How do I know when it’s time for me to consider selling my ASC?

Great question. You want to consider selling your ASC when an outside investor can add the most value to the partnership and right as you are peaking with what you can do with the center. This can occur at different stages for different surgery centers. There are buyers and sellers at all stages. It is tough to anticipate a future decline in business, so it is necessary to determine where the surgery center business is and where it is headed. Easy right? I recommend that you think of your ownership shares in your surgery center as you would shares in NIKE, Facebook, GE, etc.; value can go up or down almost anytime. Let’s take a look at the thought process in a more strategic fashion. What we do if we are brought in early enough in the decision making process is to recommend doing a SWOT (Strength, Weakness, Opportunities, Threats) analysis. There are others that you could use to get to the same place, but it is the one most of us have heard about and it is fairly easy and straightforward. A SWOT analysis guides you to identify the positives and negatives inside your Ambulatory Surgery Center business (S and W) and outside of it in the external environment (O and T). This will help you to develop a full awareness of your situation, which will help with creating a plan and making the decision. Do you hold or sell, and what is your path forward if you sell or hold? You can list internal and external opposites side by side. Answer these simple questions: what are the strengths and weaknesses of your physician group, your ASC, your market, and your efforts or actions, and what are the opportunities and threats facing it? Some of the elements typically found in a SWOT for a surgery center: Strengths  Young, engaged partners Multi-specialty case mix Well paying long term contracts Weaknesses Low volume High debt Disengaged partners Low paying contracts Overbuilt center Opportunities Ability to take on more cases or expand Improve payor contracts (e.g. an ASC that sold with payor contracts at 100% of Medicare. This was a huge buying point for the strategic buyer because it was an easy opportunity to increase revenue shortly after they bought the center.) Recruitable surgeons in the market Lower expenses Improve business best practices Internal cases that can be brought to the center Able to establish a direct to patient marketing program Threats Competing Hospitals In-office procedural rooms Competing ASCs Fractured partnership/disgruntled partners The major threat to success in the SWOT is “the competition.” So it can help to think of the competition in a broad sense as you consider threats to your...

How do I identify the ideal time to sell my ASC?

Since we know that your ASC is worth the most when you still have moderate growth, so it would be at the top of the expanding growth stage or at the beginning of the slowing growth stage. The market has recruitable surgeons, and your center can take on more cases or has excess capacity if you have to expand your day and start surgeries at 6 am and stop them at 6 pm or expand your week and do cases on the weekend. We will assume for this question that your desire is to maximize the sales price and sales terms to you and your partners and to take on a partner that will be a good fit and increase your profits. So all of that is straightforward and an easy concept. The tough part is, when will we know all of this? When we go through this process with a specific client we would conduct in-depth interviews with the owners to get a better understanding of what they want and what they are willing to commit to in order to get there, as well as the due diligence of the center’s business. We would then lead them through SWOT analysis that would help us understand what paths to discuss. Your weaknesses and opportunities in addition to what you are willing to commit to is really what determines the answer to the question. You will then determine from that process if you have the desire to execute on some of the strategies that will take advantage of some of the opportunities that have been identified in order to expand the rapid growth cycle and slowing growth cycle. In the event that you are unwilling or unable to expand the rapid growth stage of your surgery center, it does not have to be a “do it yourself” project, so that would be an ideal time to sell. If we execute the plan that is produced from the above, then the ideal time would be to sell after the changes have been made and the newly recruited surgeons have seasoned a little...

Is there a bad time to sell my ASC?

Yes of course there are less optimal times to sell you ASC. From the financial sense if you are still growing rapidly, recruiting new surgeons or have the market that would allow with some help that growth, then it is in your best financial interest to capture that growth before you sell. In other words you really do not want to sell your surgery center before the timing is right regardless of what stage your ambulatory surgery center is in. Sounds easy….the challenge is that there are some variables that are unknown in that formula without a crystal ball. So it is no different than making a surgical decision, you have to look at the situation in its entirety, analyze your ASC first-do a Ambulatory SWOT analysis (look at yours and the market’s Strengths Weaknesses Opportunities and Threats)-then look at and pay close attention to your weaknesses and opportunities. This will drive your decision. Make a professional judgment and decision and then execute on that decision. Examples of bad times to sell were bad times because we had to sell the ASC. If we were advising the centers earlier on in the process, we would have taken a different direction with the benefit of time. One time a surgery center’s majority owner, who was a surgeon, called 9 months prior to us working with him and in reality it was too late 9 months later. When he first had called us and we discussed the situation in depth, we recommended that we work together to syndicate and recruit more doctors and then add an ASC management company or hospital partner. At that time we assumed that the cost of that process was a barrier, but he called 9 months later with significant issues hanging over his head. We told him that we really did not want to get involved, but he literally begged us to help him. We explained how difficult given his timeline that it was going to be and that we would not get to where he wanted to get, but we ended up taking him on as a client. He ended up having to sell his CON and assets just to mitigate his damage. So the answer is that the bad time to sell is when you wait until you have no other option but to sell or in other words when you are forced to sell. This can happen if you are not a realist and are not able to realistically look at your SWOT and understand that either you have some weakness or your market does and you need help shoring up those weaknesses. People do this by blaming external factors when a lot...