CONFIDENTIAL1

ASCs – The Next Five Years

Presented by:

Scott Becker, Partner

www.mcguirewoods.com

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ASCs - The Next Five Years

1) Overall, still a very good business with good returns – Margins – 30 to 40% in successful Centers

2) More need to plan projects with large margins of safety

3) 25% of ASCs are owned in part by a management company – Deutsche Bank

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ASCs – The Next Five Years

4) Several macro trends tend to be negativea. Commercial payors consolidate

b. Commercial payor pressure on out of network

c. Less growth in truly independent doctors

d. Increased employment of physicians by hospitals

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ASCs – The Next Five Years

4) Several macro trends tend to be negativee. More economic pressure on Federal governmentf. Specialty Hospital Development faces legislative

challenges – ASCs should not allow physician owned hospitals to “swing in wind”

g. Medicare reimbursement changesi. Higher acuity goodii. Lower acuity negative

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ASCs – The Next Five Years

5) Greater pressure to bea. Good focused operatorb. Projects with great Margin of Safetyc. Some diversity

i. Payorsii. Doctorsiii. Proceduresiv. Suppliers

d. Build on strengths e. 15.1 Physicians per partnership – Deutsche Bankf. Remember your mistakes

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ASCs – The Next Five Years

6) State Specific Challenges

a. Out of Network Investigations – New York – state also attacking health plans

b. Self Referral Legislation – New Jersey

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ASCs – The Next Five Years7) Specialty Specific Challenges and Issues

a. Ortho

b. GI

c. Ophthalmology

d. Pain

e. Spine

f. ENT

g. Urology

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ASCs – The Next Five Years8) Net Revenues per Case – VMG Health Intellimarker

Specialty Net Revenue

ENT $1,776

GI/Endosocpy $825

General Surgery $1,572

OB/GYN $1,864

Ophthalmology $1,276

Oral Surgery $1,056

Orthopedics $2,435

Pain Management $915

Plastic Surgery $1,548

Podiatry $2,664

Urology $1,802

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THE ENDDocument #5064429

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