Becker's ASC Review

27 TRANSACTIONS Why the ASC industry is poised for growth By Patsy Newitt J oe Peluso, administrator at Aestique Surgical Center in Greensburg, Pa., joined Becker's to discuss what he thinks the ASC industry looks like and will look like as healthcare costs continue to rise. Editor's note: is response was edited lightly for length and clarity. Joe Peluso: e ASC industry is standing strong, finding creative ways to shore up under challenges to healthcare, poised to deliver high-quality, safe, accessible and cost-effective services to meet their profitability goals. ASCs' management of financial, personnel, and operational resources will help ensure the effective prioritization of outpatient care without increasing the cost of care. ASCs' financial and operational outlook shows encouraging signs of gradual continuous growth for the future of outpatient care. ere is significant optimism among ASCs for additional/new revenue. An increasing portion of healthcare providers' revenue is now coming directly from patients. More than 75 percent of patients with employer-sponsored coverage are enrolled in a health plan with an annual deductible and more than 50 percent of covered patients are enrolled in a high-deductible plan. e average family plan has an annual average deductible of at least $8,000. e way benefits are administered is also growing more complex. is shi in financial responsibility, paired with unprecedented economic conditions associated with the pandemic, has had a major impact on healthcare organizations volumes. Procedures performed in ASCs provide significant economic advantages to patients and payers. Outpatient surgical procedures performed in ASCs have continued to grow over the last several years due to significant economic advantages to patients, physicians, payers and the healthcare industry. Overall, the ASC market is projected to continue to grow, and alternative business models will be developed as the key players look to maximize efficiency and clinical success. CMS and commercial insurance payers are updating their policies that are anticipated to accelerate the transition of more complex surgical procedures to ASCs that have been proven to be safely performed with high quality and less cost. Surgical procedures that had been restricted to the inpatient only lists are being slowly transitioned by new site-of- service policies, which is a logical progression of providing surgical care in high-quality and lower-cost ASCs. In recent years, several higher-acuity and higher-reimbursed procedures have been added to the ASC-payable list and this trend is expected to continue. Specialties that will continue to transition include total joint replacements, cardiology and spine procedures. e ASC setting has been proven to be more efficient leading to greater productivity and lower costs. ese changes, along with pending legislation, will help level the financial playing field for outpatient surgery procedures that will result in driving volume and payment growth to ASCs in coming years. n Surgery Partners net income hits $18.9M, 15 new facilities in the works By Laura Dyrda S urgery Partners reported increased net income for the second quarter of 2023 and raised its full year adjusted EBITDA guidance. Six things to know: 1. Surgery Partners reported $667.6 million quarterly revenue, up 8.5 percent year-over year. The revenue reporting included an $8 million "cyber event" headwind. Same-facility revenue was up 8.3 percent and hit $4,302 per case. 2. Net income attributable to the company hit $18.9 million for the second quarter, compared to $18.4 million loss over the same period last year. Adjusted EBITDA was $100.2 million, up 16.4 percent for the quarter and improving by more than 100 basis points year-over-year to 15 percent. 3. Surgery Partners expects 2023 full year revenue to exceed $2.75 billion and free cash flow to hit at least $140 million. The company increased its adjusted EBITDA guidance for the full year to exceed $435 million. 4. Surgery Partners expects to open 15 new facilities in the next 18 months as its de novo investments progress. The company also partnered with Dallas- based Methodist Health System and acquired minority interest in three of the system's centers. 5. The company deployed around $60 million in capital during the second quarter and non-consolidated investments drove more than 30 percent revenue growth year-over-year. The company expects to see the growth "ramp up" in the next 18 months, according to DAve Doherty, CFO. 6. Surgery Partners had 152 surgical facilities in its portfolio as of June 30. n

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