Physicians Financial Partners recently released a report titled "Considerations for Buying & Financing Ownership in an ASC," which was published in the Nashville Medical News.
Jim Shaub, partner at Physicians Financial Partners, penned the report, which outlines a brief history of ASC ownership and physician investment. He touches on the Federal Physician Self-Referral Act of 1993, known as Stark Law, in which physicians can obtain ownership under safe harbor provisions. The regulatory environment surrounding ASCs becomes more complex in the 34 states requiring a form of certificate of need.
Here are six key observations from the report:
1. Around two-thirds of ASCs are 100 percent physician-owned or joint ventures between physician owners, hospitals and/or ASC management companies.
2. The ASC market has been saturated, as physicians are not building many new centers each year. Instead, physicians interested in ASC ownership typically invest in an existing center.
3. Professionally managed ASCs — those partnering with ASC companies — have higher profit margins and physicians report more time to focus on practicing medicine.
4. Physicians should buy into ASCs at fair market value, often ranging from $100,000 to $300,000 depending on the ASC's financial success and case volume. However, new centers may have buy-ins for less than $100,000 whereas mature, successful ASCs may have a buy-in greater than $300,000.
5. Physicians can finance buy-in investments; banks may be a good source of capital but require a "blanket" lien on personal assets, spousal guarantee and, on occasion, an assignment of disability and life insurance. Physicians should understand the terms of their loan before signing on the dotted line.
6. Healthcare lenders are also available to provide loans with a tailored structure to the ASC business, not the physician's personal assets. "These companies are often competitive with banks on interest rates but have added expertise in the ASC industry, which can be an advantage if the center undergoes unfavorable or adverse changes," according to the report.
Healthcare specialty lenders collaterize the loan by the physician's purchased shares, which eliminates additional guarantees and liens on personal assets. The lender can also structure repayment terms to match expected distributions and provide a cushion for income taxes without out-of-pocket repayment.
Contact Jeff Shaub at 615-788-1006 or jshaub@physiciansfp.com.