DOING BUSINESS


Key Trends in ASC Valuations Benchmark and use common valuation methodologies BY TAMI M. BOLDER


Since Medicare approved payments to ASCs in 1982, the number of ASCs has grown substantially. Fur- ther, as the number of pro-


cedures that can be performed in an outpatient setting has grown, the utili- zation of outpatient surgery centers has increased in recent years from 50.5 percent of total surgeries in 1990 to 65.9 percent of total surgeries in 2014, according to VMG Health’s “Multispe- cialty ASC Study Intellimarker 2017.” The number of ASC transactions is rising as hospitals are showing an increased interest in purchasing ASCs for strategic reasons and physician owners are looking to sell due to retire- ment or other reasons (see article on page 14 of October 2014 ASC Focus). Many ASCs are still primarily phy- sician-owned, however, the number of investments from other sources is increasing, according to IBISWorld’s “Ambulatory Surgery Centers—US Market Research Report.” Both the reports state that large ASC opera- tors and hospitals are becoming more prevalent as buyers. What is consid- ered a typical transaction structure has changed over time and these structures have increased in complexity. The increase in transaction activity in the health care industry has resulted in increased regulatory scrutiny. Hav- ing an accurate valuation is criti- cal for avoiding costly mistakes and maintaining compliance. In particu- lar, payments for assets acquired in a health care transaction need to be care- fully analyzed to ensure that no value is attributed to the volume or value of referrals. Both for-profit and not- for-profit health care providers must


ensure that any exchanges between them meet fair market value standards if they accept payments from govern- ment programs. Obtaining an inde- pendent valuation to determine fair market value will help both parties in a transaction defend the purchase price and avoid common pitfalls.


Benchmarking


An important step in determining the value of an ASC is to review key oper- ating metrics and see how the subject


20 ASC FOCUS JUNE/JULY 2018 |www.ascfocus.org


ASC compares to industry benchmarks. Several organizations provide industry benchmarking surveys. To get a com- plete picture of an ASC’s financial and operational performance, consider the following metrics.


Physician user metrics per physician ■■ ■■


Age


Whether the physician is an investor in the center


■■ Surgical specialty ■■


Stage of practice: new, building phase, stable, near retirement


The advice and opinions expressed in this column are those of the author and do not represent official Ambulatory Surgery Center Association policy or opinion.


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