• purchase 100% of the ASC; and
• issue the physician partners rollover equity in the larger PPM plat-
form.
The upside to a typical PPM transaction is that physician-sellers take
home a larger up-front return when they sell 100% (versus 51%) of the
ASC. They also receive a very small slice of rollover equity in the nation-
al PPM platform, but it is both temporary and attenuated from ASC per-
formance, as the ASC is only a small portion of the overall PPM platform
and the private equity fund is obligated to sell the PPM platform (and
rollover equity) in the near future.
As background, private equity funds pool investments from various
limited partners and use those funds to buy private companies, increase
their profitability (via managerial expertise, acquisitions, working capi-
tal, new technology, operational efficiencies and business strategy), and
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ASC Joint Venture Model Physician Practice Management Model
Surgeons have ongoing
direct ownership in ASC
Surgeons don't have ongoing
direct ownership in ASC
Long-term partnership with
"known" ASC management company
Temporary rollover equity
interest in PPM platform
Partnering with a well-established ASC management
company with historical expertise/track record
Partnering with a newer PPM
company with private equity expertise/strategy
Practice independence De-risk on practice side
Ongoing ASC profit distributions
(but smaller percentage of ownership)
No more ASC profit distributions
Less up-front cash purchase price
(only selling 51% of ASC)
More up-front cash purchase price (selling
100% of ASC and entering into PPM arrangement)
Standard 7x-8x transaction multiple Higher transaction multiple
Only 1 liquidity event
2 liquidity events: initial sale to PPM platform,
and then subsequent private equity exit
Facility-focused model
(the ASC is the lynchpin of this model)
Practice-focused model
(the ASC is viewed as an ancillary service)
A Comparison of ASC Ownership Models
Traditional ambulatory surgery center joint ventures and the physician practice management model
both pose different opportunities for risk and reward for physician-owners. Here's a breakdown.
