Costs of Developing an Ambulatory Surgery Center

Aside from the business plan, you need a realistic assessment of your initial financial investment when opening a new business. The costs of developing an ambulatory surgery center range between $2 million and $8 million.

However, multiple factors influence the exact amount you will need to cover in this price range. Let us guide you through the expenses of opening an ambulatory surgery center in 2023.

General Range of Costs of Developing an Ambulatory Surgery Center

Understanding the financial considerations of developing an ASC should be a priority for every individual or group of people who are considering getting into the business. 

Generally looking, the costs of developing an ambulatory surgery center covering one specialty is between $2 million and $3 million. This price range is for a healthcare facility with two operating rooms.

On the other hand, if you are interested in opening multi-specialty ASCs, you should plan $4 million to $8 million to have an operational facility with two surgical suites.

Planning on having more than two operational rooms? Then, you should add approximately $1 million to your developing budget to build one extra OR. Between $450,000 and $500,000 should be reserved for purchasing equipment.

Keep in mind that these prices are just averages. Some ASCs in the US have reported expenses of more than $25 million. In fact, some hospitals have invested $156 million in constructing four-story ASCs.

If you are seriously considering building an ASC, we at Surgery Center Consultant are happy to help you. We offer AAAHC-accredited consulting services and support.

Factors Influencing the Costs of Developing an ASC

When you are doing an estimated budget for developing an ambulatory surgery center, you need to have two basic factors in mind.

Location and real estate

To build an ambulatory surgery center, you either need to purchase an existing building and remodel it or buy land and build it from scratch. 

Location plays a huge role in the purchasing, site development, and construction costs.

Equipment and technology

You should answer these two questions when purchasing equipment and technology for your ASC:

• Will I purchase new or refurbished equipment?
• Do I want to have the latest technology or a basic model?

Your equipment and technology preferences will influence the final cost of developing an ASC. Remember that you shouldn’t sacrifice the quality of your services just to cut down the expenses.

Furthermore, the costs for equipment and technology also depend on the medical field your ASC will work in and the types of surgical procedures you will provide.

Investing in high-end technology and the most-sophisticated equipment might be worth it in the long run and increase ASC efficiency.

Cost Breakdown of Developing an ASC

The costs of developing an ASC can be broken down into four main categories: pre-development, construction and renovation, operational costs and license, as well as certification.

Pre-development costs

The two main pre-development costs are regarding the location, which includes land acquisition and site development. However, you also must not forget about the design expenses.

Land acquisition

The real estate costs for ASC depend on the location. However, the urban proximity and site conditions also have a significant share in the land acquisition costs.

The average ASC requires a two-acre parcel size. Hence, the average land costs for ASC are between $0.8 million and $1.2 million.

Site development

The site development requirements greatly influence the pre-development cost. How much it will cost you to prepare the land for construction depends on the parcel you purchase.

Some parcels require little site development. On the other hand, the site development costs for some parcels might be higher than the parcel itself.

The typical site preparation costs for an ASC range between $15 to $30 per square foot. We highly recommend getting an estimated quote for site prep before purchasing a parcel.

Design

Lastly, the design costs include hiring an architect and getting engineering services. The overall design costs for ASC are connected with the construction costs. 

As a rule of thumb, you should budget 7% to 10.5% of the construction costs for the design.

One piece of advice: you can save money by combining design and build services. The services will cost you $300 per square foot on average if you pay them separately but $225 if combined.

Construction and renovation costs

The national average cost for building a three-story healthcare facility in 2023 was $419.18 per square foot. The cost of developing an ambulatory surgical center had increased by 15% since 2019, when it was $362.69.

The construction cost per square foot in America varies greatly depending on the desired facility location. According to the latest data, the construction cost in Houston is $357.30, while in New York, it may reach $540.45.

Understandably, the total construction and renovation costs depend on the ASC’s size. The average size ASC building is 15,000 square feet.

But how big should the facility be according to the type of ASC?

Single-specialty ASCs are typically between 8,000 and 12,000 square feet. Conversely, multiple-specialty ASCs are around 20,000 square feet.

License and certification

Another expense for opening an ambulatory surgery center is licensing. However, the ASC licensure greatly depends on the state you are opening the facility.

First, you should be aware that not every state requires ASC licensure. If you are developing an ambulatory surgical center in the following states, you should cross the license fee off your list of expenses:

• Idaho
• Iowa
• Maryland
• Vermont
• Puerto Rico
• Washington
• West Virginia
• Wisconsin
• Wyoming

Second, the ASC licensure fees vary between the states. Some states even have additional costs, like biennial inspection fees. 

Check the table below to find out how much is the license fee for ASC in selected US states.

Aside from the Ambulatory Surgical Center License, you should also get a Medicare certification. There is no enrollment application fee for physicians, physician organizations, non-physician practitioners, and non-physician organizations. 

