Becker's ASC Review

32 Executive Briefing: ASC Industry Transaction Trends an aversion to the long operating case times for some cosmetic cases, a plastic surgeon's motivation to minimize facility fees paid to a third party (and hence retain more of the fee), and the need to collect fees directly from patients. However, according to Medicare statistics, the 2,826 ASCs that reported orthopedics as one of their specialties actually had somewhat lower lifespans (10.8 years) than the 4,220 ASCs that did not report orthopedics in their specialty mix (11.3 years). The reported specialty that had the most significant correlation with ASC lifespan was actually ophthalmology. The 3,009 ASCs reporting ophthalmology services averaged 12.7 year lifespans versus the 4,036 ASCs that did not report ophthalmology with 9.9 years. This trend is further supported by comparing the 230 single-specialty orthopedic ASCs, which averaged 9.4 year lifespans, to the 881 single-specialty ophthalmology ASCs, which averaged 13.9 year lifespans. It is difficult to explain the high correlation of ophthalmology to ASC longevity relative to orthope- dics. From an operational perspective, outpatient ophthalmology surgery is highly uniform, with cataract surgery representing the vast majority of cases. Outpatient orthopedic surgery cases are significantly less uniform, comprising of a variety of types of knee, shoulder, wrist and ankle surgery. Furthermore, ophthalmology is reported to have been performed in more ASCs than any other specialty dating back to the mid-1980s. The longer average age of ASCs offering ophthalmology ser- vices may simply reflect the specialty's greater prevalence in an outpatient surgery setting over a longer period of time. Speculatively, the difference in longevity may also be attributable to the referral habits of the different types of surgeons. Ophthalmologists appear to have a stronger tendency to operate single-specialty ASCs which may be wholly-owned or physically attached to their practice offices. This is evidenced by comparing the number of singlespecialty ophthalmology ASCs (881) to the number of single-specialty orthopedic ASCs (230). Conclusion It should be considered that perceived economic value and business longevity do not necessarily coincide. Single-specialty orthopedic ASCs may, in fact, be much more profitable than singlespecialty ophthalmology ASCs, despite the evidence that single-specialty ophthalmology centers tend to stay open 4.5 years longer. This analysis may also be somewhat skewed because it cannot account for fundamental changes in ASC reimbursement that occurred between 2007 and 2010. Medicare reimbursement for orthopedics has increased substantially since 2007, so ASC trends prior to this period may be irrelevant when compared to current perceptions of value. n Industry Trends for ASC Life Cycles and Transaction Activity By Todd Mello, Partner and Co-Founder of HealthCare Appraisers, and Nick Newsad, Senior Associate at HealthCare Appraisers R esponses from the 2013 ASC Valuation Survey and recent Medicare data indicate robust ASC transaction activity will continue through 2019. Over 1,800 ASCs will turn 10 to 12 years old between 2013 and 2019. There is evidence indicating ASCs that actively embrace major ownership changes are significantly more likely to survive this age barrier than those that do not. The 2003 – 2007 Swell Analysis of a 2012 update of the ASC Provider of Services data from the Center for Medicare and Medicaid Services indicates that new ASC Medicare certifications peaked between 2003 and 2007, with the addition of 1,813 ASCs during a five-year period. New Medicare ASC certifications dropped off significantly from 2008 through 2011. The net number of Medicare certified ASCs was 5,343 as of June 30, 2012. According to the same source, the average life span of 1,702 ASCs that have de-certified from the Medicare program over the past 27 years has gradually increased. The average age of ASCs that closed between 2007 and 2012 consistently trended between 10 and 12 years. Considering the swell of new ASCs that opened between 2003 and 2007 and the life cycle indicated above would suggest a high volume of ASCs may decertify from the Medicare program between 2013 and 2019, as over

• Cover