6 Recommendations To Run a Better ASC and Achieve a Successful Sale

Volume 11, Issue 6, March 26, 2024

By: J. Blake Peart

Preparing an ambulatory surgery center (ASC) for a sale is a worthwhile process for center owners regardless of whether they intend to sell their facility in the near future. The process examines an ASC from a potential buyer's perspective, generating tremendous insights into where an ASC is thriving (what a buyer would find attractive) and where it needs improvement (what a buyer would find troublesome). With this information, owners can undertake initiatives that would further strengthen the ASC's infrastructure and operations, likely leading to financial improvements and increased competitiveness while putting the center in a stronger position for an eventual sale.

The following are six key recommendations for how ASC owners can run a more successful center — recommendations that will also set owners up for a successful sale.

1. Think about growth from the start

When opening a new ASC, owners are typically hyper-focused on getting to the finish line so they can open the doors and start performing procedures. But at least some energy and resources should go toward building a strong business foundation. Doing so will not only help an ASC succeed, but it will become more attractive for investors.

Among the key steps owners should take early in the ASC's development include assembling business and supply teams with healthcare and preferably ASC experience who can keep owners current on performance, trends, and developments. Owners should ensure they or their administration carefully research software choices and revenue cycle management (RCM) service partners if they intend to outsource some or all of RCM. Also, prioritize ensuring processes are not duplicated and automation is fully leveraged wherever possible.

2. Develop a basic exit plan when you're developing the ASC

Another important step to take early in an ASC's history — and likely even before the ASC opens — is understanding the future exit plans of your physicians and business partners, even if it's many years away. Such alignment is essential early and only becomes more critical as owners approach their exit phase. When you choose physicians to work at your ASC, they must be willing to purchase equity in the center, be willing to work under the umbrella of a corporate entity, and be receptive to an eventual acquisition.

One of the biggest mistakes a physician-owner can make is selling their ASC when they are ready to retire, unless certain steps are taken in advance. These include keeping the business scalable and making the transfer of vendors, maintaining employee retention, and keeping a transferable payer structure top of mind.

Also, be careful not to have one or just a few physicians perform a majority of your cases unless you are confident that these physicians will buy in to an acquisition. This will be critical to a buyer's ability to acquire your center or become your strategic partner.

A key test when preparing your ASC for an acquisition is to assess what would happen if you took a vacation for 4 weeks. If the business would still run smoothly and continue to perform well financially, the center is likely in good shape for a sale. If a vacation of 4 weeks would cause significant harm to profitability and operations, this should be viewed as a red flag.

3. Take time to understand the business side of running an ASC

ASC owners cannot afford to be absent from the business side of the facility. A lack of engagement can lead to poor decisions that harm financial performance, hinder growth, and lead to a disappointing exit. Owners should take the time to understand critical concepts like acceptable accounts receivable ranges, bad debt, and key performance indicators, and the benchmarks for the costs of clinical and non-clinical staffing.

Owners would be wise to pay market salaries and distributions to themselves and their partners as anything above market is likely to be frowned upon by a prospective buyer and new partners.

When hiring staff, seek professionals who are likely to remain with the ASC following an acquisition and generally avoid hiring and promoting through nepotism unless the individuals are qualified and expected to remain on staff when there is a transfer of ownership.

Owners should understand and be involved in vendor contact negotiations to help achieve cost savings for their ASC. 

Finally, if possible, owners should surround themselves with physician-owners and non-physician-owners who have been through acquisitions to help with understanding the process and what's required for success.

4. Conduct periodic self-audits to identify opportunities for improvement and growth

Don't develop an ASC that has a mentality of: "This is how we always have done it, so we are not going to change." Change is critical to success, both when change will correct a problem and when change will improve performance.

How do you discover what you should change? Conduct internal audits, and be proactive in preparing for surveys, such as those conducted by your state and accreditation organization. Provide continuing education for staff, have a thorough onboarding orientation process for new hires, and encourage team members to always speak up when they have suggestions or concerns (i.e., creating a "just culture"). Build a culture that protects your patients backed by policy and supported by best practices. 

5. Prioritize treating patients, but don't lose sight of the business

Patient safety and quality of care are always first, but if you don't manage your expenses and pursue growth opportunities when they present themselves, you may end up with the best ASC that went bankrupt. And a bankrupt ASC can't help patients.

6. Step up sales preparation several years in advance

While planning the exit from your ASC should be an ongoing process, there is an optimal time to step up your preparation. When you believe you have about 5 years left of performing surgical procedures, begin to more seriously consider your exit and seek ways to further increase value and buyer interest in the center.

This is also a good time to list the center and consider taking on a strategic partner, especially if you're interested in maximizing your earnings from the sale through a rollover (i.e., equity roll).

The Sooner You Start Thinking Sale, the More Successful You Will Be

If you own an ASC and are thinking it's time to sell your facility or if you're wondering what you can be doing to best position your center for a sale, I'd welcome the opportunity to speak with you and talk through your opportunities. Please contact me using my information below. If you're interested in learning more about how to know when it is time to consider a strategic partner, I discussed this topic on the HST Pathways "This Week in Surgery Centers" podcast. You can listen to the episode on YouTube or through platforms like Apple Podcasts and Spotify.

J. Blake Peart RRT, CM&AA

I have had the opportunity of an extensive and diverse career in healthcare for over twenty years. In the past ten years, I have served as CEO for multiple hospitals of Fortune 500 companies and CEO for several large Ambulatory Surgery Centers. In addition, my operations and business development knowledge has allowed me to experience the entire M&A process from start to finish focusing primarily on private equity transactions. My history as both a CEO and clinician provides a unique perspective based on years of experience and empathy when working with business owners seeking M&A advice. My expertise is in Ambulatory Surgery Centers, Physician Practices, and independent hospital businesses. I am here to support healthcare business owners who select the M&A direction as one who has walked in their shoes. I know that every transaction is unique and tailored to a seller’s need in getting the best deal and providing a positive experience throughout the entire process.

We can help you with more information on this and related topics. Contact us today!

Email J. Blake Peart or Call: (318) 730-2435