Anatomy of an Ambulatory Surgery Center

1
Anatomy of an ASC Syndication Physician
Recruitment

• July 20, 2012

Presenters
Blayne Rush President Ambulatory Alliances
Curtis Bernstein Managing Director Sinaiko
Healthcare Consulting
Moderated by Rob Kurtz of Kurtz Creative
2
What is the difference between syndication and
physician recruitment?
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• Syndication sale of an interest in a surgery
  center to physicians
• Recruitment Convincing physicians to perform
  cases at the surgery center without any ownership
  interest

4
What does an ASC need do to prepare to recruit
new physicians and/or syndicate?
5
When should a surgery center recruit physicians,
undergo syndication or re-syndication?
6
What are some strategies a surgery center might
utilize in recruiting new physician users?
7
How does a surgery center value the shares being
sold during syndication?
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• Market Approach multiple of EBITDA less
  percentage of funded debt
• Income Approach future value of projected cash
  flows based on expected level of risk of
  achieving those cash flows
• Asset approach is generally not applicable
  because minority shareholders are unable to
  liquidate assets or change the way controlling
  shareholders utilize assets

9
What can an ASC do to lower the cost of the
shares or units being sold? Why would a center
want to devalue its shares?
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• Take on more debt
• Reduce cash flow through capital expenditures

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Why are the multiples less of minority interest
purchase compared to control interest purchase?
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• Discount for lack of control
• Discount taken because the interest holder has no
  ability to change what a controlling interest
  holder does with the business
• Lower if no true controlling shareholder
• Lower if business is historically run in a manner
  in which the minority interest holder would
  operate it
• Discount for lack of marketability
• Discount taken because the investment is
  privately held and the interest holder may incur
  significant selling costs and have a lengthy
  holding period before the interest can be sold
• Lower if the interest continues to earn
  distributions or capital gain over the holding
  period
• Higher when the number of potential buyers is
  very low

13
What are some of the regulatory risks associated
with physician recruitment and syndications?
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• Fair market value requirement under the
  Anti-Kickback Law
• Cannot sell interests based on level of referrals

15
QA
Blayne Rush Ambulatory Alliances (469)
385-7792 blayne_at_ambulatoryalliances.com
www.AmbulatoryAlliances.com
Curtis Bernstein Sinaiko Healthcare
Consulting [phone] curtis.bernstein_at_sinaiko
.com www.AltegraHealth.com
Rob Kurtz Kurtz Creative robert_at_kurtzcreative.com
www.kurtzcreative.com