By Donna Pleis
With reforms looming and a continued economic turn down, the healthcare environment today is continually changing, and there seems to be no end in sight. Surgery centers are struggling as they are hit with more regulations, lower reimbursements and escalating employee benefit costs, not to mention the drug shortages, rising costs, increased liability and smaller recruitment pools. On top of all of this, the surgery centers are attempting to focus on patient safety and provide a valued service while trying to improve their efficiency and control costs.
It is no surprise that these concerns have led many facilities to seriously consider a merger or acquisition offer with either a hospital, management company or independent practice association, and the numbers are on the rise. Even competing surgery centers have gotten into the buyers’ market, looking to consolidate as a result of a declining physician investor pool. While a mutually beneficial alliance may be the way to move forward, there needs to be a lot of open mindedness, creativity and serious due diligence preceding the transaction. The surgery centers also needs to take some common sense steps in preparation.
Know the Market Position of the Surgery Center
Has the center been in business for some time? Is it doing well? Getting by but able to perform much better? Or is it close to going out of business if some changes aren’t made? Knowing the answers to these questions and what the center is worth in terms of the total investment portfolio allows the center to develop a sense of where it is in the marketplace and what kind of plan needs to be put into place and how soon.
Developing goals actually will be dependent upon knowing how well the surgery center is doing and where the physician partners are in their careers. This can help determine how much or how little of the center the owners are willing to sell. In addition, by focusing in on specific business goals, such as recruitment of new partners, refining payor contracts, generating new cases and increasing profits, the center can align with a company that will help it get closer to realizing its goals.
Increase Valuation and Reduce Risk of the Center
It is obvious that a company looking to merge or acquire an surgery center is looking out for its own best interests, and wants an surgery center that is going to bring value to the table and very little risk. Centers that are attractive to buyers are often mature centers, and they are especially valuable when the center has a hospital partner. However, centers with out-of-network payor contracts and large amounts of workers’ compensation cases are viewed as higher risk.
Maximize Physician Pool
Consider the age range and diversity of skills represented by partners. Bringing younger or diverse surgeons into the partnership, adding competencies and presenting a good list of perspective partners from the area can be very enticing to a buyer, since the goal is to have the center grow after the transaction.
Seek Multiple Proposals
With any important decision, it is always good to have comparisons. Therefore, the surgery center should be meeting with and getting business proposals from at least two to three companies. This gives the surgery center some leverage for negotiation, but at this critical point many facilities rely on a consultant or a lawyer to help them through the process.
When looking to team up, many surgery centers first choose a management company, and once that affiliation is concrete, they then seek a hospital partner. But regardless of who is involved in the association, there needs to be common strategic goals and group unity for a successful partnership, as well as good communications, transparency and participation and governance by all partners. Nonetheless, the real test of a successful partnership is having a well-founded consensus on creating value and safety for the patients.
Donna Pleis graduated from the University of Pittsburgh’s Dental Hygiene Program and worked 18 years as a clinical hygienist. After obtaining a business degree, she worked in management within the insurance industry and wrote freelance articles for “The Doctor’s Press.”
abeo Management Corporation (abeo) serves as a leading source of revenue cycle management and practice management with a specialization in anesthesia. The company leverages its people, processes, and software to serve independent practices, surgery centers, hospitals and healthcare systems with a scope of services that include billing, coding, transcription, practice management, and business consulting.