The SEC allegations that HealthSouth overstated its earnings by at least $1.4 billion between 1999 and 2002 herald a new era for ambulatory surgery centers. Although this scandal creates new challenges for ASCs, it will also create a much-needed, fundamental shift in the market that will ultimately serve us all well.

Across-the-board devaluation
First, the challenging part. The fair market value of ASCs, whether publicly held or privately owned, will decline. As the dominant ASC player, HealthSouth is the investment model for the ASC market. Underwriters take their cues from HealthSouth's financial performance, and institutional investors, who hold most stocks, are quick to heed the underwriters' advice. Just as these investors jumped on the ASC bandwagon when it was hot, they will bail out now that it is not.

This devaluation of publicly-held ASCs will affect the generic formula appraisers use to value all ASCs. Appraisers had valued large multispecialty centers as high as six or seven times projected earnings, and smaller single-specialty centers as high as three to four times projected earnings. This multiple is now dropping, and the ultimate value of any ASC may level off at 33 to 40 percent below the "pre-scandal" figure.

It has already become harder to obtain financing for everything from building new surgery centers to expanding existing centers and making large capital expenditures. The HealthSouth scandal may also mean that physician-owners who want to sell part or all of their facilities will not reap as much as they could have just a few months ago.

Of course, if you work for one of HealthSouth's more than 200 surgery centers, the coming changes are likely to be even more personal: Those centers deemed unprofitable may be jettisoned, spun off or sold outright.

Outpatient centers may also be forced to operate more efficiently to maximize profitability and thus maintain a decent market value. This may be particularly challenging given the fact that reimbursements for outpatient surgeries are not keeping pace with inflation or the costs of medical supplies and equipment. In addition, the federal government will ratchet down Medicare reimbursements for many established outpatient procedures now that it has achieved its goal of moving them over from the inpatient to the outpatient setting. In fact, reimbursements for some such outpatient ophthalmic, gastrointestinal and urological procedures have already declined.

Let the healing begin
Still, in the long run, this change will do us all good. In these difficult days of one accounting scandal after another, business operators everywhere are realizing that we must get back to a system that restores trust. CEOs can no longer "cook the books" simply to reap personal profits at the expense of others. The modern ASC manager must operate honestly, with full disclosure and professionalism. In effect, this will ensure a fair and level playing field for all centers - public and private alike. This is very good news for everyone. After all, one can argue that nowhere is trust and fairness more important than in the field of health care.