Arjun Gangakhedkar, real estate and financial specialist for the recently formed ASC chain Ker Medical and principal at QHM Partners, joined Becker's to discuss two major risks to ASC real estate development.
Owning vs. renting
While the structural impediments to ASC development are few, "practices should be cautious when considering purchasing real estate for a surgery center," Mr. Gangakhedkar told Becker's.
"Real estate can quickly consume their entire capital budget, leaving less for staffing, technology and recruitment," he said. "Owning isn’t always necessary; sometimes leasing makes more sense, especially in tertiary markets with low potential for capital appreciation."
Once physicians enter into the real estate ownership side, there's a "different conversation with different considerations," he added, like site selection and future use.
Additionally, with ownership, ASC leaders have to develop with the next buyer in mind.
"If someone can build nearby at a lower cost, that will affect your resale value," he said.
Multispecialty vs. single-specialty
Specifically, overspecialization of a facility can limit future buyers. If a buyer needs to retrofit extensively, it reduces the facility's appeal and value, Mr. Gangakhedkar said.
He described an example of an ophthalmology-focused ASC in Florida that was in a great market, but was overspecialized. With a growing demand for orthopedics and podiatry in the market, adapting the facility to meet those demands would require significant capital to adapt the operating rooms.
"That’s a common issue when facilities are over-specialized," he said. "When owners want to sell, they realize that buyers are offering less because of the costs needed to make the facility useful for other specialties."
Another approach, he added, is partnering with real estate experts who understand these risks and can offer creative, modular solutions.
"There are ways to build facilities with more flexibility that lower the costs for both the tenant and the landlord," he said. "Working with a trusted real estate partner can help mitigate risk and keep options open."