“Don’t wait to buy real estate,” the old maxim says. “Buy real estate and wait.”

A smart real estate investment adds another layer of potential profit to the ambulatory surgery center you are looking to develop. Think asset appreciation, diversification, enhanced control, and potential tax advantages, says Scott Bacon, CFP®, Senior Vice President of Business Development. Current real estate valuations for ASCs range from a 6% to 7% cap rate, which equates to a 14x-20x return, he points out.

“ASC real estate is a complementary investment opportunity,” Bacon explains. “If you structure the real estate investment as you develop the ASC, you create seamless alignment in financing, site selection, and other decisions.”

“The team developing the ASC — the interior of the ‘box’ — arranges the capital stack and works closely with the architect and general contractor, all of which apply to the borders of the ‘box’ or the real estate partnership,” he notes. “Working on the ASC partnership and the real estate partnership in tandem is very efficient.”

Bacon offers this guidance to ASC partnerships looking to maximize their ASC real estate investments.

Foundation First: Start with Your OpCo

"A common mistake is letting the real estate location and strategy take precedent over the ASC," Bacon cautions.

Before you focus on the underlying real estate (PropCo), prioritize the operating entity (OpCo) for your ASC, Bacon urges. A successful ASC hinges on sound capitalization, a broad network of physician owners and utilizers, competitive rates with payers, and a procedure mix that is in demand in the service area. If a health system is a partner in the ASC, planned ASC case migration should complement hospital outpatient department (HOPD) utilization and development.

ASC Operational Needs Should Drive Real Estate Decisions

The ASC's operational needs, including its size, design, and location, should dictate the real estate strategy, not the other way around. 

For example, the real estate should be in a location where there is an ample pool of ASC patients, now and in the future. It should be convenient for both patients and physicians to access.

Don’t Overbuild Your ASC Facility

While you want to plan for optimal patient flow and future growth, under-utilized space will make your ASC less efficient and less profitable.

“Particularly if you are converting an HOPD into an ASC, you don’t need the HOPD’s size and scale for your ASC going forward,” Bacon cautions.

Speed to Market Is Crucial

Partnering with an experienced ASC developer can help you quickly make and execute optimal real estate and facility planning decisions. Speed to market drives your ASC’s success because it boosts physician recruitment and competitive advantage, and jumpstarts returns on your investment.

If you are a health system partner, an efficient, on-time ASC launch frees up HOPD bandwidth to accommodate the patients who need it, grows your ambulatory surgery service lines, and benefits your health system generally.

Compass Surgical Partners’ experience developing hundreds of high-performance ASCs across the country, coupled with expertise in corresponding real estate partnerships, can help you make the most of your ASC investment’s dual value. Contact us to assess your options.

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