"Stand-Alones" Can No Longer Stand Alone

Through the years, ambulatory surgery centers (ASCs) seemed to crop up everywhere. Today they still exist — although some of the names may have changed, along with operating structures and ownership. Just as coffee, bagel and video stores started out as independent businesses, and then merged into small regional groups and eventually national corporate chains, ASCs are also consolidating. Single ASCs are merging through acquisition, creating small chains and eventually corporate ASC entities. Why?    

Many stand-alone ASCs can no longer compete in a competitive marketplace. Continuing increases in the costs of medical supplies and operating expenses, rising staff salaries, additional competition, and lower reimbursements from insurance companies are diminishing the number of single ASCs. Also, lone ASCs typically cannot leverage purchasing power like hospital groups, nor can they acquire the needed capital to purchase newer, updated medical equipment. The old saying “strength in numbers” is true in the ASC market.

Consolidation of existing facilities through acquisition will give newly-formed ASC groups a better chance of survival as the market segment continues to develop. This evolution is a normal market trend in the life cycle of market expansion.

A 2013 survey from HealthCare Appraisers, Inc.,* representing over 500 surgery centers throughout the country, showed that respondents indicated significant levels of acquisition activity in the ASC space. A total of 52% reported the acquisition of between 1 and 5 centers, 4% reported the acquisition of between 6 and 10 centers, and 4% said they acquired more than 16 centers.

For 2014, acquisition activity is expected to remain high. In the Health Care Appraisers survey, 68% of the respondents plan to purchase between 1 and 5 ASCs, 16% plan to purchase between 6 and 10 ASCs, and 4% plan to purchase 16 or more ASCs.

Process improvements and physician recruitment are additional advantages to consolidation. Sharing methodologies to leverage the volume of surgical procedures, and decrease the number of inventory items on-hand, can help lower costs. Consolidation can also help ASCs attract qualified physicians, and build brand loyalty with a larger market share derived from multiple locations and increased revenue.

Of course, the profitability of any organization is dependent on its management team. Leaders must harness the purchasing power of their organization, streamline methodologies to manage procedure volume and control inventory.

An ASC that decides to remain independent will need to consider new or different approaches to compete in a largely-consolidated ASC market. The ASC could:

  • Recruit a physician who performs a specialized procedure not available in the market;
  • Recruit a busy surgeon with an existing referral base seeking a facility (or changing facilities) to perform his/her procedures;
  • Work with local hospitals to develop referrals for procedures that are not profitable in-house procedures;
  • Develop a wellness program offering for local corporations’ employees to increase the ASC’s visibility as a destination of choice.    

The ASC landscape will no doubt continue to change, including models of operation and ownership. One thing is certain, however — ambulatory surgery is here to stay, and so are ASCs. Same-day surgical care, including diagnostic and preventive procedures, has changed the outpatient experience for millions of Americans.
         
*HealthCare Appraisers Incorporated 2013 Report

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