Becker's ASC Review

89 TRANSACTIONS 9M square feet of medical offices to open in 2022, report says By Marcus Robertson D espite an ongoing materials and labor short- age, 9 million square feet of medical office space is expected to open in 2022, accord- ing to a report by real estate services firm Marcus & Millichap. A backlog of appointments that are now resuming, plus the needs of the aging population, are contrib- uting to strong demand for medical offices, the re- port said. The demand is projected to lead to a 2.5 percent increase in asking rent this year. Vacancies are expected to drop to 9.2 percent, the report said. The metropolitan area with the lowest vacancy rate in 2021 was San Jose, Calif., with less than 4 percent. The highest asking rent in 2021 was in San Francisco, with about $60 per square foot. The Southeast and Southwest markets appear to hold the best investment landscapes for medical of- fice building investment, the report said. n Where ASC chains' growth is headed By Laura Dyrda D allas-based United Surgical Partners International became the biggest ASC chain by far in December when it closed on a deal to acquire Towson, Md.- based SurgCenter Development. SurgCenter Development, an ASC chain fo- cused on orthopedic and spine centers across the East Coast and Midwest, added 86 ASCs to USPI's portfolio and will make an imme- diate impact on the company's bottom line. USPI already had ASCs and partnerships dotting the West Coast and Southern U.S., and truly became a national chain. USPI now has more than 430 ASCs, with its closest competitors — Nashville, Tenn.- based AmSurg and Deerfield, Ill.-based Sur- gical Care Affiliates — reporting around 250 centers in their networks. e company also has a comprehensive growth plan of a mix between acquisitions and organic growth in the next few years to hit more than 600 sur- gery centers by 2025. e deal was approved quickly by both sides and the federal government. e two signed a definitive agreement for the deal Nov. 8, 2021, and closed Dec. 22. Given how much USPI has expanded, can the other chains keep up? e quickest way to grow is through acquir- ing another ASC chain, as USPI did. It takes considerable time and effort to develop new ASCs or acquire them one by one. But that's what Brentwood, Tenn.-based Surgery Part- ners' strategy is. Surgery Partners spent $325 million in trans- actions last year and deployed $34 million in acquisitions during the first two months of 2022; by the end of the year, the company plans to spend $200 million on new centers. By comparison, USPI spent $1.2 billion on SurgCenter Development. Eric Evans, CEO of Surgery Partners, em- phasized acquisitions as well as partnerships as being core to the company's growth strat- egy during the 2021 earnings call at the end of February. Surgery Partners also inked a deal with Privia Health, a Montana-based physician clinic technology company, earlier this year. Surgery Partners expects the deal to represent long-term value to the company and act as a springboard for other partner- ships. ere are also several regional ASC compa- nies with 20 to 50 ASCs within their network, which could be prime acquisition targets for the larger chains. Many of the midsized com- panies focus on a particular specialty, such as orthopedics or gastroenterology, and bring the value of hospital partnerships to the table. e midsize chains are looking at growth avenues to increase value by taking on new partnerships and investments. Last year, Chicago and Nashville, Tenn.-based Regent Surgical Health partnered with St. Louis- based Ascension to develop its ASC chain, and received an investment from Ascension's venture capital arm. PE GI Solutions has private equity backers and Compass Surgical Partners, a developer and manager of ASCs, said growth equity firm Health Velocity Capital became minor- ity owner in the company March 11. n New York health system eyes $23.3M ASC acquisition By Alan Condon B uffalo, N.Y.-based Catholic Health is seeking state approval to acquire a majority interest in the Ambulatory Surgery Center of Western New York in Amherst, The Buffalo News reported March 21. Catholic Health agreed to a deal in August to purchase a 77 per- cent stake in the ASC, which is the "largest ambulatory surgery center by volume in the region," performing 27,000 procedures a year, according to the health system. The ASC opened in 1999 and performs surgeries in a variety of specialties, including orthopedics, ophthalmology, pain man- agement, ENT, and cosmetic and plastic surgery. It includes six operating rooms, three procedure rooms and a post-surgery re- covery room. The plans were approved April 5. The move follows Catholic Health's complete acquisition of Ster- ling Surgical Center in Orchard Park, N.Y., in 2019 and a wider trend of hospitals and health systems acquiring and developing ambulatory facilities as healthcare continues its push to the out- patient setting. n

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