At the 18th Annual Ambulatory Surgery Center Conference in Chicago on Oct. 27, a panel that included Executive Vice President and Chief Development Officer of Surgical Care Affiliates Joe Clark, CEO of Meridian Surgical Partners David F. Bacon, Jr., and Vice President of Development at United Surgical Partners International Michael Stroup, participated in a panel discussing private equity's role and view of the ASC market. The panel was moderated by Geoffrey C. Cockrell, a partner with McGuireWoods.
Even though there are better returns on de novo projects, the panelists agreed that the market for de novo ASCs is drying up and they are working more with acquisitions. "The market is clearly over saturated," said Mr. Clark. "I'd say about 80-90 percent of what we do going forward in the foreseeable future will be acquisitions. We have some centers where we have competition in the neighborhood and they've really been struggling."
In many cases, financing is necessary to push forward with ASC development and acquisition, which means the financers become owners of the company. "If these guys own 99 percent of your company, they are going to call the shots," said Mr. Bacon. "If you go into it with that mindset and stay honest about your plans, things will work out. I'm honest about what our issues are and the plans we are putting in place to correct them."
Healthcare reform has added several new opportunities for ASC growth, including joint ventures with hospitals and the possibility of accountable care organizations. "I think there is going to be a significant change in the landscape for this industry as hospitals think about different ways to employ capital and get ready for healthcare reform," said Mr. Clark. "Hospitals and health systems want to work on an ASC strategy for physician alignment, making sure ASCs operate efficiently within the health systems."
As hospitals and health systems look at partnering with physicians for ASCs, it's important for hospitals to have the right type of management model in mind. "We like it when hospitals are interested in the ASC strategy," said Mr. Stroup. "We like that hospitals are interested in ASCs because that's what we bring to the table. We want to make sure that both sides are going into the venture as a partnership. If the hospital has no interest in allowing physician ownership, that's a red flag. It wouldn't be helpful if we bought into an ASC with the hospital and they employed all the physicians and have them take their cases to the hospital."
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Even though there are better returns on de novo projects, the panelists agreed that the market for de novo ASCs is drying up and they are working more with acquisitions. "The market is clearly over saturated," said Mr. Clark. "I'd say about 80-90 percent of what we do going forward in the foreseeable future will be acquisitions. We have some centers where we have competition in the neighborhood and they've really been struggling."
In many cases, financing is necessary to push forward with ASC development and acquisition, which means the financers become owners of the company. "If these guys own 99 percent of your company, they are going to call the shots," said Mr. Bacon. "If you go into it with that mindset and stay honest about your plans, things will work out. I'm honest about what our issues are and the plans we are putting in place to correct them."
Healthcare reform has added several new opportunities for ASC growth, including joint ventures with hospitals and the possibility of accountable care organizations. "I think there is going to be a significant change in the landscape for this industry as hospitals think about different ways to employ capital and get ready for healthcare reform," said Mr. Clark. "Hospitals and health systems want to work on an ASC strategy for physician alignment, making sure ASCs operate efficiently within the health systems."
As hospitals and health systems look at partnering with physicians for ASCs, it's important for hospitals to have the right type of management model in mind. "We like it when hospitals are interested in the ASC strategy," said Mr. Stroup. "We like that hospitals are interested in ASCs because that's what we bring to the table. We want to make sure that both sides are going into the venture as a partnership. If the hospital has no interest in allowing physician ownership, that's a red flag. It wouldn't be helpful if we bought into an ASC with the hospital and they employed all the physicians and have them take their cases to the hospital."
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