As more procedures migrate to the outpatient setting, hospitals have a growing interest in adding ASCs of their own.
Oftentimes, it is more cost-effective for large health systems to pursue acquisitions or joint ventures than starting a new facility from scratch. This means that existent independent ASCs are facing more pressure to sell out to large systems, especially as the cost of providing care continues to rise.
Becker’s spoke with a number of industry leaders on whether or not their ASCs are facing a growing amount of acquisition pressure.
Editor’s note: Responses have been lightly edited for clarity and length.
Question: Do you believe that ASCs are facing increasing pressure from health systems/hospitals pushing acquisitions?
Caleb Ashmore, PT, DPT. Orthopedic Rehab Services Supervisor at Harris Health (Bellaire, Texas). ASCs are currently under significant pressure due to rising costs and shrinking reimbursements, making it increasingly challenging to operate efficiently. The cost of medical supplies and implants continues to rise, and independent ASCs, which lack the purchasing power of larger healthcare systems, are particularly vulnerable. There has been a notable recent shift towards outpatient care, with more surgeries being performed in the ASC setting. As a result of this, larger health systems are looking to acquire ASCs to expand their outpatient services. Many of these independent centers are now considering strategic partnerships with health systems to gain financial stability and access to additional resources.
Alejandro Badia, MD. Hand & Upper Limb Surgeon at Badia Hand to Shoulder Center (Miami). I believe that healthcare systems are finally realizing that current healthcare costs are unsustainable and that outpatient surgery is much more cost-effective. It is then easier and cheaper to acquire than to build de novo. That being said, many surgeons are finally realizing the value, and power, that we do have in the healthcare marketplace and there is little reason for us to be acquired as long as we hire good administrators and nursing staff. The challenge will continue to be the payors and anesthesia services.
Jason Cuéllar, MD, PhD. Spine Arthroplasty Surgeon at Cuellar Spine (Palm Beach, Fla.). Absolutely. Hospitals have caught on to the fact that they have been losing more and more of the best patients to ASCs and since they have been unable to parallel independent ASCs with their own outpatient centers, they have turned to the alternative – acquire successful ASCs. This has good and bad consequences: the good are that they often have the ability to negotiate better contract rates. The bad is that the ASC then gets managed by a large hospital corporate structure and loses their autonomy and flexibility as a small facility.
Brooke Day. Administrator at Hastings (Neb.) Surgical Center. I believe ASCs are under increasing pressure from health systems and hospital acquisitions. Large physician groups are establishing their own centers, and in urban areas, physicians often invest in multiple ASCs, which dilutes both their case volume and engagement at any one facility. This fragmentation, combined with the shift of high-revenue cases to hospital-owned or single-specialty centers, puts multi-specialty ASCs at risk, forcing them to rely heavily on lower-reimbursing, high-volume procedures just to stay afloat.
Gregory DeConciliis, PA-C. Administrator at Boston Out-Patient Surgical Suites. I believe the pressure is occurring at the physician practice level, but this is translating over to the ASCs. I wouldn’t say the ASCs have pressure, per se, but most likely it is a collaborative effort that could be successful with a joint venture. As an ASC, we are only as strong as the physicians behind us; therefore, we want to support our physicians who come to the ASC. If a joint venture is a possibility, it is best to do due diligence on the potential benefits the acquisition could provide.
Brian Gantwerker, MD. President of the Craniospinal Center of Los Angeles: I think so. A lot of times, health systems complain that ASCs that are not part of their network are cherry picking cases, and I think that is true. But ASCs have the ability to do surgeries in a more cost-effective and efficient way. Hospitals suffer from administrative bloat. In terms of their ability to manage elective cases and do so cost-effectively, it’s their own fault. There’s a ton of bloat, immobility and struggle when it comes to change and making policy adjustments that are baked into the hospital system. I think a lot of hospitals suffer from administrative bloat, and they carry those same maladaptive policies and procedures over into the ASC setting. I’ve worked with ASCs that get acquired by health systems, and the culture changes and inefficiencies start cropping up. I think hospitals are their own worst enemy and if they wanna save money, they should let physicians lead the way. A lot of times, all we doctors want to do is do our job. Let us tell you how to do things better, because at the end of the day, it’s the inevitable detachment from the administrative class to the physicians that creates problems and inefficiencies. Also, you are wasting money.
