Sure, you can buy a new 2019 Bentley Continental GTC for around $300,000. But you can pick up a gently used 2016 model for around half the price.
But did you know that the same bargain can be had on a slightly used ambulatory surgery center?
Last month, two facilities owned 51% by Surgical Care Affiliates (SCA) the ASC behemoth owned by the even bigger healthcare behemoth UnitedHealth Group, Inc., became the equivalent of not simply a slightly used exotic car, but of a slightly used GMC Yukon.
Set up as a venture between majority-owner SCA and various physicians, Belleville Surgical Center, LTD, operated two ASCs, one the eponymously named Belleville Surgical Center and the other Physicians’ Surgical Center, both located in Belleville, Illinois.
From an Illinois state filing, many of the physicians who had previously referred their cases to the ASCs joined hospital affiliated medical groups. Their referrals to the ASCs dried up.
SCA, as the ASCs’ manager, sought a buyer for the facilities as ongoing operations, in other words, as operating businesses.
But operating businesses sell for more money than, well, the skeletons of closed businesses. No buyer stepped up and the facilities closed.
But just like the smart shopper for a slightly used Bentley, up stepped a smart shopper, Shakeel Ahmed, M.D., a gastroenterologist. Dr. Ahmed purchased Physicians’ Surgical Center’s operations, as well as Belleville Surgical Center’s land and building, for $50,000. Yes, just $50,000 – all of the zeros are accounted for.
Of course, there’s no way of knowing what equipment was included in the deal – much of it under SCA’s management may have been leased. But under almost any guess as to what’s going to be involved in bringing the facility back into operation, the deal was a tremendous bargain, perhaps up to 99% off.
I’m not saying that it’s every day that a bargain like this comes around. But there are more distressed sales and other creative opportunities around that one might think.
There are other lessons here, too.
Belleville’s state fling reveals that the physician investors didn’t, as individuals, have a significant amount of skin in the game, with none of them owning more than 5% of the deal. What exactly they lost when they gave up their independent practices and signed up with hospital employers is unknown. More skin in the game might have led to a different outcome.
Having a giant corporate partner in the deal didn’t help either. In fact, it might have made it more likely that the individual physicians would stop using ASC.
Just like each of the pennies on the dollar that Dr. Ahmed used to pick up the ASC, there are two sides to the ASC coin. Some facilities fail. But even when they do, they may be a tremendous opportunity for you.
Comment or contact me if you’d like to discuss this post.
Mark F. Weiss