Current and Emerging Trends in Buying, Selling, and Valuing Ambulatory Surgery Centers. Presenters discussed typical ASC pricing and valuation methods, buyers and their motivations, differences between physician and corporate buyers, heavy out-of-network centers, multiples trends, the buying and selling process, physician syndication, hospital partnerships, and key diligence issues. They also compared co-management to joint ventures and discussed anesthesia profitability in light of recent OIG opinions. The presentation was moderated by Robert Kurtz.

1. Current and Emerging Trends in
Buying, Selling, and Valuing
Ambulatory Surgery Centers
December 7, 2012
Presenters
Curtis Bernstein Joshua Kaye Blayne Rush
Managing Director Partner President
Sinaiko Healthcare DLA Piper Ambulatory Alliances
Consulting
Moderated by Robert Kurtz of Kurtz Creative

2. What do you see as the
typical pricing of deals
today?

3. How are the prices
determined?

4. Fair Market Value
• Required standard under the Anti-Kickback
Statute
• Hypothetical willing buyer and seller
• Arms length transaction
• Known and knowable at date of transaction
• May take into account any improvements that
can be obtained by any hypothetical buyer

5. Investment Value
• Willing seller
• Specific buyer
• May take into account synergies of a specific
buyer
– Better managed care contracts
– Reduced costs
– Specific capital structure

6. Market Value
• Actual value resulting from auction of
business on open market
– Willing buyers compete against other willing
buyers for the business
– Buyers are only willing to offer amounts that
provide acceptable returns
– All offers made at arms-length

7. Who are the typical buyers
and what are they looking
for in a center?

8. Due Diligence
• Case Mix
– Cases performed by physician owners
• Payor Mix
– Current contracted rates with managed care payors
– In network vs. out of network
• Expenses
– Ability to save on supply costs / Group Purchasing Organization
• Specialties
• Ability to Grow / Capacity
• Certificate of Need (CON)
• Non-compete agreements

9. What are the key
transaction and valuation
differences in selling to
physicians versus selling to
a corporate buyer?

10. Fair Market Value
• When a not-for-profit entity or physicians are
involved in the transaction, FMV must be the
standard of value
– Cannot purchase an interest from a physician at above
FMV or sell an interest to a physician below FMV
– Generally corporate partners will not pay above FMV
• Corporate seller to corporate buyer (both for
profit) is not governed by the FMV standard
– Purchase of SCA from HealthSouth

11. What do you see as the
prospect of selling a center
with heavy out-of-network
and how are buyers
valuing out-of-network
centers?

12. Are multiples going up or
down?

13. What should someone
expect from the ASC
buying and selling
processes?

14. What does an ASC need to
do to syndicate to new
physicians?

15. What are the most
significant trends affecting
partnerships with a
hospital or another
corporate buyer?

16. Co-Management
Co-Management
Contracted with individual physicians or group of physicians? Generally group
Ability to include additional physicians Difficult, agreement with management company;
must sell shares in management company reducing
current investors interest in bonus pool
Ease of administrative management Easy, group’s ability to achieve levels, one check to
issue
Are the participating physicians required to attend Yes
management or other meetings?
Are the participating physicians involved with setting the Yes
quality measures?
How is compensation paid? Base compensation for time spent and incentive for
actual performance
Are physicians involved in the day-to-day management of Yes
the department?
When are quality metrics reset? Annually
Compensation Fixed plus incentive
Allocation of Compensation Hourly based on time commitments and / or
distributed based on company ownership

17. Joint Venture Co-Management

18. What are the key
transaction and diligence
issues to address when
undertaking a sale?

19. Can an ASC profit from
anesthesia in light of
recent OIG opinions?

20. Q&A
Curtis Bernstein
Sinaiko Healthcare Consulting
(720) 240-4440
curtis.bernstein@sinaiko.com
www.AltegraHealth.com
Joshua Kaye
DLA Piper
(305) 423-8521
joshua.kaye@dlapiper.com
www.DLAPiper.com
Blayne Rush
Ambulatory Alliances
(469) 385-7792
blayne@ambulatoryalliances.com
www.AmbulatoryAlliances.com