What Are The Usual Surgery Center Seller Concerns?

When looking at the issue of surgery center seller concerns, certainly, the issue of economics looms large, but many sellers view economics as the purchase price when the reality is that that's the tail wagging the dog.

The surgeon-owners of a surgery center need to consider the price that they will pay as a result of a sale to the wrong partner. By that, I mean that if the only thing that the surgeons are interested in are the financial terms of the acquisition, they won't ask themselves the question about what life is going to be like with that new partner.

For example, many acquirers out there have a model -- and all surgeons have to do is ask their colleagues who've sold to some of these guys -- of increasing profits by cutting costs. They pull favorite equipment and supplies out of the facility needlessly and that takes away a lot of the joy that attracted the surgeon-owners to the facility in the first place.

Look, if working at the surgery center is just as bad as working at the hospital, why work in the surgery center at all? Sure, surgeons invest in surgery centers for the ability to make money -- but that's just one factor -- other factors are more control over their life and, certainly, the ability to work in a fun atmosphere; surgery centers make surgery enjoyable for the doctors.

Selling to the wrong partner flips the entire interpersonal dynamic on its head. Yeah, some surgeon got an extra $100,000 or whatever in price, but they ended up paying for it multiple times over in grief and, if the cost cutting impacts morale and if the cost cutting impacts staffing, that $100,000 and then some disappears into a black hole.

Sellers are often also concerned about the loss of the center’s identity, the brand that they built up over years, sometimes over decades. Will the facility be rebranded? Even if it's not rebranded, will the website look like 100 other websites flying the colors of the majority owner, building the majority owner’s brand, as opposed to building the surgery center’s business?

Also sellers are often concerned about whether the deal partner is private equity or a public company, because those type entities exert tremendous pressure to both cut costs and to focus on short term profits -- this quarter over next quarter over next – after all, that’s how their executives are bonused and that’s key to their stock options, none of which is good for the long-term success of a surgery center. Again, those sorts of approaches lead to cost cutting, staff turnover, and the like.

Last, and this is a slight flip on the question, but in my opinion, Seller concerns generally stem from the fact that the physician owners of a surgery center, the surgeons, shouldn't be considering themselves as “sellers” in connection with the type of partnering deals that we offer. We're not looking for them to be “sellers” in the sense of someone who sells a car wash. We're looking for them to be highly valued minority partners in the future growth and success of the facility.

So in that sense, they certainly shouldn't be looking for a “buyer”, they should be looking for a true partner, yes, a partner who's going to facilitate their taking some of their chips off the table, a partner who's going to help them to de-risk, but a partner, not a buyer, just the same.