Article

ASC's Value Proposition Appeals to Healthcare Providers

July 30, 2024
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Ambulatory surgery centers (ASCs) are experiencing unprecedented changes in ownership as private equity investors and national healthcare organizations move into the ASC space. 

To ensure they partner with the right companies and have their worth accurately assessed, ASCs must fully understand their value proposition. This can help them make informed decisions before they consider joining with a physician group, hospital or other health system.

Changing healthcare dynamics are making ASCs appealing to other healthcare providers. “ASC investments are accelerating and becoming central to the overall health system strategy,” notes the 2023 Hospitality Leadership ASC Survey from Avanza Intelligence. “More than seven out of 10 hospitals and health systems intend to continue investing in and affiliating with ASCs.”

EMERGING AMBULATORY SURGERY CENTER OWNERSHIP TRENDS

Most ASCs are still physician owned, which has been the historical norm. However, ownership is changing. Data shows that:

  • From 2022 to 2023, the percentage of ASCs that were independent shrunk from 70% to 68%, according to VMG Health.
  • The number of ASCs under partnership by a national operator increased by a compound annual growth rate of 3.14% from 2011 to 2023, notes VMG Health.
  • 48% of hospital systems had at least one ASC in 2023, up from 41% in 2019, according to Avanza Healthcare Strategies.
  • 47% of hospitals and health systems have an affiliation or ownership interest in two or more freestanding ASCs, according to Avanza.

This trend toward fewer ASCs owned entirely by physicians is expected to continue as private equity firms and other corporate entities are looking to invest in and take at least a partial ownership role in ASCs. Changes in ownership are important because they could potentially impact ASCs’ business—more corporations and hospital systems moving into ambulatory surgery could create more competition for some ASCs.
 
However, more interest in this non-acute care specialty could also potentially benefit existing ASCs. For example, hospitals can share resources and patient referrals, while private equity firms can provide access to capital for an expansion or to purchase new technology.

HOW HOSPITALS BENEFIT BY PARTNERING WITH ASCs

Organizations that partner with or invest in an ASC expect a return. ASCs provide a strong value proposition for hospitals by offering another point of care. They also support hospitals’ business of managing high-acuity care while keeping a focus on overall costs.
 
Hospitals are facing an increase in high-acuity emergency volumes. The company Sg2, which provides data, analytics and expertise to healthcare providers and life sciences companies, expects patient length of stay in hospitals to increase.
 
“As patient acuity and complexity continue to rise, Sg2 projects inpatient discharges to grow 2% in the next 10 years with a 6% increase in average length of stay resulting in an 8% increase in total IP bed days and a 6% increase in average length of stay,” according to an article by Sg2 employees.
 
ASCs can help hospitals by treating lower acuity patients. They can also handle elective surgeries and help lower a hospital’s total cost of care for treating some patients.
 
“Enhanced negotiations with payers make an ASC strategy a valuable tool for hospitals to mitigate payer mix erosion, a challenge that has emerged with the aging population and shifting landscape of elective surgeries,” according to the Sg2 article. “We have seen a notable migration of elective surgical procedures away from the hospital toward more efficient and cost-effective ASCs.” 

“ASCs must take a data-driven approach to identify and seize new growth opportunities.”

STRATEGICALLY EXPANDING THE ASC PORTFOLIO

ASCs must take a data-driven approach to identify and seize new growth opportunities. They must also be strategic about expanding their procedure portfolios into new areas that offer a strong return on investment or meet patient needs. The list of procedures that ASCs can get reimbursed for continues to slowly expand as specialty areas are added.
 
“As procedures continue to shift toward ASCs and away from hospital outpatient departments (HOPD), it is essential to take a data-driven portfolio approach to your ASC growth opportunities,” the Sg2 article notes.
 
ASC stakeholders can start their portfolio expansion by determining which areas are best suited for their business, then add new procedures to enable short- and long-term success. 
Factors for ASCs to consider as they look to add services and potentially partner with a healthcare organization or private equity firm include:

  • Understanding what resources the ASC needs to support growth
  • Identifying market opportunities for expansion
  • Having a view into patient demographics and the complexity for new procedures
  • Recognizing the competition for specific procedures
  • Making sure the ASC has physicians capable of handling increased workloads or new procedures
  • Determining the terms ASCs want to negotiate with potential partnerships

With a strong value proposition of offering a cost-effective environment for non-acute healthcare, ASCs may be able to chart their own futures by deciding who they partner with—or choose to remain independently owned. 

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