Becker's ASC Review

51 JOINT VENTURES Physician consolidation up 'substantially': 51% now part of health systems By Angie Stewart P rovider consolidation into vertically integrated health systems increased "substantially" from 2016 to 2018, while horizontal consolidation of hospitals and health systems "grew modestly," accord- ing to an August 2020 study published in Health Affairs. The study was led by Michael Furukawa, acting director of the Agency for Health- care Research and Quality's Division of Healthcare Delivery and Systems Research in the Center for Evidence and Practice Improvement. Researchers discovered that in 2018, 51 percent of U.S. physicians and 72 percent of hospitals were affiliated with one of the country's 637 health systems. Percent of physicians and primary care physicians affiliated with vertically integrated health systems in the U.S.: Note: Authors analyzed 2016 and 2018 data from the Agency for Healthcare Research and Quality's Compendium of US Health Systems and from IQVIA OneKey. Physicians 2016: 40 percent 2018: 51 percent Increase: 11 percentage points Primary care physicians 2016: 38 percent 2018: 49 percent Increase: 11 percentage points n More physicians are selling their practices, M&A expert says By Angie Stewart T here has been "an uptick in physicians selling their practices" since the start of the pandemic, said Allison Nelson, co-deputy chair of the real estate group for law firm Akerman, in an interview with GlobeSt.com. Ms. Nelson regularly does mergers and acquisitions work for local healthcare systems. She said the uncertainty of COVID-19 has led small solo practitioners and even mid-sized or regional practice groups to consider selling or shutting down. Axios reported on this emerging trend in April. "If there is a large healthcare system that's coming in and wanting to buy their practice, I think that this is helping them decide to go ahead and sell," Ms. Nelson told GlobeSt.com. "The individual practitioners have been hit hard [by COVID-19], and even the hospitals, because they're losing rev- enue from elective surgery. This is unlike the 2008 downturn, where I didn't see that much of an impact on the healthcare industry." Office landlords may see larger healthcare systems as more "creditworthy" tenants, although they may request additional regulatory language in their leases, more sufficient parking space, additional signage, or other work to be done, Ms. Nelson said. n Florida ASC closes real-estate sale- leaseback transaction: 4 details By Laura Dyrda ASCs Inc. and J.H. Winokur closed an ASC real estate sale-leaseback trans- action for Sunrise, Fla.-based Baptist Eye Surgery Center. Four things to know: 1. The ASC is a partnership between majority owner Baptist Health South Florida and 11 eye surgeons. The surgeons owned the real estate lease and the sale was made using the existing lease and rent; as a result, there wasn't a change in the center's financial performance. 2. With five years left on their original lease, the ASC owners sold it to a pri- vate investor in a 1031 exchange. Baptist Health South Florida's credit and the historical operating results of the physician partners made the center attractive to the investor. 3. According to a statement from ASCs Inc., ASC owners may consider a sale or leaseback of their ASC real estate to provide liquidity and a source of capital for diversifying their assets, which can become especially im- portant during the COVID-19 pandemic when unforeseen events begin to impact income. 4. With ASCs Inc. advising the sellers and J.H. Winokur as the broker, the final selling price exceeded the seller's goals. At the time of the sale, the ASC was temporarily closed due to COVID-19. n

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