Ambulatory Surgery Center Acquisition Financing: What Physicians Should Know
Purchasing an existing ambulatory surgery center can be an attractive opportunity for physicians who want to become ASC owners without building a facility entirely from the ground up.
However, an ASC acquisition can involve a significant financial investment. In addition to the purchase price, buyers may need to account for equipment, working capital, existing obligations, renovations, and other transition expenses.
For physicians considering ambulatory surgery center financing, understanding how acquisition financing works can help when evaluating a potential purchase.
1. What Is ASC Acquisition Financing?
ASC acquisition financing is funding used to help a physician or qualified ownership group purchase an existing ambulatory surgery center.
Depending on the transaction and financing program, funding may potentially be used for:
- Purchase of the ASC business
- Purchase of an ownership interest
- Medical equipment
- Working capital
- Facility improvements
- Other qualifying acquisition-related expenses
The specific uses of funds and financing terms will depend on the lender, transaction, borrower qualifications, and financing structure.
2. How Much Does It Cost to Buy an ASC?
The cost of acquiring an ambulatory surgery center can vary significantly.
The purchase price may depend on factors such as:
- Historical revenue
- Profitability
- Procedure volume
- Specialties performed
- Equipment and facility condition
- Ownership structure
- Real estate ownership
The total capital requirement can also include costs beyond the purchase price.
Buyers should consider working capital, equipment upgrades, professional fees, transition expenses, and other potential costs when determining the amount of financing needed.
3. Can You Finance the Purchase of an Existing ASC?
Qualified physicians may potentially be able to finance the purchase of an existing ambulatory surgery center.
The financing structure will depend on the specific transaction and the financial strength of the borrower and ASC.
Lenders may review the historical performance of the center, projected cash flow, ownership structure, and the physician’s financial and professional background.
4. What Do Lenders Look at When Financing an ASC Acquisition?
ASC acquisition financing can involve more detailed underwriting than a standard business loan because of the size and complexity of many surgery center transactions.
Lenders may evaluate:
- Physician experience
- Credit history
- Personal financial strength
- Existing debt
- ASC revenue
- Historical profitability
- Cash flow
- Procedure volume
- Ownership structure
- The purchase price
The specific underwriting criteria will vary by lender and financing program.
5. What Financial Information Should You Review Before Buying an ASC?
Before purchasing an ASC, physicians should carefully review the financial performance of the center.
Important information can include:
- Several years of revenue history
- Profit and loss statements
- Balance sheets
- Accounts receivable
- Operating expenses
- Existing debt
- Procedure volume
- Payer mix
- Equipment condition
This information can help the buyer determine whether the asking price and expected financing obligations are supported by the center’s financial performance.
6. Don’t Forget Working Capital
One of the biggest mistakes an acquisition buyer can make is focusing exclusively on the purchase price.
An ASC may require additional capital after the acquisition to cover ongoing operating expenses and transition-related costs.
Working capital may be needed for:
- Payroll
- Medical supplies
- Utilities
- Insurance
- Equipment repairs
- Technology
- Marketing
- Other operating expenses
Having adequate working capital can provide the new owner with greater flexibility during the transition.
7. What About ASC Equipment?
Medical equipment can represent a significant investment for an ambulatory surgery center.
A buyer should determine the age, condition, and expected remaining useful life of the equipment being acquired.
Equipment may need to be replaced or upgraded after the acquisition.
Potential equipment needs may include:
- Surgical tables
- Anesthesia equipment
- Patient monitoring systems
- Imaging equipment
- Sterilization equipment
- Specialized surgical equipment
Equipment financing may potentially be considered separately or as part of a broader financing strategy, depending on the transaction.
8. SBA and Conventional Financing May Be Options
Depending on the acquisition and borrower qualifications, physicians may consider SBA financing or conventional financing.
SBA financing is provided through participating lenders and includes an SBA guaranty subject to applicable SBA requirements.
Conventional financing does not include an SBA guaranty.
The appropriate financing structure depends on the transaction, borrower, ASC financials, loan amount, collateral, and lender requirements.
9. Can Physicians Finance an ASC Ownership Buy-In?
Some physicians may not be purchasing an entire surgery center.
Instead, a physician may be purchasing an ownership interest or buying into an existing ASC.
The financing requirements for a buy-in can differ from those for purchasing an entire center.
The lender may review the physician’s financial profile as well as information about the ASC and the ownership interest being purchased.
Physicians considering a buy-in should understand the purchase price, ownership percentage, expected distributions, ongoing capital requirements, and other financial obligations before proceeding.
10. How Can Physicians Prepare for ASC Acquisition Financing?
Preparing financial information before beginning the financing process can help make an acquisition more efficient.
Physicians may want to have the following information available:
- Personal financial statement
- Personal tax returns
- Bank statements
- Information about existing debt
- Professional background
- ASC financial statements
- Purchase agreement or letter of intent
- Business projections
- Information about the ASC’s equipment and real estate
The exact documentation required will vary depending on the lender and financing program.
Final Thought
Ambulatory surgery center acquisition financing can help qualified physicians pursue the purchase of an existing ASC or an ownership interest in a surgery center.
Before moving forward, buyers should evaluate the purchase price, historical financial performance, equipment, working capital requirements, existing obligations, and projected cash flow.
Comparing financing options and preparing financial information early can help physicians make a more informed decision when purchasing an ambulatory surgery center.
