to Avoid
Many physicians who own their ASC and MOB real estate may be considering a sale-leaseback of their ASC/MOB real estate to take advantage of the increase in value of medical real estate. Due to the long-term success and profitability of ASCs, excellent credit history and rent coverage, and the likelihood that the ASC will remain in the same location for many years to [...]
Keith LeBlanc Joins ASCs Inc. as Senior Advisor
San Diego, CA., June 1, 2022 – ASCs Inc. is pleased to announce that Mr. Keith LeBlanc is joining our team as a Senior Advisor. “Keith has an incredible background and skill set that will be invaluable as we enter into more complex client engagements,” states Managing Partner Jim Freund. “I have known and worked with Keith for almost two decades and he is [...]
SOLD – Alaska Eye Surgery Center and MOB Real Estate
March 3, 2022 — ASCs Inc. and JH Winokur, Inc. are pleased to announce the closing of a real estate sale-leaseback transaction for the Alaska Eye Surgery Center and Laser Center and Alaska Lasik & Cataract Center located in downtown Anchorage, Alaska. The condominium units are located within the Ann Stevens Building, aka the American Red Cross of Alaska building. The Alaska Eye Surgery [...]
SOLD – Avala Surgical Hospital in Covington, Louisiana
February 23, 2022 — ASCs Inc. and JH Winokur, Inc. are pleased to announce the closing of a healthcare real estate sale-leaseback transaction for Avala Surgical Hospital (“Avala”) located in Covington, Louisiana. Avala is a premier 60,087 square-foot, 21-bed surgical hospital with 8 Operating Rooms and 3 Procedure Rooms, which offers some of the most innovative and minimally invasive surgeries in the south. Avala [...]
National Management Company Purchases Modesto Surgery Center
February 15, 2022 — ASCs Inc. is pleased to announce that the physician-owners of the Modesto Surgery Center have sold the ASC to a national Surgery Center Management Company and a syndicated group of surgeons. The physician-owners of the single-specialty ASC were seeking an exit strategy and a buyer for the ASC business that could provide the resources needed to grow the center, [...]
SOLD – Georgia Orthopaedic MOB/ASC Real Estate
February 9, 2022 — ASCs Inc. and JH Winokur, Inc. are pleased to announce the closing of a healthcare real estate sale-leaseback transaction for the Houston Orthopedic Surgery & Sports Medicine, Middle Georgia Orthopedics and Houston Orthopedic Surgery Center building located in Warner Robbins, Georgia. The 34,697 square foot building is home to the county’s dominant orthopaedic practices. The facility is home to an [...]