Thus, to get your ASC certified, you don’t need to pay an application fee.

Operational costs

Operating costs should be underestimated when creating the budget for your new ASC. The median operating costs in the US are approximately $6.9 million. 

Typically, the median operating costs of ASC vary by region. The US South region reported the highest median operating costs, accounting for $8.1 million.

According to a VMG Health study, the mean operating expenses represent 76.3% of the ASCs revenue. Here is a breakdown of the operating expenses.

• 23.8% for drugs and medical supplies.
• 22.2% for employee salaries and wages.
• 16.7% for general and administrative costs.
• 7.1% for occupancy costs.
• 5.2% for taxes and benefits.
• 0.9% for other medical costs.
• 0.7% for insurance.

Operating expenses per case

If you want to calculate the operating expense per case in your ASC, you can do so by following our tips.

• Use preference cards to track the physician’s cost per case.
• Use the accounting system to monitor the supplies used in the surgical procedure.
• Track the time-in and time-out of the patient.

As a guide, the mean operating expenses per case are $1,543, of which the majority is for employee salary ($436) and drugs and medical supplies ($491).

Financing Options for Developing an ASC

If you don’t have enough money to cover the costs of developing an ambulatory surgery center, there are different financing options you can consider.

Loans

Loans are one way of financing the development of your ASC. A variety of lenders offer different lending programs at different rates and terms.

When browsing, you may come across different types of loans. You should choose one according to your needs.

• ASC acquisition loan
• ASC debt consolidation
• ASC expansion, relocation, or remodeling loan
• Partner buy-out/buy-in
• Commercial real estate loan
• Loan for working capital needs

Equity financing

Another way to fund the development of an ASC is equity financing. In other words, you can raise capital by selling shares of the ASC to investors.

But who can invest in an ASC? Investors can be anyone, from individuals to entities interested in investing in your healthcare industry. Investing in ASC is becoming popular among investors because of its cost-effectiveness and offers convenience.

If you choose this financing option, you should ensure it is done according to the latest government regulations. Additionally, you should consider the costs if you want to buy out the shares and become the sole owner of the ASC.

Typically, the shares will cost more than the investors’ initial price. But on the bright side, you won’t have to go into debt to raise capital for your ASC.

Hospital-owned ASC with a physician co-management

The third way to develop an ASC is to find a hospital that is willing to be the sole owner of the healthcare facility. The hospital will take care of the financial aspects of the ASC.

The hospitals benefit from this partnership by not losing patients needing surgical procedures with the same-day release. Instead of sending the patients to independent ASC, the hospitals will send them to their own ASC.

Physicians, on the other hand, receive a fee for their roles as managers. Their responsibility is to monitor and increase the quality of care.

Grants

The US Department of Health and Human Services occasionally gives grants to healthcare providers. Typically the grants are for Medicare facilities and providers. Hence, ASCs might be eligible for a grant.

Return on Investment and Financial Considerations

The return on investment of ASC depends on several factors. However, the average ROI of ASC is approximately 638%. This means for every dollar you invest, you will get $6.38.

Revenue streams and reimbursement models

The revenue streams of ASC come from different sources, including

• Medicare
• Medicaid
• Commercial
• Worker’s compensation
• Self-pay
• Other pay

But which specialties generate the highest net revenue per case? The VMG Health study showed that the top three specialties by net revenue per case are orthopedics, otolaryngology, and podiatry.

The net operating revenue of ASCs in the US is estimated at $11.16 billion. On the other hand, the annual average profits in the ASC sector is 25%.

Market analysis of ambulatory surgery centers 

The latest analysis shows that the ambulatory surgical center market was valued at $34,507.8 million in 2022. The forecasts are that the market will notice a CAGR of 5.8% in the period between 2023 and 2030.

By 2030 the ASC market is expected to reach $54,175.46 million.

Common Mistakes to Avoid When Developing an Ambulatory Surgical Center

Whether you are new in the business or an experienced developer of an ambulatory surgical center, you should learn from the mistakes of others. 

As experienced consultants for ASC, here are the most common mistakes we notice:

• Overbuilding
• Under capitalizing
• Low case volume

You may avoid this and lower your costs of developing an ambulatory surgery center without it resulting in negative cash flow. To do so, you should consider the following:

• Build according to a realistic case volume.
• Raise enough capital to cover the costs of developing an ASC.

You shouldn’t do the development of the ambulatory surgical center alone. Contact us if you are interested in a consultation with experts that are more than 45 years in the business. 

The process of understanding the financial considerations of developing an ASC will be simplified with us.

Conclusion

The price tag of a new ambulatory surgery center depends on many factors. Some of the biggest contributors to the costs of developing an ambulatory surgery center are the type of ASC, land acquisitions, construction costs, equipment, technology, and operational costs.

Overall, the ASC with two operating rooms can cost between $2 million and $8 million.