Question about partnership

[EtherBunny]

Quick question related to partnership:

Is 10-15% ownership in an ASC (1 room, single specialty in a very affluent area with mostly commercial payer mix) a fair offer during partnership? I have no idea what sort of revenue can be expected with 10-15% ownership of an ASC.

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[deleted185747]

what is the cost for that share?

 

[EtherBunny]

what is the cost for that share?

Well, it's 10% of the cost to build the ASC. I don't know the exact figure yet but I imagine it will be roughly $60,000 maybe?? (It costs roughly $600,000 to build a single specialty, one room ASC, if I'm not mistaken).

 

[drusso]

Quick question related to partnership:

Is 10-15% ownership in an ASC (1 room, single specialty in a very affluent area with mostly commercial payer mix) a fair offer during partnership? I have no idea what sort of revenue can be expected with 10-15% ownership of an ASC.

Get an accountant to do a valuation. The "sunk costs" could be irrelevant based upon the age of the facility and depreciation schedule. If you have no idea about the underlying value asset you're negotiating to purchase, then you're not in a very strong position.

 

[EtherBunny]

Get an accountant to do a valuation. The "sunk costs" could be irrelevant based upon the age of the facility and depreciation schedule. If you have no idea about the underlying value asset you're negotiating to purchase, then you're not in a very strong position.

It's a brand new ASC (they're building it right now actually).

 

[olafa]

they (whoever is managing the buildout) should have a proforma for expected earnings. May or maynot be accurate but give an idea or expected revenue based on specialties involved and casemix. Cost of building dpeends on several factors that are variable as well not standardized. Cost of land, construction specific to that area, is structure existing and only needing TIs or is it groundup?? They should also have spreadsheeat with specific cost estimates

 

[drusso]

Don't "do it yourself." Get a competent accountant and attorney to broker the deal on your side making sure that buy-sells, shareholder agreements, etc are all legally valid and enforceable.

 

[lonelobo]

600K for ASC even if one room sounds low

 

[gdub25]

I've just gone through all this myself. 600-700k to build one room ASC is what I was quoted by several consulting firms. I was offered 10% ownership in newly established ASC that was currently undergoing accreditation. They had no income or revenue to base buy in price off of. They wanted 10k for each percent ownership which is cheap from what I'm told. They estimated that would get me 20k per month if the place got busy. They had a full pro forma for me to look at and it was very detailed. You're welcome to pm me for more details. I know how in the dark I was several months ago and how bad I wanted help navigating the difficult decisions I was faced with.

 

[deleted185747]

Is the ASC going to be out of network? If you have a lot of patients with commercial insurance with out of network benefits then this is a potential goldmine because you can charge whatever you want in facility fees.

 

[ampaphb]

1) Are you buying into the real estate? Or just the corporate entity? If you don't own the building, then what it cost to build is irrelevant.
2) How much of the revenue does the work you represent? The % ownership you are being offered should be at minimum, no less than what you generate.
3) Is this a physician owned facility? Or was it done in combination with a hospital, or some other outside entity? Is there a majority shareholder, and do you trust them?
4) Will the physician ownership be able to keep the place busy? Or will you need to attract additional docs to use the facility?
5) What is the market like? It's all well and good to say you will make a killing by keeping out of network, but if the facility down the street is in all the networks, that will likely cut into your volume significantly.

 

[Yo GabbaPentin]

Brand new 2 room asc cost me 8k per 1% to buy in at my first practice. As far as expected return, there are too many variables to predict that. I do know that out of network benefits are harder and harder to come by. I also know that insurance companies frown upon single specialty ASCs more and more with each passing year. If the site of service differentials are narrowed in the coming years (which is definitely on the radar), then you may be able to sell back for a few dollars per %. Buying in is not without some risk.