Despite recent declines in activity, private equity interest in the ASC space has been high over the last several years, with 95 outpatient-specific deals in 2023 alone.
The reception of PE investment within the ASC space is mixed, as leaders balance the need for capital and operational support amid inflationary pressures with physician autonomy and concerns about access and quality of care.
"Private equity has been a major catalyst for ASC growth by providing the capital needed for expansion, new facilities, and cutting-edge technology," Melissa Rice, a healthcare consultant and Illinois Ambulatory Surgery Center Board member, told Becker's. "Without this funding, ASC development may have grown at a slower pace, limiting access to outpatient surgical services."
Ms. Rice noted that in addition to helping ASCs reach efficiencies of scale, private equity firms may also help ASCs avoid economic pitfalls.
"Private equity firms often drive consolidation within the ASC industry, helping centers realize efficiencies of scale through mergers and acquisitions," she said. "Without these resources, individual ASCs may struggle to reduce costs through bulk purchasing, contract negotiations or streamlined operations."
She also said that without PE investment, "the value proposition for ASC owners looking to sell their business or grow their investment might have been less lucrative."
This could be an especially positive outcome for older ASC or practice owners in particular, added Mitchel Schwarzbach, a Denver-based healthcare consultant with a focus on ASCs.
"Like almost everything, having equity money in an ASC is good or bad [depending] on your perspective," he told Becker's. "Let’s take a urologist group of six doctors who are all in their 50s. It is an extremely easy sell for the equity folks to buy their practice, build an ASC for them, and start to get the cash in. The equity folks allow an exit strategy for these doctors."
But the circumstances may be different for ASC owners earlier in their careers, Mr. Schwarzbach said.
"Let’s take a urology group of six doctors who are in their 30s. They will end up building their own ASC or buy into an independent multi-specialty [group], avoiding the equity folks. The 30- year-olds are not thinking about an exit strategy," he said.
Mr. Schwarzbach also said that when private equity is involved, physicians do tend to become less involved in practice operations. But whether this results in positive or negative effects on the practice depends on the goals, experience and education of the physicians or owners of any given practice.
"When equity money is part of an ASC, the owner or doctors are just not as involved. It gives them an excuse to be much more separated from the operations of the ASC. When the doctors are one step removed, they are not motivated to get the ASC moving in the direction that they want it to," he said. "It all matters where you are sitting. The equity folks are really good at the 'sell.' Think of the 'mark,' or the practice owners who just say 'I just want to be a doctor and see patients and then go home.' What an easy sell."
While many may bite at the prospect of being able to step back from operational day-to-day and focus more on practice, Mr. Schwarzbach underscores the fact that private equity money can't replace the core function of a successful surgery center.
"Lastly, think about how the equity folks actually get involved in an ASC — it starts with the clinic practice. ASCs are not the place where 'if you build it, they will come,'" he said. "The ASC owners have to be committed to bring cases and equity folks do not bring cases, surgeons do."