Recent News

Stay up to date with ASCs Inc. — from recent Strategic Partnering news and the current ASC/MOB Real Estate market conditions, to the most recent ASCs Inc. transactions and upcoming events.

What’s new in ASC strategic partnerships in 2018?

March 27, 2018

Why do some centers command values well above other similar centers?  How can you realize maximize value for your center?

Demand for centers has increased.

ASC management company and local hospital interest in investing in all types of surgery centers continues to be very high, with multiple buyers competing to buy centers.  After over 30 years of management companies investing in ASCs and making significant profits by helping the centers grow and become more profitable, local hospitals and private equity firms are showing a heightened interest in participating in physician-driven ASCs as these continue to be the high-quality, low-cost providers. Currently there are over 50 potential buyers seeking to invest in a shrinking supply of desirable (i.e. two or more operating rooms, Medicare certified, etc.) centers. What is new is that there is more demand for ASCs, more competition to acquire centers, and multiples that are the highest we have ever seen.   Multiples for majority interests have risen to an average of 7-8 times EBITDA, and in some cases even higher.

Who is the best strategic partner for an ASC seeking to sell an interest?  

The best strategic partner for any given center is a partner that can help the physician-owners realize their financial and non-financial goals.  These typically include helping the center increase profitability and distributions while maintaining the highest quality and efficiency.

The leading ASC management companies can bring strategies that directly impact the bottom line.  Depending on the center’s location, contracting situation, and maturity, it is common to see a “lift” in contract reimbursements and substantial savings in supply costs, plus net revenue growth.  Cumulatively these can contribute to a very significant increase in profits and distributions.

A hospital partner can also bring advantageous benefits including access to better paying contracts, referrals of cases, supply contracts, and market strategies, such as managed care plans, that can be beneficial to an ASC.  However, hospitals usually use a valuation method that results in a lower value for an ASC and there is often an element of mistrust in the impact a hospital will have on how a center is operated and managed.

How have an ASC’s options for a partner changed? 

The most interesting option available today is a three-way partnership between physicians, a hospital and an ASC management company. Previously hospitals wanted complete control so they built their own centers and competed with physician-owned centers.  Now hospitals need a low-cost, high quality provider to complete their managed care marketing strategy and physician-driven ASCs have proven to be the low cost, high quality provider. In a three-way deal the physicians get the best of both worlds: a hospital partner with better paying contracts and a management company oriented towards quality, efficiency and profitability.

How do ASC owners get the highest price and best partner?

In most cases the physician-owners will be selling their first ASC, and they will be dealing with buyers who have completed dozens or hundreds of transactions and whose goal is to buy at the lowest competitive price possible.  Here are 5 key steps to getting the highest price and best partner:

• Engage a consultant with significant ASC transactional experience who knows how hospitals and ASC companies assess value and who has a track record of increasing ASC values.

• Prepare a compelling information package that highlights the history of the center and quantifies future opportunities (contracts, supplies, cases, specialties, new partners, etc.) that will increase profitability.

• Solicit competitive partnership proposals from the leading local hospital(s) and leading ASC management companies, and use the proposals to maximize the value with the most desirable partner(s).

• Select the strategic partner that has the best track record in achieving their physician-partners’ long-term goals.  In a 3-way transaction, first select the best ASC management company and let the management company bring the hospital on board as a minority partner.

• Enjoy the future with a strategic partner that shares your values and interests in having a high quality, efficient and profitable ASC.

Jonathan C. Vick, the founder and President of ASCs Inc., has assisted in development, merger, and strategic acquisition transactions for over 500 physician-owned ambulatory surgery (ASCs), endoscopy centers (ECs) and surgical hospitals since 1984. He has extensive experience in ASC and EC sales, real estate sales and leasebacks, valuations, and mergers & acquisitions. He can be reached at 760-751-0250 or jonvick2@ascs-inc.com. More information can be obtained at:  www.ascs-inc.com.

Maximizing the Value of Your Surgery Center in 2018

February 26, 2018

Some physician-owners of surgery centers wonder: Why do some centers command values well above other similar centers?  How can I maximize the value of my center?

Many physician-owners of ASCs have considered selling an interest to an ASC management company and/or hospital but their centers may not be prepared to attract the highest possible offers.  The information below is intended to assist ASC owners in preparing their center to attract the highest offers from the best strategic partners.

Surgery centers are in demand – this is a “seller’s market”.  Your center is probably worth more than you think it is, but to realize maximum value the center must be properly prepared so that it represents exceptional value to the buyers.

