bility and minimal disruptions from emergencies. At the same time, ASCs have the benefit of offering a lower cost alternative to the hospital envi- ronment. In general, they are better able to contain costs and have less overhead than hospitals. It is the ulti- mate trifecta that results in a good investment for PE: patients, physi- cians and payers all are happier. Over time, thanks to advances in techniques and technology,


have been able to perform a growing number of types of procedures. Most recently, the Centers for Medicare & Medicaid Services (CMS) added total knee arthroplasty, a mosaicplasty pro- cedure and six coronary intervention procedures, including cardiac stent- ing, to the list of Medicare’s covered surgical procedures at ASCs in 2020. CMS found that these procedures “can be safely performed in an ASC setting and would not pose a significant safety risk to beneficiaries if performed in an ASC setting.” CMS also is considering adding 13 additional coronary inter- vention procedures to its ASC covered list in the future. Recently, we heard an ASC valua-

tion expert say that healthcare is often referred to as “recession-proof.” With the advancing age of Baby Boomers, it is likely that healthcare services will con- tinue to remain in high demand. Health- care’s impact on the economy is signifi- cant, accounting for almost 20 percent of the gross domestic product and growing, according to CMS data. This makes for a solid investment for PE. With a reputation for quality care at reduced costs, increased opportunities for reimbursable cases and protection from economic downturn, PE contin- ues to show strong interest in investing in ASCs.

ASCs’ Interest in PE Physicians want to practice medi- cine without the headaches of admin- istrative tasks and chasing insurers

As healthcare spending continues to increase and more currently hospital-based procedures are shifted to the ASC setting, PE’s interest in investing in ASCs is unlikely to slow down.”

—Michael F. Schaff and Alyson M. Leone, Wilentz Goldman & Spitzer, P.A.

for payment. PE investors allow doc- tors to do just that. Often, PE firms already have relationships with pay- ers and strategic expertise that can help grow ASC revenue and profit. They can provide capital for improve- ments, expansion and technology that facilitates data aggregation. Physicians continue to remain inter-

ested in a PE investor, since, plainly stated, PE firms are offering more money than other investors, including physicians and hospitals. PE is paying anywhere from 6–12 times EBITDA for the ASCs. EBITDA, or earnings before interest, tax, depreciation and amor- tization, is considered the benchmark

of an ASC’s profitability. Purchases are generally structured to give sell- ers long-term capital gains treatment, which creates significant tax savings. Many physicians consider this pur- chase price a windfall, and physicians who are close to retirement sometimes view these purchases as an exit strategy that allows younger physicians to take some money off the table immediately by realizing value for their interest now while continuing to share in the growth of the center.

Common Terms in PE Transactions An initial consideration in structuring a transaction is whether the PE firm


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