Acquisitions of healthcare real estate such as ASCs and medical office buildings are on the rise again after a brief lull at the beginning of the COVID-19 pandemic.
The healthcare landscape is becoming increasingly challenging for independent physicians and surgery centers with significant downward reimbursement pressure from insurers and overhead, such as malpractice insurance and IT systems, continuing to climb.
These factors, coupled with economic challenges brought on by the pandemic, have significantly reduced the margins under which independent groups, according to Ed Hellman, MD, president and interim CEO of Indianapolis-based OrthoIndy.
Large organizations, such as specialty groups, hospitals and health systems, use their size to combat this trend, but independent ASCs find it more challenging as smaller organizations receive less favorable payer contracts.
However, as procedures continue to migrate to the outpatient environment, demand increases for groups that perform tasks previously performed in the hospital — and surgery centers are no exception. This creates a favorable market to sell an independent ASC, and more physician-owners are taking advantage of the increased value of their facilities.
"If you're running a freestanding, unaffiliated ambulatory surgery center, I would stand there with a big empty bucket and wait for people to pour money into it," Michael Ast, MD, of New York City-based Hospital for Special Surgery, told Becker's. "Right now, between private equity, surgery center management companies and health systems, there is no question people are trying everything they can do to get surgery centers in their network."
Hospital systems and national ASC chains are partnering with physicians in joint ventures and snapping up surgery centers in key markets.
In November, Dallas-based United Surgical Partners International, a subsidiary of Tenet Healthcare, announced a $1.2 billion deal plan to acquire SurgCenter Development and ownership interest in 92 of its ASCs.
De novo surgery center development also will continue as health systems look to capitalize on the transition of services to the outpatient environment. In addition, independent physicians are looking to ASCs for more control of the care they provide as well as the opportunity to financially benefit down the line in an ultimate sale of the ASC.
In October, more than $759.7 million changed hands in real estate transactions involving ASCs and medical office buildings. One mega-money deal in November saw Bahrain-based investment bank GFH Financial Group splash $200 million to acquire 11 medical office properties in the U.S.
"The pandemic has underlined a need for more outpatient services and continued demand for healthcare services. As a result we are seeing strong investor sentiment in the medical offices sector," said Nael Mustafa, co-chief investment officer-real estate at GFH. "This trend is particularly true in the U.S., where healthcare spending comprises around 18 percent of [gross domestic product], compared to around 10 percent for most other developed countries."