What is the future of outpatient (O/P) surgery and how will this impact the value of ASCs?  Demand for O/P surgery is expected to skyrocket over the next decade fueled by cost containment, convenience and clinical advancements.  This is expected to result in an exponential growth of case volumes.  Centers can prepare for this growth by aligning with strategic partners that bring resources to capture this growth and profit from it.  So, for many owners, the goals are to prepare their ASC to represent maximum value and to partner with an entity that will ensure that their center will benefit from future growth in O/P surgery.

Why are more hospitals interested in acquiring ASCs and how will this impact the value of independent ASCs?  Hospitals have high overhead and are under pressure from payors to offer greater value.  The easiest and fastest way for a hospital to provide greater value is to acquire existing O/P centers that have a lower cost structure.  Most ASC fees are about 50% of HOPD fees and payors are directing their customers to lower cost facilities.  Hospitals must acquire or build cost-efficient ASCs so that they can compete.  With more qualified buyers, the value of ASCs increases.  Increased demand for centers is why we are seeing higher multiples than ever before being offered for ASCs.

What can ASC owners do to increase profitability and the value of their ASC?  The fastest way to increase the value of a center is to identify and recruit additional users, to increase the number and complexity of procedures, and to quantify the additional revenue that these procedures will generate.  Most of this projected additional revenue will be reflected on the net income line as few additional expenses will likely be incurred.  This will not have an immediate impact on profits but it will reflect future profitability and will have an impact on the multiples offered, thus increasing the value of the center, often significantly.

How can ASC owners use competitive bidding to maximize the value of their ASC?  With increasing demand for O/P surgery, and hospitals and ASC management companies seeking partnerships with ASCs, it makes sense for ASC owners to solicit competitive bids from entities that are interested in partnering with their center.  Typically, hospitals use a discounted cash flow analysis to value a center while the ASC management companies use a multiple of trailing 12-month earnings, with no discount.  The ASC management company’s valuation approach almost always places a higher value on an ASC than the hospital approach.  Even if the hospital is your first choice as a strategic partner, it is good practice to obtain competitive bids from several of the leading ASC management companies in addition to the hospital.  The competitive offers reflect “fair market value”.  This usually results in higher offers and a choice of strategic partners.  Often a 3-way deal (physicians, hospital, ASC management company) is the end result, with the physicians as the largest shareholder.  To increase the value further, a second round of bidding will enable the sellers to bring their preferred strategic partner’s offer up to the price of the highest bidder.

How can ASC owners maximize the value of their ASC/MOB real estate?  Physician-owners often don’t realize how valuable their ASC/MOB real estate has become.  It is often advantageous from a business perspective to sell an asset once it has fully appreciated and is returning a low ROI, such as is typical with medical real estate.  If the physicians own their ASC/MOB real estate they have an opportunity to sell and leaseback the property with no change in rent and no personal guarantees of the long-term lease, at a very attractive profit.  For example, a 10,000 sf ASC paying $360,000 in annual rent would have a sale and leaseback value today of over $5 million.  Most sale and leaseback transactions attract multiple competitive offers within 30 days and a deal can close in as little as 60 days.  A 1031 exchange will shelter the sellers from capital gains taxes.

Jonathan C. Vick, the founder and President of ASCs Inc., has assisted in development, merger, and strategic acquisition transactions for over 500 physician-owned ambulatory surgery (ASCs), endoscopy centers (ECs) and surgical hospitals since 1984. He advises on ASC and EC sales, real estate sales and leasebacks, valuations, and mergers & acquisitions and can be reached at 760-751-0250 or jonvick@ascs-inc.com.

© Copyright ASC COMMUNICATIONS 2018.

Why sell and leaseback your ASC/MOB real estate? How to maximize the value of your property.

January 26, 2018

At the Becker’s ASC Review 24th Annual Meeting: The Business and Operations of ASCs, in Chicago on October 26-28, 2017, a seminar on How to maximize the value of your ASC/MOB real estate and defer taxes in a sale/leaseback was presented.  Following are questions and answers from that seminar.

Why sell and leaseback my ASC/MOB real estate? Many physicians who own their ASC/MOB real estate do not realize how much value their real estate represents.  These physicians have significant capital locked up in real estate that could be deployed in higher yielding investments. Take, for example, a group of 5 surgeons in Ohio who developed an MOB/ASC for $3 million 10 years ago, with a $2 million loan. Now the ASC is successful, is paying annual rent of $350,000 and half of the debt is paid off.  The rent they are paying themselves (and paying tax on) makes their real estate worth $5 million, but appreciating only at the rate of 2 percent to 3 percent a year, plus they are paying income tax on the rent. So, after selling and leasing back the real estate (with no increase in rent) and paying off the loan, the physicians have $4 million in cash to invest in higher yielding investments and no longer have to pay tax on the rent income.

