Andrew Hayek, president & CEO, and Joe Clark, executive vice president and chief development officer, of Surgical Care Affiliates discuss the ASC transaction market and SCA's considerations for acquiring centers. During its time as an affiliate of HealthSouth, SCA acquired very few centers; however, SCA has since become a fully independent company and, over the last 18 months, an aggressive acquirer of centers.
Q: How has SCA's acquisition strategy changed since becoming independent of HealthSouth?
Andrew Hayek: We fully separated from HealthSouth in mid-2007. Since then, we have launched a new culture, based on patient care and serving our physicians. We have recruited more than a dozen new senior leaders, and we have achieved growth in revenue and profitability for our centers. Much of this improvement has been based on developing best practices in key areas — clinical, volume growth, supplies, labor and billing — and sharing those best practices systematically across our centers. We also have built the capability to be an acquirer of single-site surgery centers and multi-site companies. We have built our team and have the financial resources to support our efforts — we generate free cash flow, we have more than $100 million of available liquidity and we have a supportive capital partner.
Joe Clark: Currently, we're on track to bring on about one new center a month in 2010.
Q: Are you finding more ASCs are interested in being acquired than in the past?
AH: Given the political environment, there is a lot of uncertainty around reimbursement and regulation. Regardless of the direction of healthcare reform, provider reimbursement rates will continue to be under pressure, and that creates a level of anxiety for ASC owners. There is also an increased intensity of Medicare surveys and infection control standards and documentation. Facilities have to operate more and more efficiently to be successful, and benefits of scale have led more ASCs to consider bringing in a partner to help them survive and thrive in a very competitive environment.
Q: What do you look for when evaluating a center for a possible acquisition?
AH: First and foremost, we look for strong clinical care — an environment and set of practices that support patient safety and a focus on patient comfort and convenience. We also look for a group of committed physicians who will continue to work together in advancing the center. We don't come in with any preconceived notions about deal structure or our ownership share. If an ASC is strong clinically and has great doctors, we are willing to tailor the deal to fit the circumstance.
JC: We're actively seeking both single and multi-site operations as well as single and multi-specialty centers. Whether or not we move forward with a deal comes down to the attributes of the center — the tightness of the partnership, how well the physicians work together and high-quality clinical operations.
Q: Are there certain specialties that make an ASC more attractive?
JC: We are particularly interested in orthopedics, ENT, GI and ophthalmology, which can be very profitable service lines for single or multi-specialty centers. We haven't focused as much in plastics or cosmetic surgery, given their reimbursement attributes.
Learn more about Surgical Care Affiliates.