Mauricio Garcia-Jacques, MD. Interventional Pain Specialist at iAche (Houston). Absolutely. Hospitals view ASCs as strategic assets for cost-efficient care delivery and payer leverage, while independent ASCs face the hard choice to “join or be squeezed” by economic and regulatory headwinds. Larger systems are seeing this as an opportunity to expand their footprint, expand the outpatient services in preparation for value-based care models and to negotiate better payment rates at lower overhead than inpatient services.
Emma Gimmel, BSN, RN. Director of Nursing at Manhattan Endoscopy (New York City). There is multiple or a combination of factors independent ASC may be experiencing pressure from, the systems/hospitals reaching out with strong marketing offerings and the convenience of power of group-everything, news of processing neighboring and similar practices acquisitions, the uncertainty of the supply chain effects under current economic climate, the anesthesia services overhead leftover from the COVID-19 pandemic, are a few. In history, the life of an ASC changes over time due to distinct reasons, circumstances and the changing business environment and practices. Some can be expected, and others make the choice as they consider their options. Those ASCs that have been acquired may provide a testimony in time of the process, worth of identity changes, profit sharing experience after the initial incentives and those projected benefits promises with a retrospective opinion in con/neg. As challenging as it may be and with no promise of solid solution, independent ASCs may be at a point where resourcing or developing interdependent relationships could be an option when independence is a preference.
Christina Holloway, RN. Corporate Clinical Coordinator at Advanced Ambulatory Surgery Center (Altamonte Springs, Fla.). Hospitals are expected to provide the spectrum of healthcare services without the incentives afforded to ASCs. To maintain a balance of return with staffing and supply, it is a natural progression for organizational acquisition. In addition, ASC business models focus on physician integration on contract rather than direct employment. This allows for more scheduling control to maximize utilization, thus enhancing cost control. Initially, these initiatives leveraged the market. With incentives afforded to ASC systems, it has realigned long-term strategies for hospitals in position to take advantage. This incentive also varies by state- hospital systems have advantages navigating diverse infrastructures across states, making ASC ownership more attractive, while in-contract independently owned centers could struggle formulating long-term approaches to the complexities.
Omar Khokhar, MD. Gastroenterologist at OSF HealthCare St Joseph Medical Center (Bloomington, Ill.). Yes, for several reasons. Acquiring ASCs helps increase outpatient revenue and it’s simpler to acquire an ASC than build one from the ground up. The real question is: is it in the spirit of collaboration or consolidation?
Philip Louie, MD. Spine Surgeon at Virginia Mason Franciscan Health (Seattle). Yes, ASCs are absolutely feeling the pressure! As more spine (and orthopaedic cases in general) continue to shift to these outpatient centers, larger health systems/hospitals are moving aggressively to acquire physician groups and their ASC ownership stakes. Over the past decade, ASCs have become highly valuable assets. They are lower-cost, higher-efficiency care environments that have demonstrated improved outcomes, satisfaction, and ultimately align well with the broader push towards some sort of value-based care system. Many large health systems/hospitals never prioritized ASCs — until they started losing cases (and revenue) to them. And now, there is this mounting pressure — health systems are trying to regain procedural volume and revenue that has shifted to the outpatient space, while independent practices are trying to maintain autonomy and flexibility in how care is delivered. There will be a growing tension.
Mark Mayo. Leader at Mark Mayo Health Care Consultants (Wauconda, Ill.). The vast majority of ASCs have remained physician-owned. There have been some gains in management company joint venture ASCs and some entry by hospital-physician joint ventures. The physician model requires succession planning in order to continue with younger surgeons joining established practices which have a vested ownership interest in an ASC and still seems the dominant ownership model. Hospitals have been known to acquire an ASC with the express purpose of controlling (usually limiting) the number of cases or even closing down the center altogether. Physicians left the inefficiency of the main OR for their own specialty ASC with consistent staffing and a focus on efficient case performance and turnover. Many hospitals insist on managing and operating their ASCs much like they run the main ORs so there is little incentive for surgeons to go to a hospital-based ASC. In some acquisitions, the hospital has partnered with their physicians and a management company, which may result in the surgeons losing control by being outvoted by their hospital and management partners. Hospitals who wish to maintain their loyal surgeons will provide the joint venture with expertise in contract negotiations, infection control, management systems and financial leadership. Cases moved from the main OR to the ASC free up main OR scheduling for larger, more complex and more profitable cases for the hospital while allowing efficiencies at the ASC for a variety of procedures. Such a joint venture can be a true win-win, but both parties must remain committed to that shared goal.
