Endoscopy and 2013: A Look Back
The Endoscopy Center market has not been a stranger to the impact of changes brought about by the Affordable Care Act (ACA) and a developing industry. What may have once looked to be an industry of basic “mom-and-pop” type centers are now transitioning into full-blown business opportunities.
The changes and ramifications of 2013 have not gone unnoticed by industry professionals. Many know the significance in looking to the past year as 2014 unravels.
“In 2013 we saw the M&A activity in the ASC space slow down after a busy and robust 2012,” said Barry Tanner, CEO and President of Physician Endoscopy. “The activity appeared to be slower throughout the year however, for the transactions that did get done, the pricing remained relatively unchanged compared to 2012.”
“New organizations are buying up surgical centers and partnering up,” Dr. Leventhal said. “There are several reasons for this. Some of the centers need capital; some of it is business management. These larger companies are bringing a lot of experience to the table in negotiating contracts with insurance companies and working in supply management, HR issues, and the like.”
Another driving force inspiring acquisitions had to do with the desire of physicians working in such centers to diversify, in the opinion of Dr. Robert Donachie of Texas Endoscopy, LLC.
“As far as acquiring other companies, some practices are starting to diversify into other niche practices,” Dr. Donachie said. “I would say that there’s a steady interest in the physicians in diversifying themselves in ownership.”
In terms of merging and joint venturing, Dr. Donachie has taken note of other contributory factors.
“There is an aging physician population and increasing concerns about reimbursement,” he said. “Anything that’s a specialty hospital, or a hospital affiliated center gets a higher reimbursement day-rate than the ASC rate.”
“The here and now reimbursement changes are both in fee-for-service professional fees and also in a shift in payer mix from historical levels of stability to one that is today transitioning,” Tanner said. “Millions of people have been forced to change their health insurance as a result of the ACA.”
In other words, these rates, which stem from the effects of the ACA and other healthcare reforms have impacted and will continue to impact the Endoscopy Center space according to Tanner.
“So much within healthcare is changing,” he said. “There are regulatory changes, changes requiring the investment in technology, changes requiring reporting (PQRS), changes in quality metrics, movement away from episodic care to population care, including bundled payments in some cases resembling capitated structures of old.”
The repercussions of these changes will be felt heavily by smaller GI practices going forward.
“All of these changes fall upon GI practices that are mostly made up of small (2 to 6 physicians in size) practices that simply do not possess nor can they afford the expertise or the dedication of time that will be required to be invested in business activities in order to survive going forward,” Tanner said.
The changes themselves, be what they may, should not change the main focus of the individual Endoscopy Center practices in terms of the results of negotiations and contracts.
“The interest of the surgical centers needs to be at the forefront,” Dr. Levanthal said.
Despite the changes and unknowns about the future, Dr. Donachie sees no reason for physicians to shy away from taking advantage of opportunities to get involved in the ASC market.
“I still think that for independent minded physicians there remain many good reasons to develop and get involved in the private ownership and development of an ASC, and I don’t think there’s anything that’s any more attractive than doing so if you have a surgical specialty that you’re practicing,” Dr. Donachie said. “Furthermore, I don’t think there’s anything that’s going to hinder that from a legal or economic perspective in the near future.”
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