Written by: Eli Dresner
The Ambulatory Surgery Center Market is Ripe With Opportunity for Growth…
Investment in ambulatory surgery centers (ASCs) is on a tear right now and the demand is expected to continue its fast-growth trajectory. According to Becker’s ASC Review, the global ASC market is forecast to reach $117 billion by 2027, as more surgical procedures can be performed at these facilities, more procedures migrate away from hospital outpatient departments (HOPDs), and the costs for these procedures is reduced through ASC delivery.
Increasing the ASC footprint in a hot market can yield significant benefits for stakeholders across the board—including health systems, specialty practices, developers that target the healthcare industry, and private equity (PE) groups. With the ASC market remaining fragmented despite continued industry consolidation, it’s a segment that’s ripe with opportunity.
…But That Doesn’t Mean It’s Simple to Choose a Specific Market for Your Next ASC Investment.
To ensure success and a high ROI, you need to identify the optimal markets based on where ASCs are most underutilized and where there is a propensity to use them more. That’s a complicated undertaking, requiring access to specialized data and algorithms that enable you to pinpoint opportunities accurately, quickly, and at scale. Unfortunately, some healthcare organizations approach the exercise almost blindly, without the benefit of data-driven insights and intelligence that can ensure a high return and long-term success.
What if you could get a glimpse into the ASC investment opportunity in the US and identify markets with the greatest potential to shift care away from HOPDs? What if you could get a sense of which markets are hottest for ASC investment right now? You can, based on the data-driven market assessment that Pivotal Analytics recently completed.
Which Markets are Hot…and Not…for More Ambulatory Surgery Center Growth?
First, we’ll reveal the markets we identified as presenting the greatest opportunity for ASC investment in the US (what readers really want to know!), then we’ll share our methodology.
At a high level, we learned there are many US markets that present a strong opportunity for ASC expansion for selected healthcare services, with much lower ASC utilization rates compared to the national average of 60.5% (source: Pivotal Analytics). Low ASC utilization is one of several measures for assessing an investment opportunity, as it points to areas where patients don’t have ready access to ambulatory care for procedures it may be appropriate for. Sometimes those markets are dominated by hospitals that deliver the lion’s share of outpatient procedures; but in other markets, that may not be the case.
So, our first cut at assessing the hot markets for ASC expansion involved identifying the 20 markets with the lowest ASC utilization, out of a pool of 111 markets in large metropolitan areas (Figure 1). Some are smaller markets dominated by hospitals; others are larger markets where major health systems are the leading players.
Figure 1
20 Markets with Low ASC Utilization/High Potential to Shift to ASCs
Peeling Back the Onion on ASC Market Opportunity
Many hospitals, practices, developers, and other healthcare stakeholders might stop here and use this initial data to inform their ASC investment decisions. But that would be a big mistake because it doesn’t factor in another, vital dimension of ASC opportunity: the propensity of a market’s healthcare consumers to use an ASC for outpatient procedures.
Low ASC utilization alone isn’t a sufficient barometer of ASC opportunity because it doesn’t tell you whether patients in that market would or should use these facilities. Understanding patient propensity to use ASCs involves looking at healthcare behavior profiles and arriving at a target profile—the percentage of consumers in the market with the desire and willingness to use an ASC for select outpatient procedures.
Figure 2 shows what happens when we start to peel back the onion and consider ASC utilization in the context of target profile. For this analysis, we identified the markets with the lowest current ASC utilization patterns where the population also shows a higher-than-average propensity to utilize ASCs.
Without including this step in your market assessment, it’s likely you wouldn’t have considered some of these markets that made the cut.
Figure 2
10 Markets with Lowest ASC Utilization and Above-Average ASC Propensity
Pivotal also found that looking at these same two dimensions in a slightly different way yielded slightly different and noteworthy results. By prioritizing target profile percentage first, then layering on ASC use, we identified additional markets that may be ripe for ASC investment (Figure 3).
Figure 3
10 Markets with Highest ASC Propensity and Below-Average ASC Utilization
What the Data Tells Us About Finding ASC Investment Opportunities
A deep dive into the data and thoughtful analysis of what it means for ASC expansion shows that any of the markets in Figures 2 and 3 might present good ASC investment opportunities, depending on a stakeholder’s goals and strategy. However, without taking a studied, analytical approach, it would be impossible for a healthcare stakeholder to arrive at a list of hot ASC markets like these.
