Monica Cintado, senior vice president of development for United Surgical Partners International discusses four factors that could mean a successful merger between two ASCs. In this case, the two merged ASCs would maintain distinct locations rather than consolidate into one space.
1. Both centers are financially strong. According to Ms. Cintado, one of the first traits she looks for in a potential ASC merger is individual financial strength. "There is a level playing field when there's a relatively equal financial position," she says. "If one center is significantly more profitable than the other, it's often difficult for the center that's not as profitable to accept dilution in a merged entity." She says physicians should consider taking a defensive stance and dilute for future growth potential via the merger.
2. Physicians agree with the merger and want to work together. A merger becomes less likely when there is significant physician disagreement or competition, Ms. Cintado says. Physicians should be engaged in the merger discussion from the beginning to decide whether the partnership will work. "Do they feel there's a future together that would allow them to be stronger together than apart, and will they consider recruiting additional physicians into the partnership?" she says. Because physician shares may be diluted in the future by new physician partners, the physicians have to accept the merger as a means to grow the business.
She says history can act as a barrier when two groups within the same specialty come together after years of competition. "Two different orthopedic groups in two competing centers might continue to be competitive [following the merger]," she says.
3. Merging will create a more attractive entity than two separate ASCs. The primary reason to merge two ASCs should be the formation of a more attractive entity, Ms. Cintado says. For example, a larger partnership may be more useful for recruiting additional physicians. If the ASC shares physicians who perform cases at both centers, those physicians may be able to assist in the merger and use their influence to convince their colleagues. "The focus should be on the strength you will have going forward, whether that means looking at attracting new physician partners, improving their contracting strategy or discussions with hospitals about a relationship," she says.
She says if one center is at capacity and the other is less busy, a merger could mean better case times for existing partners and a more comfortable schedule for staff. On the other hand, the two groups should discuss upfront the possibility — and pros and cons— of potentially merging all of the business to one facility at some point in the future. That sort of collaboration should be the focus of the partnership.
Ms. Cintado also mentions that a merger between two ASCs does not preclude the possibility of other growth — for example, a joint venture with a hospital.
4. Leadership could be combined to create one governing body. While potential cost savings may not be the focus of an ASC merger, Ms. Cintado says merging ASCs may be able to achieve some savings by combining the leadership of the two facilities. "You can potentially combine the leadership by having one [overall] administrator and then two clinical leaders at each location," she says. "Having a clinical director is important to manage the day-to-day operations, whereas the administrator's role — managing the partnership and the financial operations — can be done over two locations if they're joined."
She says a potential merger should consider this possibility. Just like competing physicians, competing leadership could present issues for a successful merger. Make sure your strategic plan covers how ASC leadership will change to fit the needs of the new, larger entity.
Learn more about United Surgical Partners International.
Read more on ASC mergers and acquisitions:
-Sell Your Surgery Center For Its Maximum Value: 11 Things to Consider
-5 Tips for Surgery Centers Considering a Merger or Acquisition
-ASC Transactions and Pricing During 2010: 4 Key Concepts
1. Both centers are financially strong. According to Ms. Cintado, one of the first traits she looks for in a potential ASC merger is individual financial strength. "There is a level playing field when there's a relatively equal financial position," she says. "If one center is significantly more profitable than the other, it's often difficult for the center that's not as profitable to accept dilution in a merged entity." She says physicians should consider taking a defensive stance and dilute for future growth potential via the merger.
2. Physicians agree with the merger and want to work together. A merger becomes less likely when there is significant physician disagreement or competition, Ms. Cintado says. Physicians should be engaged in the merger discussion from the beginning to decide whether the partnership will work. "Do they feel there's a future together that would allow them to be stronger together than apart, and will they consider recruiting additional physicians into the partnership?" she says. Because physician shares may be diluted in the future by new physician partners, the physicians have to accept the merger as a means to grow the business.
She says history can act as a barrier when two groups within the same specialty come together after years of competition. "Two different orthopedic groups in two competing centers might continue to be competitive [following the merger]," she says.
3. Merging will create a more attractive entity than two separate ASCs. The primary reason to merge two ASCs should be the formation of a more attractive entity, Ms. Cintado says. For example, a larger partnership may be more useful for recruiting additional physicians. If the ASC shares physicians who perform cases at both centers, those physicians may be able to assist in the merger and use their influence to convince their colleagues. "The focus should be on the strength you will have going forward, whether that means looking at attracting new physician partners, improving their contracting strategy or discussions with hospitals about a relationship," she says.
She says if one center is at capacity and the other is less busy, a merger could mean better case times for existing partners and a more comfortable schedule for staff. On the other hand, the two groups should discuss upfront the possibility — and pros and cons— of potentially merging all of the business to one facility at some point in the future. That sort of collaboration should be the focus of the partnership.
Ms. Cintado also mentions that a merger between two ASCs does not preclude the possibility of other growth — for example, a joint venture with a hospital.
4. Leadership could be combined to create one governing body. While potential cost savings may not be the focus of an ASC merger, Ms. Cintado says merging ASCs may be able to achieve some savings by combining the leadership of the two facilities. "You can potentially combine the leadership by having one [overall] administrator and then two clinical leaders at each location," she says. "Having a clinical director is important to manage the day-to-day operations, whereas the administrator's role — managing the partnership and the financial operations — can be done over two locations if they're joined."
She says a potential merger should consider this possibility. Just like competing physicians, competing leadership could present issues for a successful merger. Make sure your strategic plan covers how ASC leadership will change to fit the needs of the new, larger entity.
Learn more about United Surgical Partners International.
Read more on ASC mergers and acquisitions:
-Sell Your Surgery Center For Its Maximum Value: 11 Things to Consider
-5 Tips for Surgery Centers Considering a Merger or Acquisition
-ASC Transactions and Pricing During 2010: 4 Key Concepts