Rick Ngo, MD. General Surgeon at Texas Hernia & Surgical Specialists (Tomball). Absolutely. Health systems/hospitals are well aware that the ASC industry (their competition) is growing quickly and substantively. They realize they have two choices:
1. Eliminate the competition by acquiring them.
2. Compete against the competition by building their own ASC.
The former option is clearly the ideal one for them.
Joseph O’Brien, MD. Medical Director of Minimally Invasive Orthopedic Spine Surgery at Ortho Bethesda (Md.). I see the biggest challenge from management organizations such as USPI that are buying up surgery centers. This arrangement decreases margins and often leaves the physician owners with predatory contracts.
Andy Paulson. Director of Hospitalist, Pediatric Hospitalist, Intensivist, Pulmonary Clinic & EEG/Sleep Lab at Carle Health (Urbana, Ill.). I would answer this as yes. It can either be a direct way of acquiring or it can be a subtle such as closing medical staff to only employed providers to force more employed physicians. Also, as physicians are nearing retirement, they are looking for ways to exit their practices, and hospital ownership is a good option.
John Peloza, MD. Orthopedic Spine Surgeon at Midwest Orthopedic and Spine (Chicago): Yes, ASCs are facing increasing pressure from health systems and hospitals pushing acquisitions. This pressure stems from the healthcare industry’s shift toward cost-effective outpatient care, with hospitals aiming to retain revenue and expand their service offerings.
Market Trends:
1. The ASC market is growing with a projected compound annual growth rate of 6.02% from 2024 to 2030.
2. 65% of surgical procedures have moved to ASCs, driven by lower costs.
3. Regulatory changes
– CMS has been removing procedures from the inpatient only list, enabling more surgeries to be performed in ASCs, including orthopedic, spine and cardiovascular procedures.
– Rollback of certificate of need laws in several states, which reduces barriers to ASC development.
4. Acquisitions
– HCA Healthcare/Surgery Ventures acquired 2 Texas ASCs.
– HCA Healthcare/Litchfield Hills Surgery Center.
– Regent Surgical Health acquired Oregon Surgical Institute.
– Tenet Healthcare/USPI added 57 ASCs in 2024 for a total of 518 ASCs in 37 states.
– Prime Healthcare/Ascension.
Challenges to consolidation:
1. Regulatory and antitrust laws
2. Operational integration
3. Physician autonomy
– MD control
– Consistent quality of care
4. Rising Costs
– Supply chain
– Labor
5. Fragmented nature of the ASC market
– Local and independent players
– Economies of scale
– Standardizing operations across facilities
The trend to move surgical cases to ASCs will only accelerate in spite of the many challenges. Because of minimally invasive surgical technologies and techniques, and much better anesthesia and pain management protocols, higher acuity and complex cases can be done in ASCs rather than hospitals. The cost of care in ASCs is markedly less because hospital overhead is astronomical. The best ASCs are single-specialty focused, resulting in better outcomes with fewer complications. The patient experience in an ASC is also much better with more personal attention and convenience.
Healthcare systems and hospitals regard ASCs as a significant threat to their business model. The most profitable segment of their revenue stream is moving to the outpatient environment, leaving them with high-cost, low-revenue chronic disease management. Therefore, they are adapting to this reality.
Healthcare systems/hospitals have several advantages. Their insurance contracts are substantially better than ASCs. Nonprofit systems do not pay income or property taxes, nor do they pay taxes on charitable donations. They also use tax-free municipal bonds to fund expansion. Publicly traded corporations have massive financial assets compared to individual ASCs or ASC companies. They also drive volume discounts on equipment and have more secure supply chains. They can afford to pay higher salaries and benefits for staff. They can offer physicians much better contracts per surgical case and can do joint ventures/ownership deals with surgeons. With a hospital partner, physicians have access to all hospital system resources. Expect acquisitions to surge in the future.
