FEATURE


“If a physician is contributing an ASC ownership interest to a trust, an appraisal may be needed for Internal Revenue Service reporting.”


Current Factors Influencing Value To begin gaining a general under- standing of your ASC's worth and whether it is likely to command a price toward the higher or lower end of your market, look at your ASC's defining details, including number of physicians and specialties. In these cases, more tends to be bet-


How Much Is Your ASC Worth?


Learning your surgery center’s value can help with short- and long-term planning BY ROBERT KURTZ


A


fter ASC owners engage ASCs Inc. in Valley Center, Califor- nia, to help facilitate a sale, the process they follow involves collecting signifi- cant due diligence material and devel- oping a confidential information mem- orandum (CIM), says Jonathan Vick, the company’s founder and managing partner. This document shares finan- cial and operational information about the ASC that is critically important to prospective buyers. It also helps inter- ested buyers determine what they will offer for the center. A CIM can reach 50 or more pages,


Vick says. This, he says, is indicative of the complexity of determining the value of an ASC. “There are many dif- ferent factors that affect value upward or downward. This includes specifics about the ASC, who the buyer is and


12 ASC FOCUS AUGUST 2021 | ascfocus.org


how much of the ASC is being sold. There is no simple formula.” Matthew Muller, director


for


HealthCare Appraisers in Denver, Col- orado, cites several instances when an ASC appraisal is valuable. First, he suggests obtaining one to determine the value of your ASC when decid- ing whether to engage in a transac- tion. Second, he recommends hav- ing one in hand when transacting an ownership interest in the ASC with a health system, management company or other investors and during transac- tions between shareholders, including physician buy-ins and redemptions. “In addition, if a physician-owner


is undergoing a marital dissolution, they will usually need to learn the value of their ownership interest for purposes of equitably splitting the marital balance sheet,” Muller says.


ter, Muller says. “The number of phy- sicians performing cases at the center is a determinate of value as having more physicians can help alleviate risk of a material downturn in case volume should a physician leave. Having more specialties performed at an ASC can also help alleviate the risk a single- specialty ASC may face, such as pro- cedures from that specialty moving to an office-based setting.” The types of specialties performed


in your ASC also can have a significant influence on value, Vick says. “Ortho- pedics, spine and cardiology are cur- rently considered high-value special- ties, whereas urology, podiatry and plastics are considered lower-value specialties. Specialty value is influ- enced by factors including revenue, profitability and volume.”


Having many physicians perform- ing cases in valuable specialties, however, is not necessarily a recipe for high valuation. “You also want a historical financial performance that shows stable or consistent growth as that may demonstrate an ASC has successfully executed its manage- ment strategy.” Quality of earnings is another area


worth examining, Vick says. Quality here refers to whether revenue is gen- erated by in-network or out-of-net- work payer contracts. Out-of-network earnings are considered significantly less valuable than in-network earn- ings. “The reason is that out-of-net-


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