In the 2017 ASC Valuation Survey, HealthCare Appraisers outlined how an ASC's location in a certificate-of-need state and status as an out-of-network center affects the center's valuation.
Buyers are sometimes willing to pay a premium for ASCs located in CON states. According to the ASC company respondents, the premium can be anywhere from less than 0.25 multiple to more than 1 multiple:
1. No premium: 26 percent
2. Less than 0.25 multiple
3. 0.25 to 0.5 multiple: 42 percent
4. 0.51 to 0.75 multiple: 11 percent
5. 0.76 to 1 multiple: 0 percent
6. Greater than 1 multiple: 16 percent
The center's out-of-network status and case mix may also affect how buyers approach the deal. Here is the out-of-network percent revenue that exceeds the buyer's risk tolerance for the survey respondents:
7. 20 percent of revenue: 71 percent of buyers
8. 40 percent of revenue: 19 percent of buyers
9. No threshold: 10 percent of buyers
When buyers consider out-of-network centers, many adjust valuation models and pricing. The most common adjustment method is converting the revenue in-network to control for risk. Here is the breakdown:
10. Control revenue to in-network: 68 percent
11. Apply higher risk factor/discount rate: 5 percent
12. Adjust multiples downward: 14 percent
13. Combination: 5 percent
14. Walk away because the risk is too great: 5 percent
When centers aren't contracted with any commercial payers, the magnitude of multiple reduction for the center is:
15. Less than 0.5 multiple: 7 percent
16. 0.51 to 1.5 multiple: 14 percent
17. 1.51 to 2 multiple: 21 percent
18. Greater than 2 multiple: 57 percent