How does a sale/leaseback work? An ASC/MOB broker with a network of national buyers will create a marketing package and send to 12 or more qualified buyers (REITS, private investors, family trusts, etc.).  This typically generates 6 to 10 competitive offers for your property. Typically, the buyer that offers the best price and terms will be selected by the sellers, who will receive cash on closing.  The ASC will continue to pay the same rent as before, paid to the new owner instead of to themselves.  The sellers will either pay a capital gains tax on the profits from the sale, which will be significantly less than the income tax they were paying for the rent they received, or they will defer the capital gains tax by buying one or more income-generating properties in a 1031 exchange.  This will also diversify the sellers’ investments.

How to sell and retain control?  Most sale and leasebacks are executed with a triple-net (NNN) lease.  This means that after the sale the sellers will continue to be responsible for the ongoing expenses of the property, including real estate taxes, building insurance, and maintenance, in addition to paying the rent and utilities so that the sellers continue to remain in control of the property.

How to maximize the value of your property:  Common mistakes made by sellers: Mr. Jason Winokur, a Principal of JH Winokur, Inc., a nationally recognized ASC/MOB real estate broker, presented the following mistakes that are commonly made by sellers:

• Rent is too low – should be market rate which is $30/sf to $40/sf.  The higher the rent, the greater the selling price.

• Leases are too short – should be 10 to 15 years, plus renewal options, to get the best price and most offers.

• Selling at the wrong time – sales should be made when interest rates are low as this will yield the highest selling price

• Selecting a local broker who has no buyers.  You should pick a broker who already has buyers for your property.

• Having only one offer to consider – sellers will always get a better price when there is competition among buyers

• Sellers not taking advantage of a 1031 exchange – this will defer taxes and give you tax-free use of the sales proceeds to reinvest in one or more income generating properties.

 

Since 1984 Jonathan C. Vick, the founder and President of ASCs Inc., has advised ASC physician-owners on development, merger, and strategic acquisition transactions for over 500 physician-owned ASCs, endoscopy centers (ECs) and surgical hospitals. He has extensive experience in ASC and EC sales, real estate sales and leasebacks, valuations, and mergers & acquisitions. He can be reached at 760-751-0250 or jonvick@ascs-inc.com.

Multi-specialty ASC real estate sells for $6,000,000, a CAP rate of 6.62%

November 20, 2017

J.H. WINOKUR, INC., of White Plains, New York, in association with ASCs Inc. of Valley Center, California, brokered the sale of the real estate of the Dublin Surgery Center, located in Dublin, Ohio.

The Dublin Surgery Center is a 14,416 square foot multi-specialty ambulatory surgery center with four operating rooms and two procedure rooms.  The Dublin Surgery Center physicians partnered with Surgical Care Affiliates, now part of UnitedHealth Group’s OptumCare, and signed a new 15-year lease.

The property was sold on behalf of the physician-owners to a real estate investment fund.  The transaction closed at a price of $6,000,000, representing a 6.62% CAP rate.

Do you own your ASC real estate?

ASCs Inc. helps physicians who own their ASC/MOB real estate to sell it at a premium price and leaseback with no change in rent.  Many physicians who own their ASC/MOB real estate don’t realize how much value their real estate represents. Physicians usually have significant capital locked up in real estate that could be deployed in higher yielding investments. There are a growing number of private investors and real estate investment companies that realize what great businesses ASCs have proven to be.  These buyers are offering premium prices to acquire ASC/MOB real estate. In every situation, each ASC/MOB property we offer for sale attracts multiple premium-priced offers within 30 days of being listed.

Our goal is to help physician-owners of ASC/MOB real estate to obtain maximum value and optimum terms for the sale and leaseback of their real estate, with long-term leases and no personal guarantees.

Click here to view a list of our recent ASC/MOB real estate transactions.  These transactions demonstrate the demand that exists for medical real estate when marketed by a firm with national buyers — local commercial realtors typically do not have access to these buyers.  We market to national buyers who compete to buy the properties we represent and we consequently obtain the highest possible prices for our clients.

When you want to sell your ASC real estate, call us at 760-751-0250 to discuss the process and how to obtain the highest possible value.

How to create a strategic partnership with a hospital

February 10, 2016

How to create a strategic partnership with a hospital
Written by Jonathan C. Vick, Founder and President, ASCs Inc | February 05, 2016
There can be significant benefits to having a hospital as a partner for a surgery center, as long as the terms of the partnership are beneficial for the surgery center. If the partnership is not beneficial a center may find that it has sold equity to a non-producing partner and this can prevent the physician-owners from achieving their long term goals.

