From private equity to operation costs, six ASC leaders connected with Becker's to discuss the consolidation trends they are monitoring in 2023.
Editor's note: These responses were edited lightly for clarity and brevity.
Alejandro Fernandez. CEO of Synergy Orthopedic Specialists (San Diego): Despite the increased interest rates and inflation, private equity-backed medical groups and other consolidators have an optimistic outlook about opportunities in the next 12 months. Specialties like gastroenterology, orthopedics, ophthalmology, ENT and others that derive significant earnings from their ASC operations are prime targets for acquisition and consolidation. Due diligence continues to be a focus area to ensure value creation exists and reduce risks for all. In a competitive landscape where consolidators are competing for acquisitions, those who can provide value by creating growth opportunities, income repair with ancillaries, efficiency in operations and improving market rate payer contracts will win in the long run. Multiples of EBITDA can only get you so far.
Alfonso del Granado. Administrator and CEO of Covenant High Plains Surgery Centers (Lubbock, Texas): I don't see a significant uptick in ASC acquisition this year, though we may continue to see consolidation among management companies. I cannot speak to the acquisition side, but from the ASC management perspective I see significant growing pains in setting up management and communication systems, integrating the hodgepodge of an ASC's existing software applications with the management company, for example. The result is labor-intensive manual reporting at some of the largest management companies, which takes away time that administrators need to focus on service quality and growth and increases bureaucratic workload upstream. It would not surprise me if this is one of the factors contributing to the slowdown in consolidation.
Curt Collins. COO of Palmetto Surgery Center (Columbia, S.C.): We are working to join a larger healthcare system's group purchasing organization, which will reduce our supply costs by 21 percent over the next year. We will remain an independent surgery center as we have in the last 22 years; however, leveraging this purchasing agreement will be a win for both organizations driving supply costs down. This is nothing new in the industry because this has been done nationally with competing hospitals entering into these types of GPO agreements to leverage costs, which is a win for both (or more) organizations.
Joe Peluso. Administrator at Aestique Surgery Center (Greensburg, Pa.): Consolidation trends in ASCs for 2023 will continue to focus on affordability. Healthcare costs have continued to escalate, rising at a faster rate than inflation impacting accessibility and affordability for families and businesses, which is not sustainable. The ASC industry continues to expand with hundreds of new facilities scheduled to be built in 2023 because CMS is updating regulations and payments that will allow more complex surgical procedures to be performed safely and cost effectively in an ASC setting.
The major players in the marketplace will continue to grow. However, new trends that involve collaboration and partnerships between and among independent physician specialists and independent community hospitals/systems will develop innovative strategic models. These models provide opportunities for physicians to have a majority ownership interest in the ASC versus the traditional models of highly capitalized national organizations, private equity and large integrated healthcare delivery systems having a controlling majority interest and also employing some physicians.
Mark Morgan. COO of St. Mary's Huntington (W.Va.) Internal Medicine Group: Continued capital venture consolidation of ASCs and, specifically, specialty ASCs.
Paul Hiltz. CEO of NCH Healthcare System (Naples, Fla.): The consolidation trends I'm watching are on the hospital side. I'm watching to see if large national systems actually deliver better care at lower costs than an independent hospital can provide.