Becker's ASC Review

20 Thought Leadership What 6 ASC leaders think about industry consolidation By Laura Dyrda N early half of independent physicians think consoli- dation in healthcare is inevitable, according to a survey from McKinsey & Co., but the overwhelming majority of small and independent practice owners believe they should fight to stay independent. Physician-owned ASCs face similar pressures to merge with larger organiza- tions to survive, especially amid the pandemic. Here are thoughts from six ASC industry leaders about consolidation. William Prentice, CEO of Ambulatory Surgery Center As- sociation: One trend that is a potential concern is healthcare consolidation that we've seen over the last decade which has allowed the big to get bigger, sometimes at the expense of some really strong independent healthcare providers in various markets. That is something we all have to keep an eye on; I believe bigger doesn't necessarily mean better. Meredith Warf, administrator of Mississippi Sports Medicine and Orthopaedic Center (Jackson, Miss.): Consolidation has been in the ASC space for several years, now making its way into orthopedics. On the heels of a global pandemic, surgery centers are looking for strategy, especially in the higher-risk areas of specialties like ortho- pedics and cardiology. These risk areas also present areas of potential value — strategic partnerships represent a way to both capitalize on the future value as well as mitigate the risks in the next few years. These partnerships may look several different ways: national surgery center companies may come in as a management company; ASCs may look to partner with the bigger hospi- tal systems for the contract rate "lifts" that are likely short- lived and compliance/regulatory help or referral sources, or practices can partner with private equity-backed platforms. Those platforms are equipped with the capital needed to drive insightful, robust data capabilities, benchmarking [and] leverage with payers, while continuing to provide the same quality service to patients that ASCs can offer at such a reduced cost. With value-based care here to stay, ASCs are held responsi- ble for more data collection and patient follow-up than ever before. Capital needs to maintain the cutting-edge treat- ment options like robotics and spine surgery are cumber- some and mitigated with strategic partnerships. Todd Currier, administrator of Northern Wyoming Surgi- cal Center (Cody): I feel that collaborative and strategic relationships with hospitals and management company partners will be essential in the coming years. We are see- ing a lot of mergers among physician groups and consoli- dation within medical communities. This strength will help the industry grow exponentially as the push for outpatient care continues to grow and be desired by patients and pay- ers alike. Those ASCs that are able to develop and coordi- nate service lines will thrive into the future. Raghu Reddy, administrator at SurgCenter of Western Maryland (Cumberland): Hospitals and private equity groups are acquiring ASCs at a faster pace than before. The catalyst here is the CMS approval of total joints, spine and cardiovascular procedures. The pandemic certainly helped to migrate the ASC-eligible procedures from [hospital outpatient departments] to ASCs. The insurers are also play- ing an instrumental role in migrating the cases to the ASC due to all the obvious advantages that ASCs provide. The national ASC management companies [are] also increasing the joint-venture partnership with hospitals and private eq- uity groups. Shrinking reimbursement and threat of survival, especially in difficult or competitive markets, have also ac- celerated the M&A activity. Jim Freund, senior partner at ASCs Inc.: We have truly seen a paradigm shift away from hospital-based procedures to the ASC setting, and COVID-19 has acted as yet another catalyst. With CMS continuing to approve higher acuity pro- cedures that can be performed in the ASC setting and with payers taking a more active role in directing patients to high quality, lower cost of care settings, nonhospital outpatient surgical facilities are becoming a more integral part of the healthcare delivery system. While we continue to see strong demand coming from the national ASC management companies that have historically partnered with independent physician-owners, virtually every healthcare system and hospital has initiatives in place that involve expanding their freestanding surgical facilities footprint. In addition we have seen an influx of new invest- ment coming from the private equity and investor markets, through their own firms or partnering with ASC industry organizations and individuals. n

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