Becker's ASC Review

10 ASC MANAGEMENT Independent ASCs' new dilemma By Patsy Newitt T he ASC industry is facing a new dilemma: An aging physician population looking to cash out, but not necessarily to larger consolidators. e industry is largely fragmented, with around 68% of ASC facilities operating independently, as of 2023. is makes the ASC market ripe for acquisitions at the individual facility level, according to a report from VMG Health. As a consequence, the industry is consolidating, albeit slowly. e number of ASCs under partnership by a national operator jumped to 1,941 in 2023 — up from approximately 1,339 in 2011. "What's starting to happen is many of these physicians are mature now, some are getting ready to retire, and I think some would like to cash out or bring in new surgeons," Joe Peluso, administrator at Aestique Surgical Center in Greensburg, Pa., told Becker's. "Unfortunately, many surgeons are now employed by health systems or private equity groups, so there isn't the potential to bring in many new doctors to take over. As a result, I think many are cashing out." However, as more than 77% of U.S. physicians are now employed by hospitals, health systems or corporate entities, there aren't many independent physicians le to take over the ASCs. A new ASC company, Ker Medical, is looking to disrupt the trend of selling to private equity and health systems. Ker's ASC model involves integrating four or five ASCs under similar management with a board made up of the principals, John Webb, one of Ker's founders and president of MMC Capital Markets, told Becker's. e board handles operations, but physicians retain their autonomy. Ker's model also provides physicians with the option of an exit strategy, which is particularly attractive for physician owners who don't want to involve large institutional management, equity or health system partners. Independent ASCs that don't follow this model are at risk of losing control, Mr. Webb said, particularly when older physicians want to exit and younger ones want to buy in, yet neither the older or younger physicians want to sell the ASC. When this happens, ASCs typically turn to conventional banks, and as a result, they can lose their leverage or power to negotiate lower pricing and favorable terms and conditions, Mr. Webb explained. Mr. Webb said he's seen a number of cases where a young physician wants to buy into an ASC deal but doesn't have the capital. In such cases, his team puts together a credit facility, oen funded by the ASC partners, to recruit a new physician. e money they pay in can then go toward the older physician who is nearing retirement. e model also bypasses the need for private equity — the ASC market has seen continued private equity activity, most oen tied to physician practice portfolios, which allows investors to capture additional revenue streams, according to the VMG Health report. "e independents are getting a lot of pressure from the private equity side. ey hear horror stories of deals that didn't go well and they don't know which way to turn," Mr. Webb said. n 8 billing-cycle partner red flags for ASCs By Claire Wallace I t is not uncommon for ASCs, especially smaller facilities, to outsource billing operations to revenue cycle management companies. In a new report published in October, Surgical Notes identified eight red flags for ASCs to watch for when seeking a billing-cycle partner. Eight billing partner red flags for ASCs: 1. Lack of communication. Ensure that ASCs are assigned a dedicated person at the billing company who will promptly respond to queries. Ensure there is a clear system for responding to queries. 2. Decreasing collections and strained cash flow. Be sure that when entering the partnership, the billing company prioritizes completing an extensive assessment of its new client's revenue cycle performance to identify problems and opportunities for improvement. There should be an initial action to address collections and cash flow. 3. Reporting problems. Billing companies should provide regular client reports. Companies should also have access to analytics systems to take a deeper dive into revenue cycle performance. 4. Declining KPIs. Companies should closely monitor client key performance indicators. ASCs should be informed of their KPI performance and changes over time. Among these KPIs are accounts receivable over 90 days, denial rates, collection rates and percentage of cash goal reached. 5. Limited analytics. Billing companies should be using analytics to improve client performance. 6. Disorganized management and staff turnover. ASCs should be sure of who serves as their account manager. ASCs should not have to struggle to get in touch with executives. 7. A lack of ongoing support and education. Billing companies should be providing ASCs with educational support and resources. 8. Lackluster commitment to security. Billing companies should make ongoing investments in security. They should have powerful encryption techniques, and inform ASCs of any upcoming security changes. n

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