Out-of-network strategies can affect ASC value, according to the 2019 ASC Valuation Survey by HealthCare Appraisers.
HealthCare Appraisers and the Ambulatory Surgery Center Association collected data from 26 companies, including ASC management companies, investment bankers and business brokers to compile its report. Three things to know:
1. For adjusting valuation models and pricing for out-of-network centers, 71 percent of respondents convert revenue to in-network. Thirteen percent of respondents apply higher risk factors and discount rate, and another 13 percent adjust valuation multiples downward.
2. Respondents also weighed in on effective reduction for multiples paid for an ASC with an out-of-network strategy:
- Less than 1.0x: 12 percent
- 1.1X to 2.0x: 46 percent
- 2.1x to 3.0x: 23 percent
- 3.1x to 4.0x: 12 percent
- Greater than 4.1x: 7 percent
3. Twenty-three percent of respondents did not have a threshold where the percentage of revenue that was out-of-network would exceed the company’s risk tolerance. However, several respondents did:
- 1 to 10 percent of revenue out-of-network: 24 percent report this exceeds risk tolerance
- 11 to 20 percent of revenue out-of-network: 34 percent report this exceeds risk tolerance
- 21 to 30 percent of revenue out-of-network: 13 percent report this exceeds risk tolerance
- 31 to 40 percent of revenue out-of-network: 3 percent report this exceeds risk tolerance
Three percent of respondents felt out-of-network was a positive attribute.