Building a New ASC? Here’s Why a Feasibility Study is Crucial

By Traci Albers, CEO and Allison Bolger, CFO

Ambulatory Surgery Centers (ASCs) have become increasingly prominent as healthcare shifts toward outpatient care. Offering convenience, cost savings, and high-quality care, ASCs provide a valuable alternative to traditional hospital-based surgeries. However, opening a new ASC requires detailed planning, financial foresight, and operational efficiency. For many providers new to ASC development, the journey can seem daunting. This is where a feasibility study comes into play—a critical tool to ensure success.

The Growing ASC Market: A Lucrative Opportunity

The market for ASCs is on a significant growth trajectory. In 2021, the U.S. ASC market was valued at $37 billion and is projected to reach $59 billion by 2028, with a compound annual growth rate (CAGR) of 6.9%​.

This surge is primarily driven by the increasing shift from inpatient to outpatient procedures and the rising demand for cost-effective surgical care.

The ASC volume is expected to increase by 21% by 2034 to an estimated 44 million procedures annually.

Such growth reflects a significant opportunity for healthcare providers but also underscores the need for careful planning to capitalize on this expanding market.

Cost Advantages of ASCs

One primary reason for the rapid growth of ASCs is their cost efficiency. ASCs can perform surgeries at 45% to 60% lower costs than hospital outpatient departments (HOPDs).

This cost difference benefits patients, Medicare, insurers, and the healthcare system as a whole. For example, Medicare saves $4.2 billion annually by having procedures performed at ASCs​.

Moreover, shifting surgical procedures from hospital settings to ASCs can save billions more. If just 50% of eligible surgeries were moved to ASCs, Medicare could save an additional $2.5 billion annually, benefiting patients from reduced out-of-pocket expenses.

The Importance of a Feasibility Study

Given the financial potential of ASCs, it’s easy to understand why more healthcare providers are considering building their own centers. However, venturing into ASC development without thorough preparation can be risky and requires a feasibility study to assess cash needs, financial risk, and viability of the project.

A feasibility study is more than just a preliminary analysis—it’s a comprehensive examination of all the critical elements in launching a successful ASC. It considers market demand, financial forecasts, operational requirements, and potential risks, providing a solid foundation for decision-making.

Here’s what a comprehensive feasibility study from Surgical Management Professionals (SMP) typically includes:

• Market Demand Analysis: This step assesses local demand for outpatient surgical services and evaluates the competitive landscape. With ASC volume expected to grow by 21% over the next decade, this analysis ensures that your new facility meets an existing need​.  SMP works in partnership with the local providers and client to assess the demand in the market.  Some markets have very few remaining independent physicians and/or the majority of physicians are nearing retirements.  These are two examples of risk factors that must be considered.

• Financial Projections: SMP provides detailed financial forecasts outlining projected startup costs, working capital needs, operational expenses, and projected revenues. With the ability to perform surgeries at a fraction of hospital costs, ASCs offer a compelling business case for providers looking to improve their financial outlook. However, with the increasing costs to operate an ASC since COVID, it is imperative to understand if the current payer mix and specialties can generate enough revenue to cover the projected costs.  This step is crucial to understanding the long-term profitability of your ASC.

• Operational Planning: From staffing needs to workflow design, a feasibility study evaluates the operational aspects of running a successful ASC. If you have never ran an ASC, SMP will advise on typical ASC costs ranging from contract services to drug and supply costs to other operational expenses.  SMP’s expertise helps ensure that your facility operates efficiently from day one and you have projected all required costs

Risk Mitigation and Long-Term Success

The benefits of conducting a feasibility study extend far beyond the initial planning phase. By identifying potential risks early, providers can develop strategies to mitigate those risks, reducing the likelihood of financial or operational setbacks.

For example, by understanding the financial landscape ahead of time, providers can make informed decisions about funding, equity, and partnership opportunities. It is not uncommon to see ASCs that have not adequately planned for the startup cash needs until the payer contracts have all been executed.  This puts a strain on the partners and in some cases, results in the need for additional capital.  Furthermore, precise financial projections help ensure your ASC is viable and positioned for long-term success.

Taking the First Step Toward ASC Success

The growing demand for ASCs presents a tremendous opportunity for healthcare providers. However, navigating the complexities of ASC development requires detailed planning and expert insight. A comprehensive feasibility study is the best first step in ensuring your facility is built for success—financially, operationally, and in patient care.

At SMP, we are committed to helping healthcare providers make informed, data-driven decisions. Our expert feasibility studies are designed to guide you through every step of the ASC development process, providing a roadmap to success.

If you’re considering building a new ASC, contact SMP to learn how we can help.

Visit “Contact Us” for more information.