Jeff Simmons, chief development officer at Regent Surgical Health, an ASC developer and manager, discusses 10 factors that influence a center's sales price.
1. Earnings. If the ASC is making money, its price can be based on a multiple of earnings, minus the debt. The typical multiple for ASCs has declined in recent years from 6-8 times earnings to 5-7 times earnings.
2. Assets. If the ASC is earning little or no money, it is evaluated based on assets minus the debt. Regent, for example, trades in centers that are losing money, breaking even or making a small profit, such as up to $500,000 a year.
3. Amount of interest sold. "The multiple would also be affected by the amount of ownership to be sold," Mr. Simmons says. If the selling physicians want to hold on to majority interest, the price would be less because the buyer would not be able to control operations. ASCs selling a minority interest have a multiple of 3-4 times the value of the assets while ASCs selling majority interest have a multiple of 5-7 times.
4. Market conditions. These factors play a smaller role in evaluations the earnings, assets or debts, but they are worth mentioning. Some examples follow.
5. Glut of ASCs in the area. If there are too many ASCs in the area, a center up for sale would have a lower value.
6. Nearby hospital buying up ASCs. If a hospital in the area is buying up ASCs, usually in partnership with physicians, this will take volume away from unaligned ASCs and thus lower their value.
7. Location in a CON state. States with tough CON laws make it more difficult to open new ASCs and thus raise the value of existing ASCs. "Centers in CON states have a higher value," Mr. Simmons says.
8. Multiple specialties. The more specialties a center has, the higher the multiple. Musculoskeletal ASCs, including spine, orthopedics and pain, are at the high end of the multiple.
9. Managed care contracts. ASCs that are fully contracted with insurers are at the high end, while out-of-network ASCs are at the low end.
10. Newer ASC. A new ASC would have a higher value in an asset-based evaluation because its equipment would be new. "If a place is brad-new and has high assets and very little debt, it would be ideal for asset purchase," Mr. Simmons says. Equipment loses value in 5-7 years. Most ASCs are more than five years old.
Learn more about Regent Surgical Health.
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