Transactions are common in the ambulatory surgery center marketplace and with the increasing complexities in healthcare more physician owners are turning to management and development companies for their expertise. Management companies can offer physician owners advice, leverage in contact negotiations, legal expertise and access to benchmarking from across their network. However, not every management company is a good fit for all centers and sometimes as the ASC evolves their needs change.
According to the HealthCare Appraisers ASC Survey 2013, 35 percent of management and development companies examined one to five candidates for acquisition last year; another 29 percent looked at six to 10. Among those who were looking, 57 percent reported acquiring one to five centers while 6 percent acquired more than 16.
Heading into 2014, 53 percent plan to acquire at least one to five centers, meaning there is plenty of opportunity for ASCs to find the right management company, or make a key switch. Typically, physician owners and operators begin to have doubts about their management company when profits are consistently low, but in some cases other factors have a bigger impact.
"Of course the economic performance of the surgery center is a clear barometer, but smart governing bodies will separate management company performance from fiscal performance initially when evaluating its management. An ASC with a good management company can have bad profits and ASCs with poor management companies can be very profitable," says Joe Zasa, Managing Partner and Founding Partner of ASD Management. "You have to take the money out of the discussion and assess the management company objectively using established measures."
Mr. Zasa says the four key core areas of ASC management include:
• Sound clinical system support
• Business office management
• Managed care contracts
• Clinical risk management and compliance
"Make sure to benchmark your management company's performance in these areas and compare your numbers with other centers," says Mr. Zasa. "Figure out if there is clear evidence about whether the company has a positive or negative impact on the ASC."
There is also the subjective factor, but make sure that when evaluating based on subjective elements that you factor in the motivation of the respondent. How does the staff respond to the management company? Do you get leadership and direction from your management company? Is the information timely and accurate? Surgeons — investors or not — play a critical and important role in the success of the center, and their interactions with the management company is crucial. Do the surgeons like the current management company or not? If there are ongoing issues between them, now might be a good time to make a switch.
"The management company should be able to communicate effectively with the surgery center physicians and administrator," says Mr. Zasa. "They should help the center set goals and guide them along the way to meet those goals. Above all, the management company should demonstrate value through leadership and measured performance. Demonstrable value is the test and it should be measured objectively and subjectively in order to make an informed evaluation."
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