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What to Look for When Acquiring or Partnering with ASCs

What to Look for When Acquiring or Partnering with ASCs

With the recent slowing of the previously rapid growth in physician-owned ambulatory surgery centers (ASCs) nationwide, hospitals and health systems are increasingly seizing the opportunity to improve their preparedness for value-based care by acquiring or partnering with such ASCs

Ambulatory surgery centers (ASC’s) have become known throughout the healthcare industry for providing a high quality, convenient and cost-effective experience for patients and payers alike. Therefore, as the U.S. healthcare system continues to shift toward value-based, outpatient care, it is in many ways a natural progression for hospitals to consider acquiring or partnering with surgery centers.  In fact, for some hospitals, developing outpatient services may be a matter of survival.  Many hospitals view ASCs as a strategic acquisition target because they provide high-quality, low-cost, and convenient settings for performing an array of sophisticated, same-day procedures. However, to ensure a successful ASC acquisition or partnership, there are many facets of an ASC that a hospital should first evaluate.

Hospital and ASC leaders should perform a due diligence process that involves an intensive and thorough look into the targeted ASC operations and finances. Understanding the operational nuances between an ASC and hospital is vital to the acquisition’s success. While weighing the difference between hospital outpatient departments and ASCs, the key operational considerations include:

  • Managed care contracts
  • Current/historic caseload, payer and specialty mix, and cost for performing procedures
  • Surgery-center coding
  • Payment rates
  • Collections process, particularly the point of service collections process
  • Accounts receivable process
  • Appeals process

There are many considerations that affect the financial statements of an ASC so each item should be looked at carefully during the due diligence process. Key financial considerations include:

  • Physician support – likelihood of retaining doctors after acquisition to ensure enough cases per month to break even
  • Capital structure – who has a stake in the ASC and how much
  • Facilities – current location and future growth opportunities
  • Payment rates by payer – are contract rates fair, need to be negotiated, etc.
  • Operating expenses – how do operational expenses compare to industry averages
  • Incremental benefits – what other benefits might help the ASC be more successful
  • Primary care provider referrals – how the forecasted shortage of physicians will impact the center in the future
  • Patient satisfaction – how to ensure a positive patient experience through any transition

As healthcare continues to grow into a retail business, outpatient surgery has become more and more appealing. If hospitals dig deep during the due diligence process, they can discover how a potential ASC acquisition or partnership can help them meet their long-term and strategic goals.

For more detailed information about what to look for when acquiring or partnering an ASC, download this HFM magazine article written by Nader Samii, CEO of National Medical Billing Services

This post was first published May 16, 2017 and was updated July 29, 2020.

Nader Samii, HFMA, Mergers & Acquisitions, value based care



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