January 30, 2018
Connect Healthcare welcomes Toby Scrivner, a director in Stan Johnson Company’s Tulsa, OK office who specializes in healthcare real estate. He shares his thoughts on investing in ambulatory surgery centers (ASCs), and what investors should think about when considering this asset type.
Connect Healthcare: Why are ambulatory surgery centers (ASCs) a good commercial real estate investment in today’s market?
Scrivner: The business model of ASCs provides insurers and consumers with a lower cost alternative to surgical procedures performed in a hospital. ASCs are attractive because demand for their services is increasing. This comes from both the growing number of aging baby-boomers, and from the increasing number of procedures approved that don’t require an overnight hospital stay. ASCs are specialized and challenging to replace—the cost of a new building is expensive, so tenants tend to stay in the property long-term.
Connect Healthcare: What factors are driving the value of surgery centers?
Scrivner: Aging baby boomers are putting increasing demands on the U.S. healthcare system. This generation represents nearly 20% of the population, and the need for more frequent visits to the doctor, hospitals, and ambulatory surgery centers.
Connect Healthcare: What questions should physicians or real estate investors ask before acquiring a surgery center?
Scrivner: Investors should consider the age, layout, and size of the operating rooms of the facility. If a facility is dated, it can be challenging to entice new physicians or patients. Is it a single or multi-specialty practice? Diversity can insulate from threats to the revenue stream posed by cuts in payments from insurance providers or CMS. Age and number of physicians should be considered—a practice with only five physicians can be jeopardized if one or two key physicians retire or leave. Finally, understand the tenant’s financials. Know the revenues and their sources, the case types and volumes, and the rent coverage ratio. These are a few important questions to consider.
For questions, comments or concerns, please contact Jennifer Duell Popovec