High transaction activity in outpatient ambulatory surgery centers (“ASC”) has occurred on an annual basis over the last decade. While many transactions are for controlling-interests in ASCs by larger healthcare entities looking to expand their continuum of care, transactions involving an equity interest between physician shareholders, management companies, health systems, and investors, are also consistently occurring. Uncertainly surrounding the future of healthcare has led to an increase in joint ventures, of which the contribution of an ASC has come into play. Shareholder disputes and marital dissolutions also may require an appraisal of an ASC. For a variety of reasons, transaction activity in the ASC space has been, and is expected to, continue to be high.
As those involved in healthcare are aware, the industry is highly regulated. It is important than an appraiser of an ASC has a thorough understanding of this environment. In addition to appraisal services, HAI has been engaged on many occasions to provide appraisal review services of ASC appraisals that were prepared by other valuation firms. Through this appraisal review process, HAI many times uncovers major errors in the appraisal that was prepared by other firms. This highlights the importance of choosing a firm that specializes in the appraisal of ASCs, and is fully aware of the regulatory and operational issues that affect ASCs.
APPROACHES TO VALUing AN ASC
Generally, there are three recognized methodologies to an ASC valuation, as defined below.
- Income Approach: A process involving determining a value indication of a business, business ownership interest, security, or intangible asset, using one or more methods that convert anticipated future economic benefits into a single present amount.
- Market Approach: A process involving determining a value indication of a business, business ownership interest, security, or intangible asset using one or more methods that compare the subject to similar businesses, business ownership interests, securities, or intangible assets that have been sold.
- Asset (or Cost) Approach: A process involving determining a value indication of a business, business ownership interest, or security using one or more methods based on the value or cost of the assets.
A judicious and experienced valuation professional will consider all three valuation approaches. While the application of only one or two approaches might be thought to be appropriate for a particular ASC appraisal, consideration of one approach while declining to consider whether other approaches are suitable is inconsistent with most standards for appraisal experts.
For profitable ASCs, it is typically appropriate to consider both the Market Approach and Income Approach. The Asset (Cost) Approach may be a relevant consideration, however, this valuation methodology is better apt for startup ASCs or those which are struggling financially.
At HealthCare Appraisers, our comprehensive experience in ASC valuations, coupled with in-depth, industry leading healthcare valuation understanding, has given our team of valuation professionals the tools to successfully navigate the complex nuances of ASC appraisals. Our ASC Valuation Survey, which is published on an annual basis, surveys the ASC industry to observe and evaluate trends in the value of ASC ownership interests. The ASC Valuation Survey is frequently requested by healthcare attorneys, physicians, ASC administrators, investors, and management companies, nationwide. The survey, which has been made available as a free download, highlights how the professionals at HealthCare Appraisers’ have a pulse on the ASC industry that most other appraisal professionals lack.
SPEAK TO AN ASC EXPERT
The appraisers at HealthCare Appraisers have a wealth of experience and years of combined expert knowledge in every type of healthcare business valuation appraisal situation. As you search for a strategic partner, consider entrusting the healthcare business valuation professionals at HealthCare Appraisers to provide you with timely and cost-effective solutions to your ASC appraisal needs.