Becker's ASC Review

18 TRANSACTIONS The new forces entering the ASC industry By Francesca Mathewes T he ASC industry is facing new forces in consolidation: large health systems and independent ASC groups with non- traditional business models. Over the last five years, Dallas-based Tenet Healthcare, parent company of United Surgical Partners International, began reducing its debt profile and shiing focus to its ASC portfolio — now the largest in the U.S. Tenet capitalized off outpatient migration by offloading some assets while investing in ASCs. e health system sold nine hospitals in California and South Carolina for a total of $3.9 billion and plans to sell its majority stake in five more Alabama hospitals for $910 million this fall. e company acquired 45 new centers in the first quarter and quietly purchased ASC chain Covenant Physician Partners. Nashville, Tenn.-based HCA Healthcare has emerged as another major player with its ASC branch Surgery Ventures. In an earnings call in July, CEO Sam Hazen said HCA's profitability and revenue grew in the first quarter despite volume decline. HCA finished 2023 with 124 ASCs and 24 endoscopy centers, which saw 1,044,415 total surgery cases — a 2.1% increase year over year. Outpatient procedures accounted for 38.3% of patient revenues. Another large player in the race to acquire ASCs is UnitedHealth Group's Optum, parent company of ASC giant SCA Health. e company has made massive strides in acquiring physicians, physician practice groups and ASCs over the last several years. In 2023, Optum added nearly 20,000 physicians to its payroll, bringing its total to at least 90,000 affiliated physicians. e company operates 2,200 primary and specialty care offices in 16 states. But there are new entities trying to change the structure of ongoing consolidation.. Longtime ASC owner-operators Mark Quigley and John Webb, along with developer Woodrow Moore and analyst Arjun Gangakhedkar, created Ker Leader Medical earlier this year. e new ASC operates under an ownership-focused model and was created to disrupt current corporate investment trends. e new structure puts physicians in leadership positions and provides them with the option of an exit strategy. is is a pull factor for physician owners who, Mr. Moore told Becker's, "do not want to involve large intrusive institutional management, equity or health system partners" in the partnership phase and who may seek an exit strategy. e ASC also offers options for employee ownership and stock option plans. Ker Medical's plan also focuses on internal acquisition, offering an acquisition-and-transition model to a new generation of physician leaders. "e future of medicine should not be doctors being directed to the benefit of the hospitals, insurance companies and Wall Street firms, rather we offer the opportunity for physicians to build long term value for their patients and communities independently," Mr. Moore said. Benjamin Stein, MD, is an orthopedic surgeon who co-founded and is chairman of ASC development group Capital Surgical Solutions. He shied to independence aer witnessing the changes that took place aer a former employer was bought out by a larger company. Capital Orthopedic Surgery in Germantown, Md., was his company's first ASC, which has seen success aer opening over four years ago. "It has outperformed the rest of the region in terms of quality — whether you look at satisfaction, patient outcomes, or complications," Dr. Stein told Becker's. n What hospital closures mean for ASCs By Francesca Mathewes In August alone there were five major hospital closures in the U.S. For ASCs, this might result in an influx in patients who have lost access to services through providers at hospitals or HOPDs. "ASCs will have the ability to pick up additional service lines, potentially boosting revenue, as hospitals continue to shutter services," Elaina Turner, RN, administrator of New Albany, Ind.-based Commonwealth Pain and Spine, told Becker's. However, there are still some procedures and specialties that might face a more difficult transition to the ASC space. "[N]ot all service lines will be appropriate additions to the ASC. … Hospitals will continue to shutter services that are no longer profitable, but ASCs should use caution in implementing new service lines and ensure that staff and providers are trained in those procedures and that the physical space is appropriate for those service lines," Ms. Turner said. Cardiology, orthopedics and advanced spine surgery are among the most common procedures, according to a 2023 report from VMG Health. In a first-quarter Surgery Partners earnings call, cited in the report, CEO Eric Evans noted that acquisitions were an aspect of the ASC chain's growth outlook. "With an increase in the share of orthopedic and cardiac procedures moving into lower-cost, high-quality, short-stay surgical facilities, we are considering all options to capture our fair share, including sourcing and managing a robust [mergers and acquisitions] pipeline" he said. n

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