Surgery Center Transactions and Valuation: Thoughts From VMG Health’s Kevin McDonough

Published by Becker’s ASC Review

At the 9th Annual Orthopedic, Spine and Pain Management-Driven ASC Conference in Chicago, Kevin McDonough, CFA, senior manager with VMG Health, gave a presentation on surgery center transactions, current market analysis and valuations.

Market observations

Mr. McDonough began the presentation by noting the maturation of the ASC industry in recent years. The development of de novo centers has slowed as markets become saturated, and ASCs are more focused on consolidation and cost control than new development. The economic downturn and the sluggish recovery of the economy have put additional pressures on ASCs as patients opt out of elective surgery. Finally, declining reimbursement rates and the uncertainty of healthcare reform have forced ASCs to consider the future of their revenue streams and options for partnership with hospitals and management companies.

ASC industry maturation

Mr. McDonough said the maturation of the ASC industry means growth has leveled off and the number of available physicians per surgery center has declined. The industry has also seen more mergers and consolidations, among both ASCs and surgery center management companies. The last few years have shown a declining growth in ASC development, with just a 2-3 percent increase since 2008. Growth in the number of

surgery centers from the largest ASC management companies — including USPI, HCA, NovaMed and AmSurg — has also declined over the last two years.

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