The valuation of Ambulatory Surgical Centers (ASCs) requires numerous considerations specific to the healthcare industry, including issues relating to the impact of management fees. Todd Sorensen, MBA, (VMG Health, Nashville) writes in BVR’s Guide to Healthcare Valuation, “virtually all multi-center owner/operators of ASCs charge the centers a fee of between 4 and 7% of net revenues to provide management services.” Sorensen adds that, “because the owner/operator receives the management fee off the revenue line before operating expenses, the risks associated with the fee are significantly less than the earnings generated by the owner/operator’s equity investment in the ASC. Accordingly, when evaluating multiples from guideline transactions, it is particularly critical to understand whether the buyer received a management fee contract pursuant to the transaction.”
Other nuances to consider when valuating ASCs and other ancillary medical services: 1) out-of-network versus in-network billing; 2) projected volumes and charges; 3) operating expenses and capital expenditures; and 4) global versus technical only billing. Want to learn more? Use the link above to pre-order an advanced copy of this must-see resource.
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