The Market
According to ACS Industry Overview, August 2024, there are currently 11,000 ASCs in the US and in 2023 the ASC market was valued at $43.2 billion. 50.8% of the ASCs are single-specialty and 49.2% are multi-specialty. In 2023 68% of ASCs remained independent.
These data points have lead to a current trend toward Joint Ventures with physicians, ASC management companies and hospital systems. This is due to staff coverage for anesthesiology, pressures to keep costs down and a focus on higher-margin surgeries.
Trends
There is a shift to outpatient and out of hospital procedures. By 2030, 80% of hospital outpatient demand will be added to Medicare coverage. Investors are attracted to high growth outpatient surgery center types such as Cardiology, GI, Orthopedics and Ophthalmology which also have high reimbursement levels. While the shift in the number of Cardiovascular cases to the ambulatory setting is expected to accelerate in the coming years, cardiovascular outpatient surgery generally carries a significantly higher risk of complications due to the direct manipulation of the heart and blood vessels. The degree, pace, and nature of the shift is likely to differ from what has occurred to date in orthopedics. The reasons are a combination of factors unique to Cardiovascular Surgery such as quality and safety concerns. In addition, the nature of Cardiovascular care is different from orthopedic care.
The market real estate value of ASCs is dependent on the type of specialty center, the location of the center, the condition of the building, and the profitability of the ASC. The current high-growth ASC specialty types are Gastroenterology (GI), Ophthalmology, Cardiology and Orthopedics.
Cardiology is the fastest growing ASC specialty group (13.6% growth from 2019 to 2023) because interventional cardiology is in its initial stages. Gastroenterology has experienced reliable growth due to colonoscopies (7.4% growth from 2019 to 2023) because of the aging population. Ophthalmology has also experienced reliable growth due to cataract surgeries (3.7% growth from 2019 to 2023) because of the aging population. Orthopedics has also experienced consistent growth (5.1% growth from 2019 to 2023) and is most financially attractive to investors because of high reimbursement levels. Orthopedics has been broadened by an increase in joint replacements, clinical and economic advancements in spine surgery and overall patient awareness in personal activity. This has brought orthopedic ASC use to the forefront for patients, physicians, and hospital systems. Other ASC specialty types are also growing and are not being overlooked. Private Equity (PE) often own many ASCs to lower their risk and increase their investments vertically.
Factors Determining Real Estate Value
Key considerations to determining the value of an ASC are the following according to Pinnacle, a national healthcare consulting firm which I wholeheartedly agree with:
- Revenue streams including revenue sources (patient fees and reimbursements)
- Profit margins
- Historical financial data from past 2-3 years
- Staffing - high turnover is a red flag.
- Geographic location – proximity to hospitals, patient demographics, and local competition.
- Market demand for outpatient surgical services – population growth and prevalence of chronic conditions
- Expansion opportunities – expanding services by adding new specialties or operatories
Conclusion
Because healthcare providers continually seek low-cost, high-quality care, ASCs have been and will continue to be attractive an attractive mechanism for both providers and investors. For these reasons, it is one of and will continue to be, one of my healthcare real estate advisory team’s primary focuses. Feel free to contact me for more information. Susan Wilson, CCIM, MBA swilson@lee-associates.com Healthcare Real Estate Advisor
Vice President, Lee & Associates Healthcare
