Here are six risk factors that have a very high impact on ASC value, according to responses from ASC operators to VMG Health's 2011 ValueDriver ASC Survey. For each risk factor, operators were asked to rate whether the factor had a very high, high, medium, low or very low impact on ASC value. These factors were most commonly thought to have a "very high" impact on ASC value, based on percentage of responses.
1. High level of ownership by physicians in competing centers. Physician ownership in competing centers can cause a conflict of interest for physician-investors when they have to decide where to bring cases. Sixty percent of respondents believed physicians owning stock in competing centers had a very high impact on a center's value. Most respondents believed the risk was somewhat significant, as no respondents responded that a high level of ownership had a low or very low impact on value.
2. Significant number of active physicians nearing retirement age. A core group of physicians nearing retirement age means an ASC will have to recruit heavily once retirement rolls around — a challenge in many markets where physicians are tied to other facilities. Fifty-three percent of respondents believed a center's value could be very highly impacted by a majority of aging physicians. Respondents choosing "high" or "very high" made up 93 percent of the total, suggesting that aging physicians are a significant risk to a center undergoing valuation.
3. High reliance upon few physicians to drive majority of volume/revenue. If a few physicians are responsible for the majority of a center's cases, the ASC could lose significant revenue if one or more of those physicians left. Fifty-three percent believed reliance on few physicians had a very high impact on value.
4. High reliance on out-of-network payors. Perhaps because of the uncertainty of the future of out-of-network reimbursement, 93 percent of operators believed high reliance on OON payors had a very high impact on ASC value. The next most common response was "high" with 7 percent, making it the only other answer selected.
5. High concentration of patient volume/revenue from a single payor. ASC experts agree that a high concentration of volume from a single payor can be risky because the center is at the mercy of the payor's reimbursement changes. Operators were not in total agreement about the risk posed by reliance on a single payor, but more operators responded that the concentration would have a "very high" impact on value than any other answer at 40 percent.
6. Expected growth in future periods. A valuable ASC will have a strategic plan for growth several years into the future, with the intention to recruit more physicians, expand specialty mix or increase profits in other ways. Forty-seven percent of operators responded that expected growth had a very high impact on value, while 27 percent said growth had a high impact and 20 percent thought it had a medium impact.
Learn more about VMG Health.
Read more on ASC transactions and valuation:
-5 Current Trends in Surgery Center Acquisition and Operation
-Deerfield Beach Outpatient Surgery Center Opens in Florida
-Pennsylvania's Erie Shriners to Convert to ASC
1. High level of ownership by physicians in competing centers. Physician ownership in competing centers can cause a conflict of interest for physician-investors when they have to decide where to bring cases. Sixty percent of respondents believed physicians owning stock in competing centers had a very high impact on a center's value. Most respondents believed the risk was somewhat significant, as no respondents responded that a high level of ownership had a low or very low impact on value.
2. Significant number of active physicians nearing retirement age. A core group of physicians nearing retirement age means an ASC will have to recruit heavily once retirement rolls around — a challenge in many markets where physicians are tied to other facilities. Fifty-three percent of respondents believed a center's value could be very highly impacted by a majority of aging physicians. Respondents choosing "high" or "very high" made up 93 percent of the total, suggesting that aging physicians are a significant risk to a center undergoing valuation.
3. High reliance upon few physicians to drive majority of volume/revenue. If a few physicians are responsible for the majority of a center's cases, the ASC could lose significant revenue if one or more of those physicians left. Fifty-three percent believed reliance on few physicians had a very high impact on value.
4. High reliance on out-of-network payors. Perhaps because of the uncertainty of the future of out-of-network reimbursement, 93 percent of operators believed high reliance on OON payors had a very high impact on ASC value. The next most common response was "high" with 7 percent, making it the only other answer selected.
5. High concentration of patient volume/revenue from a single payor. ASC experts agree that a high concentration of volume from a single payor can be risky because the center is at the mercy of the payor's reimbursement changes. Operators were not in total agreement about the risk posed by reliance on a single payor, but more operators responded that the concentration would have a "very high" impact on value than any other answer at 40 percent.
6. Expected growth in future periods. A valuable ASC will have a strategic plan for growth several years into the future, with the intention to recruit more physicians, expand specialty mix or increase profits in other ways. Forty-seven percent of operators responded that expected growth had a very high impact on value, while 27 percent said growth had a high impact and 20 percent thought it had a medium impact.
Learn more about VMG Health.
Read more on ASC transactions and valuation:
-5 Current Trends in Surgery Center Acquisition and Operation
-Deerfield Beach Outpatient Surgery Center Opens in Florida
-Pennsylvania's Erie Shriners to Convert to ASC