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The Utilization of the Market Approach

In Appraising Outpatient Enterprises Healthcare related outpatient enterprises provide services that do not require hospital admission and may be performed outside the premises of a hospital. Similar to valuation of any business, valuations of outpatient enterprises should include consideration of the three general approaches to valuation (i.e., the income approach, the market approach, and the asset/cost a ...

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Determination of the Appropriate Standard of Value

An In-Depth Series on Healthcare Valuation This first installment will discuss Fair Market Value, the most prevalent standard of value in the healthcare industry, and why this is the required standard of value for most healthcare transactions. This article will also discuss the premise of value, which further defines the circumstances of the transaction, and how to determine which methods may be applicable ...

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Common Misconceptions Regarding Healthcare Entity Valuations

Five Remaining Leading Misconceptions (Part II of II) The following discussion summarizes and responds to common misconceptions many analysts have with regard to the valuation of healthcare entity property and/or services transfers. These analyst misconceptions typically involve a misunderstanding of one or more of the relevant regulatory provisions. These analyst misconceptions typically relate to an erron ...

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Common Misconceptions Regarding Healthcare Entity Valuations

Five of the 10 Leading Misconceptions (Part I of II) The following discussion summarizes and responds to common misconceptions that many analysts have with regard to the valuation of healthcare entity property and/or services transfers. These analyst misconceptions typically involve a misunderstanding of one or more of the relevant regulatory provisions. These analyst misconceptions typically relate to an e ...

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Appropriate Use of Extraordinary Assumptions and Hypothetical Conditions

Healthcare Valuation Considerations when Valuing Outpatient Services With healthcare evolving, how can practitioners project the future benefit stream related to outpatient services? In this article, the authors discuss the use of hypothetical and extraordinary assumptions. They argue that use of these assumptions requires careful consideration as they can have a significant effect on value. In addition, th ...

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Understanding Compensation per Work RVU

The Structure of Physician Compensation The structure of compensation for hospital/health-system employed physicians is a constant struggle for administrators with the rise of physician practice acquisitions and subsequent employment of these physicians. Based on estimates from Jackson Healthcare1, approximately 35 percent of all physicians are employed by a hospital/health-system. As a result, the issue of ...

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The Imperative of Considering the Concept of Highest and Best Use in Healthcare Valuation (Part 1 of 2)

Traditional valuation methodologies have relied upon the analysis of historical accounting and other data as predictive of future performance and value. However, this may not hold true with every economy, industry, or even every enterprise within an industry, over time. For example, the turbulent status of the healthcare industry over the last five decades, since the passage of Medicare in the 1960s, has in ...

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Legal Implications for Hospital Boards, In-House Counsel, and Management to Consider to Avoid a Broken Deal

Merger and acquisition activity in the healthcare industry has increased over the past few years. The playbook used in the past has shifted. In this article the authors share their views on whether and when to announce the deal, the importance of conducting pre-deal due diligence, appearing before the Board of Directors, understanding the constituents that are needed to succeed, and conducting pre-market du ...

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Regulatory Tripwires and the FMV Implications of Health Systems Losing Money on Employed Physicians

Valuators Take Note Fair market value is key to compliance with both the Stark Law and the Anti-Kickback Statue. Solid, well-reasoned valuations can be essential in establishing compliant arrangements, and these must consider practice losses as applicable. In this article, Lynn Gordon, Esq., states that it is “prudent to have a valuation in place that supports compensation as fair market value,” especially ...

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Valuation of Hospital System Targets

Insights from the Analysis of Mega Transactions By scrutinizing data from large transactions, valuation experts can glean important information and insights into current healthcare valuations. In this article, Collin McDermott and Bridget Triepke summarize SEC filings, review the implied valuation of large healthcare mergers—based on the purchase price—and provide a detailed review of the fairness opinions ...

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IRS Proposes New Changes to Cafeteria Plan Elections and Lookback Period

  On September 18, 2014, the Internal Revenue Service (IRS) issued two new notices—one proposing changes for when a taxpayer can revoke healthcare coverage in a cafeteria plan and enroll in a plan on the health insurance marketplace exchanges; the second notice proposes an approach for how to measure the lookback period for determining who is a fulltime employee when an employee changes positions withi ...

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Intangible Assets in Healthcare

Approaches and Methods Used to Realize Income from Licensing IP Assets This article discusses valuation topics related to a subset of intangible assets which are most applicable to healthcare businesses. Business valuation professionals are often engaged to value specific intangible assets, either as part of a detailed business valuation or after a transaction has been completed. When valuing healthcare-ori ...

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Healthcare M&A Focuses on Outpatient Facilities

While mergers and acquisitions within the healthcare sector are expected to grow this year, the bulk of the deals will likely involve targets such as large, outpatient care centers and allied healthcare facilities, as opposed to large in-patient hospitals. This analysis comes as part of a white paper recently released by Ponder & Co. Also included were projections that nonprofit institutions will be the ...

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Dissecting the Medical Practice Revenue Stream—Part 1

Four things valuators should know about medical claims and coding While all valuators need to be able to cite specific factors considered in the determination of fair market value, many times the measures selected could be applied to a variety of industries. In this first of a two-part series, Jeffry Moffatt examines why revenue is most often a primary area of interest for valuation, because without revenue ...

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Accountable Care Organizations

Value metrics and capital formation Robert Cimasi serves as chief executive officer of HEALTH CAPITAL CONSULTANTS (HCC). Mr. Cimasi’s firm is a nationally recognized healthcare financial and economic consulting agnecy headquartered in St. Louis, MO, serving clients in 49 states since 1993. He is author of a three-volume set that offers a comprehensive reference guide to the factors involved in consulting wi ...

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Issues When Valuing Healthcare Transactions

Medical practice sale pitfalls There are several issues to be keenly aware of when valuing a medical practice, including sources used to evaluate the efficiency of a practice and the need to determine what a benchmark is for the doctor in the practice. It is imperative to do a common sizing calculation when comparing a practice’s performance with national practice data for the medical specialty. ...

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