Looking at our findings, a few key insights stand out:
Two top opportunity markets that surprised us were Boston and Cleveland. Both are clearly considered progressive healthcare markets—with nationally renowned acute care centers calling these cities home—yet they’ve been viewed as slow to invest in facilities that deliver essential outpatient procedures outside of an HOPD. Nevertheless, our quantitative assessment demonstrated that both markets rank high for ASC investment opportunity.
The top opportunity markets that were much less surprising to our analysts included Colorado Springs, Colorado; Lansing, Michigan; and Augusta, Georgia. Each is characterized by a large metropolitan area in which patients tend to out-migrate for higher acuity services. As a result, health systems and practice groups in those markets are investing heavily in beefing up their ASC networks.
We would be remiss if we didn’t note the markets with the lowest opportunity for building out an ASC network. Surprisingly, while markets like Dallas, Phoenix, and Washington, DC are taking a proactive approach to shift care away from the hospital campus, numerous strong health systems are well-entrenched there, tamping down the potential. Perhaps not surprisingly, New York City, Los Angeles, and San Francisco ranked near the bottom of the list due to the known real estate challenges that constrain investment in new hospital campuses. In cities like these, health systems must be even more strategic in distributing services across their networks.
At the same time, the fact that the bottom five metro markets across the Sunbelt (including Albuquerque and Oklahoma City) and the Pacific Northwest (including Boise) were identified as expansion opportunities is likely in part because they’re high-growth cities attracting corporate relocations and talent.
For a dynamic look at where low ASC utilization and a high propensity to use ASC sites of care intersected to create our hot list, see the map image below or check out the interactive version of this map.
The Methodology Behind These Findings: How We Analyzed the ASC Market
To conduct this assessment, the Pivotal Analytics team used a five-step process that leveraged our business intelligence platform and predictive analytics capabilities together with amplified data and data mapping. This exercise involved combining our unique data assets (including claims, demographic, and proprietary healthcare behavioral data), distributing the data geographically down to the local or even parcel level, transforming it through the Pivotal DataLab, and presenting it in the form of compelling, easy-to-use data visualizations.
Here’s what our five-step methodology involved.
We isolated Core Based Statistical Areas (CBSAs) with 500,000+ residents to arrive at an initial cohort of local markets.
We evaluated each market across the percentage of ASC-friendly procedures that are performed outside of a hospital setting and the percentage of the population that falls into the target profile.
To gauge the state of the ASC market, we segmented the procedures most often shifted to ambulatory settings and reviewed claims data for these procedures at facilities across each market in our initial cohort. Our analysts compared the billing volume for these procedures at HOPDs vs ASCs to identify areas marked by slower migration away from hospital settings.
Recognizing that behavioral patterns are essential to a deep understanding of what drives ASC use, we leveraged our partnership with UniteUs to develop behavioral profiles and uncover patterns in how people in these markets make healthcare decisions. By reviewing a matrix of the expected total cost of care for each profile against their degree of engagement in their care journey, we focused on two distinct patient profiles most likely to use ASC services based on their need for care and their engagement with their care network.
Based on those analyses we identified the hot opportunity markets for ASC investment (as reflected in the previous figures).
Additionally, to provide context across the US overall, we assessed the largest US markets to see where the propensity to use ambulatory surgery centers intersects with their current use.
So Where Should You Invest in a New Ambulatory Surgery Center? It Depends…
The Pivotal analysis was designed to present an initial assessment of potential markets for further investment in ASC infrastructure. Our aim was simply to identify markets where there is a need for more ambulatory care options coupled with a population that we’d expect to seek non-hospital care options, especially for the selected outpatient services we evaluated.
Of course, there are many other factors to consider when deciding where you should invest in ASCs, and each stakeholder’s goals will differ. But as a first step, our recent analysis can give you a framework to narrow the field when you’re evaluating potential markets for ASC investment, before you take the next step of conducting a much deeper analysis and due diligence.
Pivotal has unrivaled expertise in developing market opportunity assessments to guide healthcare real estate investments, with experience conducting hundreds of assessments for potential ASC investments on behalf of healthcare systems, specialty practices, real estate developers, and PE groups. If you’d like to explore specific markets for potential healthcare real estate investment or find out which ASC-friendly services we considered in our services basket, contact Pivotal.