HealthCare Appraisers is pleased to have collaborated with members of the Ambulatory Surgery Center Association (ASCA) in publishing our 2019 ASC Valuation Survey, a resource for ASC administrators, investors, and other stakeholders to gauge insights into transaction activity and valuation trends within ASCs throughout the United States. The respondents to the 2019 ASC Valuation Survey are ASC management companies, health systems, ASC business brokers and investment bankers. In aggregate, respondents this year either own or manage over 20 percent of the ASCs in the United States.
The consensus from our survey respondents is that ASC transaction activity was robust and competitive in 2018, with that activity expected to continue into 2019. 70 percent of respondents purchased at least one ASC in 2018, with nearly 90 percent expecting to purchase an ASC in 2019. Most respondents observed both increased competition for acquisitions, and increased acquisition activity in 2018 as compared to 2017.
Our survey results indicate that valuation multiples for controlling interests in both single-specialty and multi-specialty ASCs have increased notably year-over-year when compared to the results contained in our 2018 ASC Valuation Survey. From HealthCare Appraisers’ vantage point, this is not a surprising trend. Private equity platforms have been active in acquiring single-specialty physician practices and their affiliated ASCs in several specialties, both as platform acquisitions and subsequent bolt-on acquisitions. Health systems show a continued interest in purchasing ownership interests in freestanding surgery centers as a result of a continued push for site-neutral payments, and through the expansion of “inpatient” surgeries (e.g., total joints) being performed in an outpatient setting.
We noted divergence in responses related to transactions involving minority interests in ASCs. We would have expected some of the responses at the lower end of the multiples-range spectrum to have increased year-over-year, as to be consistent with the rising multiples for controlling interests. One-third of survey respondents indicate that a formula is utilized in connection with minority interest transactions, rather than an independent FMV opinion. Depending on how regularly these formulas are updated, it may be an indication that a transaction utilizing a static formula is not being reflective of the changing market for ownership interests in ASCs. This may result in transactions occurring at a level that is inconsistent with fair market value.
Matthew Muller is a director for HealthCare Appraisers. Contact him at mmuller@hcfmv.com. The complete 2019 ASC Valuation Survey will be available May 1 as a free download at www.HealthCareAppraisers.com.