Understanding the pros and cons of ASC ownership is key for surgeons looking to make the best decision for their future. In the current ASC environment, is it even possible to survive without buying in or partnering? With reimbursement cuts reducing surgeons’ profits on surgeries, many believe that ASC ownership is the only way to go—but that doesn’t mean it’s a concern-free venture, or that it’s right for everyone.

Having a good understanding of the timing and the logistics of ASC ownership will help you make the best possible business decision.

As You Consider Ownership

There is no question that ASC ownership is a major undertaking that can shape your future career, and, thus, it is prudent to be cautious, says Bennett Walton IV, MD, MBA, a cataract, refractive, and cornea surgeon at Slade & Baker Vision in Houston. He advises to approach ASC ownership wisely, and take the time to think through your plans each step of the way.

“One of the first things that I would advise young surgeons on is thinking through the kind of practice they want to have,” Dr. Walton says. “Even though I believe that, in general, ASC ownership makes good financial and practical sense, it isn’t everything. If there are going to be a lot of refractive or cash-pay patients in a boutique practice, then the ASC does become of smaller financial importance to your overall career. In a volume-based practice without much of a refractive or cash-pay component, however, the ASC income becomes a huge portion of the revenue you as a surgeon might generate.”

Regardless of practice type, Dr. Walton says that he does believe—in most situations—ASC ownership is a solid financial move for surgeons, as long as they are making educated decisions through each step of the process.

Do Your Research

Making educated decisions starts with performing your due diligence. “Not all ASCs are created equal,” warns Dr. Walton.

Of course, understanding what ASC ownership entails can be challenging for young surgeons who are taught nothing about this in residency, notes Michael Patterson, DO, an ophthalmologist with Eye Centers of Tennessee.

“Although we are certainly trained inside of ASCs, we don’t learn anything about owning one or buying in, so that business side of ophthalmology can be very elusive,” Dr. Patterson admits. “It’s important that surgeons are being cautious about their futures and not making hasty decisions.”

→ Buy-In Questions.

First and foremost, do your research on the ASC, making sure that you will, in fact, have the opportunity to buy in at some point, continues Dr. Patterson. “Don’t just assume you’re on track to buy in, as some won’t allow you to. You must also evaluate those shares and ensure you will receive a fair and equal opportunity when the time comes.”

If you know that you will have the opportunity to buy in at reasonable terms, then you should also consider geography, says Dr. Walton. In other words, have you found a location where you can see yourself remaining for the long term?

It’s not always easy to look that far into the future, but that’s exactly what you must do when evaluating an ASC, as selling an ownership interest may not be a quick or easy task, either.

“Additionally, look at the career arcs of the surgeons driving the center,” says Dr. Walton. “Do they have decades left to support the ASC, or just a few years?”

→ Structure & Control Questions.

Stephen C. Sheppard, CPA, COE, managing principal of Medical Consulting Group, LLC, has assisted many ophthalmologists with ASC ownership. He advises prospective owners to closely examine the structure of the ASC.

“Is it wholly owned by the practice that you’re in?” he asks. “If so, then the culture of the ASC is going to be similar to the culture of the practice, and chances are you’re already comfortable working there. But if it’s not—and it’s owned by multiple practices or is a multispecialty facility—then you might not be so comfortable. There is an important quality-of-life component to this that must be evaluated.”

Sheppard says that in multispecialty ASCs, you need to look at “control concerns.” Do the ophthalmologists have a say in equipment selection or major vendor providers? How is the organization run? Will everything be dictated to you or will you have a say in decision-making? Sheppard says these are all vital points to consider.

→ Financial Questions.

“You should also look at the ownership structure,” before making your decision, advises Sheppard. “What is the legal form of the entity? The answer can have significant tax implications.”

In addition, with the prevalence of private equity acquisitions right now, it’s important for doctors to evaluate whether the particular ASC has already made a transaction with a traditional corporate partner or a private equity firm, adds Sheppard. If that one big transaction has already occurred, it can limit your upside.

The point is, says Sheppard, there is a lot more to consider than just the buy-in cost. Though he says that the “economic potential” makes sense with ASC ownership, it still must be evaluated carefully.

“There is not only that financial component, but also the lifestyle component when it comes to buying into an ASC,” Sheppard says. “You are making a long-term commitment, so you want to be able to feel confident it’s a place where you’ll be happy.”

When to Buy In

Knowing when to buy in is another vital point of consideration. Although the right time to buy is ultimately a personal decision, Dr. Patterson says waiting too long can be detrimental.

“I believe that within two years of practicing at an ASC, you should have the opportunity to buy shares in order to make it worth your while,” he says. “I believe the sooner that you can acquire shares of a surgery center, the better, because the long-term potential of paying back the investment is better.”

Dr. Patterson says that many surgeons feel they should wait until they have enough personal capital, but during that time the value of the surgery center could increase as a direct result of your own work—and you will miss out on that earning.

Of course, whether or not you are in a position to tolerate large loan payments cannot be ignored. In the end, the buy-in decision will come down to the financial arrangement.

“Some banks prefer that loans for ASCs are paid back in three to four years, so you must be sure you have the right cash flow to tolerate the loan terms—which may result in a net negative cash flow for a number of years despite a favorable long-term value,” says Dr. Walton. “What is your personal appetite for debt? That’s the ‘peace of mind’ component to this. Some physicians may feel incredibly uneasy about taking on large amounts of debt while others can tolerate it, recognizing that it will pay off for them.”

An additional point to consider in terms of timing, though it is a big uncertainty, is whether office-based surgery ever becomes a reality, adds Dr. Patterson. If that does come to fruition, he says, buying into an ASC (or not) may become less relevant.

Overcoming Financial Worries

Having just completed a residency or fellowship, young ophthalmologists are often still facing tremendous medical school debt and may even struggle just to secure the financing that they need. Sheppard says they must face the ultimate question of “How much debt am I willing to take on?”

He adds that when decisions are made wisely, a business arrangement can ultimately be reached in which “everyone is happy.”

When it’s done right, Sheppard asks, why wouldn’t you buy into an ASC? He says that although he understands all of the concerns, there are ways to be smart about the process. It’s always important that both the buyer and the seller feel the price is fair. And there are wise financial steps which can be taken to ensure doctors can grow both their income and their practice.

“To me, the biggest downside to not buying in is that you miss out on a tremendous amount of revenue for your practice—and your family,” Dr. Patterson adds. “ASCs also make good sense from a functional standpoint. They are more efficient with spending money and are ultimately a better option for most patients. They carry a lesser risk of infection, cost less, and allow for quicker procedures—which are all the ultimate goals of any surgery.”

Dr. Patterson says he feels that many young surgeons do not realize the financial ramifications of not owning a surgery center.

“Yes, there are risks, regulatory battles, and staffing headaches that come along with ASC ownership—but the rewards far outweigh the risks,” he says. “In my mind, it’s not even close. Though you absolutely need to do your research and make wise decisions, I would say that ASC ownership makes sense for most doctors.” ■