Presented by: Todd J. Mello, MBA, AVA, Principal How Do the ASC Companies Assess Value? A Presentation by HealthCare Appraisers, Inc. based upon its 4 th Annual ASC Valuation Survey Presented June 23, 2006

Presentation Outline  Participating Companies  Why do we care?  Company Profiles  Factors Impacting Value  Valuation Trends and Multiples

Participating Companies Affiliated Surgery Center Group, LLC AmSurg Corporation * Blue Chip Surgical Center Partners Health Inventures, LLC HealthMark Partners, Inc. HealthSouth Corporation * Meridian Surgical Partners National Surgical Care NovaMed, Inc. * Pinnacle III Regent Surgical Health, LLC Surgis Inc. Symbion Healthcare * Titan Health Corporation United Surgical Partners International ** Publicly Traded

Why Do We Care?  Detail to actual transactions occurring in marketplace provides valuable insight in the private company valuation process (i.e., “sanity check” to Income Approach)  Provides mechanism for ASC owners to readily estimate value  Provides mechanism for ASC owners to monitor reasonableness of formula- driven buy/sell provisions in governing documents

Company Profiles  Public – 5; Private – 10  ASCs under ownership/management  10 or fewer: 4  11-30:5   51+4

Company Profiles  Preferred number of physician owners  Fewer than 10:13%  11-20:60%  The more, the better27%  Most desired specialties: orthopedics; ENT; GI; pain management; podiatry, ophthalmology; and general surgery  Preferred equity ownership percentage

Company Profiles  Management Fees Charged  None:1  Less than 4%1  4% to 4.9%0  5% to 5.9%9  6% to 6.9%3  7% or higher1  Acquisition Strategy

Company Profiles  Determining Value for Recurring Transactions (i.e., investments and divestitures)  Independent appraisal14%  Formula set forth in governing documents72%  Other14%  Periods incorporated in valuation/purchase offer  Trailing 12 months75%  YTD, annualized12.5%  Other12.5%  Primary earnings measure relied upon in valuation  EBITDA less i-bearing debt79%  Net Income7%  Other14%

Factors Impacting Value FactorNoneMod.High Opportunities for Growth014%86% Age of Owners064%36% Managed Care Penetration 064%36% Extent of hospital penetration 43% 14% Nature of specialties7%36%57% Existing presence in market 077%33% Hospital affiliation/ownership 14%57%29% Extent of MD ownership021%79% Extent of indebtedness21%50%29% Size of center057%43%

Factors Impacting Value  MedPAC rate freezes  2004: 54% No Impact; 38% generally lowered valuation multiples  2005: 100% No Impact  Existence of barriers to entry (e.g. CON)  92% report paying a premium for an ASC in a CON state  Value of premium: 20% - less than a 0.25 multiple; 30% to 0.50 multiple; 40% to 0.75 multiple; 10% - greater than a 0.75 multiple  Out-of-Network benefits  64% report that the existence detracts from value  36% report that it depends upon the extent of out-of-network contracts

Valuation Trends & Multiples  In the past year, what best describes your observations related to the following:  Acquisition activity: 57% report no change form previous year; 43% report increasing activity  Competition for acquisitions

Valuation Trends & Multiples  What valuation multiples are you most typically observing in the marketplace during the past 12 months for controlling interests?  In the past year, what best describes the multiples paid or considered by your company?  67% report no change form previous year  33% report increasing multiples (i.e., higher valuations)

Valuation Trends & Multiples  Discounts involved in the purchase/sale of minority interests:

Valuation Trends & Multiples  By comparison, publicly traded “pure play” ASC companies were valued in the market during their 2005 fiscal year as follows Company NameMarket Value ($ in millions) Enterprise Value (“EV”) ($ in millions) EBITDA ($ in millions) EV/EBITDA Multiple AmSurg$727.9$825.0$ X Symbion$494.9$580.0$ X USPI$1,370.0$1,590.0$ X NovaMed$159.7$167.2$ X Group Average17.6X

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