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What Does 2019 Hold for ASCs?
10 Trends to Consider

posted July 12, 2019

Ambulatory investment, including investment in ambulatory surgery centers (“ASCs”), continues to be viewed as a critical strategic move among healthcare organizations, especially large health systems, H2C research shows. Last year, Tenet Healthcare Corp. increased its investment in an ASC chain even as it divested other assets. Meanwhile, a recent poll shows 48 percent of hospitals and health systems plan to make additional ASC investments.


But operating an ASC not without challenges. Some independent ASCs face increased difficulty recruiting physicians at a time when hospitals employ 44 percent of physicians. Lower profit margins mean ASCs must be highly efficient, perform well on quality, and provide an excellent patient experience, all while keeping costs low. They also must be skilled in using data analysis to determine which services best meet the needs of the market.


What is the outlook for ASCs in 2019 and beyond, and how can operators gain the most from their investment? Here are 10 things to consider.


Hospitals and health systems are making big bets on ASCs. The number of ASCs owned by or affiliated with hospitals and health systems more than doubled from 2007 (16 percent) to 2017 (41 percent), according to The Advisory Board Company.


Some health systems have begun to prioritize ambulatory investments over traditional brick and mortar. For example, last year, Ascension publicly announced an “advanced strategic direction” and hinted at plans to scale back hospital operations in favor of expanding its outpatient footprint.


The ASC market is growing. One recent study shows health plans, employers, and consumers could save billions by choosing to have outpatient surgeries performed in ASCs rather than hospital outpatient departments. It’s no surprise, then, that the ASC market is expected to reach $40 billion by 2020. Some predict outpatient procedure volumes will increase 16 percent from 2016 to 2026.​


ASCs are strategically moving into the physician practice management (“PPM”) space. During McDermott Will & Emery’s 2018 Health Care Services Private Equity Symposium, panelists pointed to a move away from “pure-play ASCs,” with some ASCs pivoting into PPMs. ASCs also are exploring new types of strategic partnerships. One example shared during the conference: the merger of Surgical Care Affiliates with Optum.


But investment in ASCs doesn’t guarantee success. There are numerous disadvantages to ASC investment, such as lower reimbursement for hospital-equivalent procedures, or those that are also performed in hospitals on an outpatient basis. (Physicians, however, often receive higher payment rates for procedures performed in ASCs.) Some ASCs face challenges aligning physician compensation with the ASC’s long-term goals; others struggle to achieve and sustain healthy case volumes.






Figure 1: Advantages and Disadvantages of Investing in an ASC

Source: O’Neill, S.M., MD, PhD, et al., “Should Your Health Care System Invest in an Ambulatory Surgery Center? A Decision-Making Framework,” Bulletin of the American College of Surgeons, November 2017,


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Hammond Hanlon Camp LLC (“H2C”) is an independent strategic advisory and investment banking firm committed to providing superior advice as a trusted advisor to healthcare organizations and related companies throughout the United States.  H2C’s professionals have a long track record of success in healthcare mergers and acquisitions, capital markets, real estate, and restructuring transactions, acting as lead advisors on hundreds of transactions representing billions of dollars in value.  Hammond Hanlon Camp LLC offers securities through its wholly-owned subsidiary H2C Securities Inc., member FINRA/SIPC.  For more information, visit



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To survive with thin margins, ASCs must tightly control expenses. Expenses for ASCs vary widely. Supply costs as a percentage of net revenue range from 15 to 32.7 percent per facility. Meanwhile, salaries, wages, and benefits range from 17.8 percent of net revenue to 30.4 percent. To survive over the long term, ASCs must closely manage their costs, from administrative expenses to supply costs to compensation.


Maintaining the right volume of procedures also is critical. Depending on the facility’s procedure and payer mix, an ASC with four operating rooms may need to perform 2,000 to 4,000 procedures a year to achieve a heathy margin. It’s also important to remember that typically, just 40 to 60 percent of procedures that could move from the hospital setting to an ASC actually do so, according to the American College of Surgeons. That’s because some patients and physicians prefer not to make the switch.

Designing service offerings with a “one-stop shopping” consumer mindset could be a competitive differentiator. Increasingly, consumers are seeking ASCs that provide a wide array of surgical services. This is prompting ASCs to recruit other specialties, such as orthopedics and gynecology, to broaden their offerings for consumers.

The rise in consumerism also means ASCs must carefully craft their value strategy. Providing value based on lower cost alone isn’t enough. ASCs also must seek ways to elevate the patient experience before and after surgery. Strategies include providing a calm and soothing atmosphere, providing post-operative care kits with nice-to-haves like warm socks and Chapstick, maintaining continuity in care staff, and helping family members feel comfortable while they wait.


Engaging patients in their out-of-pocket costs also is key to an ASC’s survival. With the rise in high-deductible plans, ASCs must develop effective strategies for patient financial engagement—including flexible payment plans. They must also engage consumers in discussions around how out-of-pocket expenses will be paid before care is delivered. Doing so increases transparency in financial communications while reducing the risk of bad debt.

Weighing Your Options? H2C Can Help


If your ASC is struggling to maintain sufficient volumes or achieve a healthy margin, H2C can provide guidance. Contact us for more information.






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