VMG Health’s 2023 Healthcare M&A Report Forecasts Continued Positive Growth for ASCs

Looking ahead is the lifeblood for planning for the ambulatory surgery center (ASC) market, and 2022-2023 proved to be no exception to the rule that the outpatient industry continues to evolve. The annual VMG Health’s 2023 Healthcare M&A Report examines the healthcare M&A landscape in 2022 and the 2023 outlook by leveraging VMG Health’s expertise as the leading provider of healthcare transaction and valuation services. According to the report, “The ASC marketplace continues to be an active transaction arena as major operators consolidate and look for new opportunities in this space.”

The number of Medicare-certified ambulatory surgery centers in the United States grew at a compound annual growth rate of 1.3% during the period of 2011-2022, according to the report, and increased from 5,217 to 6,028 Medicare-certified ASCs. With about 70% of freestanding ASCs independently owned and operated, the rest of the market is dominated by larger groups. Surgical procedures have continued to shift to the ASC setting as higher-acuity cases are handled by the OR teams there.

Along with this shift comes more investment. According to the report, “PE (private equity) investors have continued investing more intentionally in this space. PE interest in ASCs is often tied to their physician practice portfolio companies, notably gastroenterology (GI) practices and, increasingly, orthopedic and cardiology practices. Driven by favorable tailwinds this type of investment in ASCs allows PE investors to capture additional revenue streams related to their physician practice investments. PE interest in an ASC strategy outside of a physician practice portfolio company has also increased recently.”

The macroeconomic climate has impacted health care across the board and ASCs are no exception as labor, supplies and overall costs have pressured the market. When the ASC payment final rule for CY 2023 was released by CMS on November 1, 2022, it resulted in overall expected growth in payments equal to 3.8% in CY 2023 – the largest increase year over year. Even with this larger increase, the report concludes, “Although the ASC industry recognizes the increase in payments as a win, many major players believe the increase was insufficient given the extraordinary cost pressures hospitals and ASCs are facing.”

Activity in the ASC market will continue to be active as interest in expansion into surgical specialties evolve and investors see the value of this environment in their local and regional markets. The report forecasts growth and changes for the outpatient surgery space and concludes, ”Overall, ASC transactions of all types are expected to continue the positive momentum that persisted in 2022 and the subindustry is expected to see the level of transactions increase through 2023.” OSM