Don Ritucci (left), Scott Fraser (middle) and John Lamberth (right) speak at the ASC News Investment & Operations Conference in February 2024.The ambulatory surgery center (ASC) space is one of the more attractive sub-sectors in all of health care.
That standing is partly because of surgery centers’ value proposition – typically the lower-cost setting compared to hospital-based surgeries. It’s also because of patient preferences, with health care consumers appreciating the streamlined ASC experience.
In many ways, ASCs are a “win” for all health care stakeholders, according to Scott Fraser, founder and managing partner of Fraser Healthcare.
“I always preface things that ambulatory surgery centers are on the right side of health care reform,” Fraser said at the Ambulatory Surgery Center News Investment & Operations Conference. “And if you think about providers, patients, payers and self-insured employers, you are the solution.”
Fraser Healthcare is a consulting practice focused on growth strategies, health systems and private equity firms.
John Lamberth, chief development officer at Tennessee-based AMSURG, echoed those ideas.
“There are tons of macro tailwinds in the market,” Lamberth said at the conference.
AMSURG is an ASC management company that operates more than 250 centers across the U.S.
Because of those tailwinds and the attractiveness of the ASC market, some foresee more investment and dealmaking activity in 2025. An increase in dealmaking activity could also be driven by older physicians looking to cash out of their ASC, in addition to shrinking ASC margins pressuring some groups to seek strategic partners.
But whether it’s a buyer’s or seller’s market depends on the center, Lamberth said.
Quality physician alignment, healthy case volumes and strategic geography all play into that question.
“So ‘is it a buyer’s or seller’s market’ is a little bit of a complicated question, because for the right ASC, it’s certainly a seller’s market,” Lamberth said. “For the wrong ASC, it’s a buyer’s market.”
AMSURG executive John Lamberth speaks at an ASC News event.
The dealmaking landscape
While the ASC space is positioned for more action in 2025, it’s still one that more investors and buyers are becoming familiar with.
“People are still trying to figure out the landscape,” Don Ritucci, head of health care M&A at Oppenheimer, said at the conference. “There’s going to be further consolidation in this space.”
New York-based Oppenheimer is an investment firm specializing in health care.
Much of the consolidation in the ASC space is being led by strategic buyers and health systems, many of which are aggressively pursuing ambulatory care strategies. Private equity has been an active health care buyer in recent years, but PE hasn’t been an industry-defining force in the ASC space yet.
“I see the interest, but I don’t see a lot of activity with private equity directly in ambulatory services,” Ritucci said. “Not because they don’t want to.”
AMSURG itself has been an active buyer.
In January, AMSURG acquired an ownership interest in Texarkana Surgery Center, an outpatient surgery center in northeast Texas.
In July, AMSURG acquired an ownership interest in the Salem, Oregon-based River Road Surgery Center, a multi-use facility specializing in ear, nose and throat (ENT) procedures, among others.
Generally, AMSURG looks for opportunities that have strong physician buy in and room to grow on the volume side.
“A lot of times, we get inbound interest from older surgeons who want to sell because they’re approaching retirement,” Lamberth said. “Where does volume come from if physicians are done practicing soon? First and foremost, we look for strong, growing, vibrant practices that plan to stay engaged.”
As far as building a new center versus buying an existing one, the decision often comes down to physician buy-in and local market conditions, Lamberth said.
“We don’t pursue that ‘if you build it, they will come’ strategy,” he said, adding that AMSURG looks for established relationships and a clear anchor group of physicians.
Lamberth, Fraser and Ritucci all agreed that physician alignment is a critical driver of transaction success.
When a deal involves multiple physician-owners, unifying expectations and clarifying governance can require extensive time and effort, Fraser said.
And generational differences among doctor-owners can complicate matters. With some ready to retire, others in the early stages of their careers, all of that can factor into a deal’s financial structure.
“First and foremost, it’s physician alignment,” he said.
Some buyers are increasingly targeting specialty practices such as orthopedics and cardiology as part of broader, multi-site platform strategies, Fraser said.
“With the new wave of MSOs [management services organizations], so much of the thesis is site-of-service shift,” he said. “Orthopedic and total-joint centers continue to be bright spots. And we see increasing attention on cardio as well.”
While cardiovascular offers potentially high margins, it can be a more challenging service line to grow.
“I’m bullish on cardio,” Fraser said. “But you have to consider that moving higher-acuity cases outside the hospital setting isn’t a two- or three-month journey. It can be two or three years.”
One of the biggest challenges to getting deals across the finish line has been extremely rigorous due diligence processes.
“It is exhausting,” Ritucci said. “No ‘i’ goes undotted or ‘t’ uncrossed.”
Oppenheimer’s Don Ritucci at the ASC News Investment & Operations Conference in February 2024.
Health system-ASC joint ventures
Another notable trend over the past several years is the prevalence of health system-ASC joint ventures.
Health systems that once viewed outpatient centers as competition increasingly see them as integral to their future strategy, Lamberth said.
“We get some systems that come to us saying, ‘Hey, we want to go full on. We’ll let our employed docs buy in, shift higher-acuity stuff out of the hospital, and we need a partner to help us think it through,’” he said.
Other health systems only act once they realize they’re running out of capacity for simpler procedures, such as colonoscopies, he added.
Regardless of the impetus, the right JV model can provide significant value to all parties, Fraser said.
“I think you need to look at the environment,” he said. “[There are] very progressive, proactive health systems that … have a like-minded synergy with their employed docs to say, ‘Hey, we’ll help you build this synergy and leverage our contracts, we’ll give you equity, and we’ll do this as a true partnership.’”