John Polikandriotis, PhD. CEO at South Florida Orthopaedics & Sports Medicine (Stuart). Health systems/hospitals are intensifying their pursuit of ASC partnerships and acquisitions in response to the ongoing shift of outpatient procedures away from hospitals. This migration is fueled by payer incentives including value-based care models that emphasize site of service cost-effectiveness and quality outcomes, as well as provider preference for ASCs’ efficiency, streamlined scheduling, and greater control over equipment and staff. In addition, patient demand for affordable, high-quality care and CMS policy changes such as removing procedures from the inpatient-only list and expanding ASC coverage to include key orthopedic surgeries further accelerate this trend. So, as surgeries continue to move from inpatient and hospital outpatient departments to independent ASCs, health systems are aggressively seeking to retain these cases and the associated revenue.
John Prunskis, MD. Medical Director at DxTx Pain and Spine (Barrington Hills, Ill.). It depends on the individual situation. Hospitals are enjoying an artificial higher payment for identical procedures, compared to payments to ASCs. Some of them also enjoy non-for-profit status which further magnifies the revenue they’re making from outpatient type procedures.
Until payment site neutrality is reached where identical procedures are reimbursed the same whether they’re done in a hospital or an ASC, hospitals won’t be under pressure to purchase ASCs unless they see that physicians whom they can’t control, in other words those who are not employed by the hospital, are opening up their own ASC. Hospitals may offer to partner with physicians planning to open an ASC if for example in a CON state the CON board would review that application more favorably.
Adnan Qureshi. Managing Director of M&A at Kaufman Hall. No, I don’t believe that independently-owned ASCs are feeling pressured by health systems to be acquired. Rather, if a health system is pursuing a joint venture or acquisition of an independent ASC partnership, it’s a reflection of the success of the center and reputation of the ASCs physicians in their service area. The heightened interest level from health systems to partner with independent ASCs provides ASC partnerships with the options to sell a portion or all of their ownership and maintain their practice independence while aligning closer with hospitals that operate in their service area.
Patty Shoults, BSN, RN. Corp Director Ambulatory Surgery at AdventHealth (Altamonte Springs, Fla.). In my perspective, I do not believe that health systems are actively “pushing” acquisitions. Instead, they are aligning with ASCs that share the same goals and vision as the health system, primarily focused on providing lower-cost settings for care. These alignments are typically long-term partnerships, and it is crucial for both entities to have a shared vision and objectives to ensure mutual success. Additionally, it is worth noting that more surgeons are choosing to be employed by health systems. Some of these surgeons may have had ownership stakes in the ASC before their employment by a health system, which can influence the dynamics within the ASC. The shifts in outpatient surgery care are expected to continue growing, and for long-term success, an ASC must choose a partnership that is well-aligned with its goals and values.
Scott Sigman, MD. Chief Medical Officer/Founder OrthoLazer Orthopedic Laser Centers (North Chelmsford, Mass.). The biggest pressure that will be developing between health systems and hospitals regarding ASC acquisitions will be site neutral payment policies. Site neutral payment policies are being considered by Congress at this time. As much as ASC owners were hoping for a raise the most likely scenario will be for a reduction in payment to HOPD facilities. This site neutral reduction in hospital payment for similar procedures will drive hospitals and hospital systems to move outpatient procedures to the ASC. This will be a driving force for potential acquisition of community ASC’s in the near future.
Alexander Sudarshan, MD. Ophthalmologist at Doctors Hospital (Brownsville, Texas). Not only do I believe that ASCs are under increasing pressure from hospital systems and private equity to be purchased, but I have seen these results.
Mark Vorherr. CEO at Mayfield Brain and Spine (Cincinnati). Yes. Health systems and hospitals are looking to ASCs as a hedge against potential site-neutrality legislation, and as a means to share in the profitability of physician-owned ASCs. Control and governance are priority these days, and physicians should make efforts to keep costs low and quality high by maintaining ownership majorities.
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