It is advisable to have a plan on how the hospital will be brought in as a partner and specific expectations and goals in mind prior to initiating discussions with the hospital. Here are some thoughts on how to successfully bring in a hospital as a partner:

First of all when seeking a strategic partner it is usually politically important to include one or more hospitals in the negotiation. From a business perspective it can be very beneficial for an ASC to have a hospital partner if they will give you access to their contracts and if they will refer patients to your center. These are big “ifs” and need to be clearly negotiated as part of the deal, before the deal is signed. Usually only one hospital is included as a partner.
Secondly the hospital’s usual starting position is that they need to own 51% and they use the income method of valuation so they almost always give the center a lower value than the ASC management companies that use the market multiple of EBITDA method to value a center.
Thirdly, if the hospital ends up as a 51% owner, regardless of what they say, they will want to run the center like a hospital thus destroying the efficiencies and economies that have made your center successful in the first place.

So based on our experience our recommendation is to:
1. Include the hospitals in the negotiation so they feel they are part of the process
2. Seek partnership proposals from several ASC management companies that have models that include a hospital partner and that have a track record of negotiating successful 3-way deals with a hospital as a minority partner
3. Obtain partnership proposals from more than one ASC management company as they will offer more than the hospital so this establishes FMV for the center and creates competition to maximize the value
4. If it makes sense to have a hospital partner a 3-way deal can result in the best of all worlds: access to hospital contracts and referrals, a management company that knows how to profitably manage ASCs, the highest possible price, and a corporate partner that is oriented to maximize profits so that distributions will continue to increase.
5. Negotiate a deal first with the selected ASC management company, and then with your management company’s assistance and expertise negotiate bringing the hospital in as a partner if it provides specific benefits to the partnership.

Jonathan C. Vick, the founder and President of ASCs Inc., has advised on development, merger, strategic acquisition and real estate sales transactions for over 500 physician-owned ambulatory surgery (ASCs), endoscopy centers (ECs) and surgical hospitals since 1984. He has extensive experience in ASC and EC sales, development, business planning, operations, valuations, and strategic mergers & acquisitions. He can be reached at 760-751-0250 or at e-mail: jonvick@ascs-inc.com. More information can be obtained at website: www.ascs-inc.com

 

© Copyright ASC COMMUNICATIONS 2016.

What Do ASC Buyers Look for in Potential Acquisitions?

January 27, 2016

Jon Vick of ASCs Inc. gives a detailed picture of the ambulatory surgery center buyer’s market, what qualities buyers look for in potential ASC acquisitions and how ASC leaders can position their centers to attract the right buyers.

Question: Who are the primary buyers in the current ASC market? 
To find out the answer to this question, and more, click here.

Selling ASC Real Estate: 5 Things to Know for Flawless Transactions

January 22, 2016

Ambulatory surgery center physicians often own the ASC’s business and real estate. “Over the last year the stars have aligned so that owners of ASC/medical office building real estate can now sell at a very attractive price, get cash for their real estate, lease back the ASC at market rate rent and realize significant tax advantages,” says Jonathan Vick, founder and president of ASCs Inc.

Mr. Vick explains why the current climate is favorable for real estate sale and the steps physician-owners can take to complete a smooth transaction.

Read more at Becker’s Hospital Review

What ASC Physician-Owners Need to Know About ASC Real Estate Sales & Leasebacks

January 20, 2016

Oftentimes ambulatory surgery center physicians own not only their center, but its real estate as well. Jonathan Vick, founder and president of ASCs Inc., answers questions on successfully selling ASC real estate and obtaining favorable leases for the buildings.

Question: When does it make sense for ASC physicians to consider a lease back transaction for their center?
To find out the answer to this question, and more, click here.

4 smartest things ASC owners do today: Preparing for sale

January 18, 2016

When physicians decide to open an ASC, business success is top of mind. Conducting present business in a way that maximizes future business, however, is a priority that can escape those who are not extremely planful. Here are four of the smartest things ASC owners can do today to maximize future gains from the sale or transfer of various parts of their business.

Read more at Becker’s ASC Review

ASCs Inc. markets your surgery center to the right buyers

January 15, 2016

Most surgery center owners want the highest price for their surgery center and a corporate partner that will grow the business and its profits. Whether you are selling a minority or majority interest, you want to sell to a partner with a track record of success that places a high value on your surgery center.

With over 30 surgery center companies interested in investing in surgery centers, selecting the right buyers makes all the difference between an average price and a premium price. By selecting the right prospective buyer, sellers will realize a higher selling price and a partner that increases profits and distributions. ASCs Inc. advises and assists surgery center owners so that their center is professionally marketed to leading surgery center companies that are looking for specific types of centers. ASCs Inc. helps surgery center owners maximize the selling price by recognizing and valuing all of the profits and assets of a center, creating a competitive environment, and marketing the surgery center to the buyers that want to invest in your type of center.