Letter of Intent Template for Acquiring an Ambulatory Surgery Center

Transaction Structure and Consideration

Define whether the acquisition is structured as an asset purchase, stock purchase, or partial equity buyout with physician rollover. ASC deals frequently involve hybrid structures — such as an MSO acquisition paired with preserved physician equity — to navigate Stark Law and Anti-Kickback Statute constraints. Specify total purchase price, form of consideration (cash at close, seller notes, equity rollover), and any earnout components tied to case volume or payer contract milestones.

💡 Sellers will push for maximum cash at close and minimal earnout dependency. Buyers should tie earnout specifically to case volume by specialty — not just gross revenue — to protect against payer mix deterioration. If physicians are retaining rollover equity, confirm the rollover percentage is meaningful enough to incentivize retention but does not create Anti-Kickback Statute exposure. Engage healthcare regulatory counsel before finalizing structure language, even at the LOI stage.

Purchase Price and Valuation Basis

State the valuation methodology and EBITDA multiple being applied. ASCs in the lower middle market typically trade at 5x–9x EBITDA depending on specialty mix, payer contract quality, accreditation status, and physician retention risk. Identify the trailing twelve-month EBITDA figure the offer is based on, any add-backs applied, and the conditions under which the purchase price may be adjusted after due diligence.

💡 Sellers frequently include physician compensation above fair market value in EBITDA add-backs; buyers should normalize physician compensation to fair market value benchmarks for the specialty mix. Challenge any add-backs for one-time equipment purchases if those items will recur as capital expenditure obligations. The range between 5x and 9x is wide — premium multiples are justified only by diversified payer mix, long-term payer contracts, and multi-physician ownership with demonstrated volume growth.

Due Diligence Scope and Period

Define the due diligence period, the categories of information to be provided, and any access limitations relevant to a healthcare setting. ASC due diligence extends well beyond financials to include Medicare certification status, state licensure, accreditation certificates, payer contracts, physician ownership agreements, malpractice history, and compliance program adequacy. Specify a realistic timeline given the complexity of healthcare regulatory review.

💡 Sixty days is a minimum for a thorough ASC due diligence — push for 75–90 days if the ASC is multi-specialty or has complex physician partnership structures. Sellers will resist broad access to individual payer contract rates early in the process; negotiate a phased disclosure tied to exclusivity milestones. Insist on receiving the full Medicare cost report and any CMS audit correspondence within the first two weeks — these are non-negotiable and signal items that can derail a deal if discovered late.

Regulatory and Licensing Contingencies

Make the transaction explicitly contingent on satisfactory resolution of all material regulatory and licensing conditions. For ASC acquisitions, this includes Medicare and Medicaid provider agreement assignment or re-enrollment, state operating license transfer, CON compliance where applicable, and accreditation continuity. These are not boilerplate contingencies — failure to address them can result in loss of billing privileges post-close.

💡 Medicare re-enrollment following a change of ownership can take 60–120 days. Buyers should confirm whether a tie-in notice or change of ownership filing with CMS is required, and whether the ASC can continue billing under existing provider numbers during the transition. Sellers will push to limit this contingency period; buyers should hold firm on a 90-day window. If a CON is involved, add at least 45 additional days — state approval timelines vary widely and can extend the process significantly.

Physician Retention and Non-Compete Provisions

Address key surgeon retention expectations, non-solicitation and non-compete commitments from selling physicians, and any employment or medical staff privilege arrangements post-close. Physician departure risk is the single largest value-destruction event in an ASC acquisition — this section must be detailed, not vague.

💡 Physician partners will resist long non-competes and non-solicitation terms — particularly if they are retaining rollover equity and will remain clinically active. A 24-month, 25-mile radius is a reasonable baseline but must be tested against state law in the jurisdiction. Earnout structures that reward retained physicians for case volume growth are often more effective retention tools than restrictive covenants alone. Confirm with healthcare counsel that physician employment arrangements comply with Stark Law fair market value requirements.

Exclusivity and No-Shop Period

Define the exclusivity period during which the seller agrees not to solicit or entertain competing offers. Given the complexity of ASC regulatory review, buyers need adequate protected time to complete diligence without auction pressure. Sellers should ensure the exclusivity period is not open-ended.

💡 Sixty days of exclusivity is standard for an ASC deal but may need to extend to 90 days if regulatory approvals or complex physician equity unwinding are involved. Sellers should insist on a hard termination right — open-ended exclusivity with rolling auto-renewals can trap a seller for months while a buyer conducts leisurely diligence. Buyers should protect against sellers using the exclusivity period to back-channel with competing acquirers under the guise of existing relationship maintenance.

Confidentiality and Non-Disclosure

Confirm that both parties are bound by confidentiality obligations covering all information exchanged during diligence, with specific attention to HIPAA-regulated data, physician compensation information, and payer contract rate details. Reference any standalone NDA already executed or incorporate confidentiality terms directly into the LOI.

💡 ASC transactions involve uniquely sensitive data — payer reimbursement rates are commercially sensitive, physician compensation is legally regulated, and patient information is HIPAA-protected. Reference the existing NDA if one is in place rather than restating all terms in the LOI. Confirm that your NDA explicitly covers payer contract rate disclosure, which is often a specific carve-out in standard NDAs. Any HIPAA-regulated data shared during diligence should require a Business Associate Agreement.

Definitive Agreement and Closing Timeline

Establish a target timeline for negotiating and executing a definitive purchase agreement and a projected closing date. Set expectations on key workstreams — regulatory approvals, physician agreement negotiation, financing — so both parties understand the path to close.

💡 Closing timelines for ASC deals routinely run 4–6 months from LOI signing to close when regulatory approvals and physician agreement negotiations are included. Sellers should resist artificially compressed timelines that leave insufficient time for regulatory compliance — rushing these steps creates post-close legal exposure. Buyers should flag early if rep-and-warranty insurance is being pursued, as this requires its own underwriting timeline and affects escrow and indemnification structure.