AHLA/BVR’s Guide to Healthcare Valuation is now available. The Guide, edited by Mark Dietrich, is co-published by the American Health Lawyers Association and Business Valuation Resources. http://cpa.net/?page_id=427
AHLA/BVR’s Guide to Healthcare Valuation is now available. The Guide, edited by Mark Dietrich, is co-published by the American Health Lawyers Association and Business Valuation Resources. http://cpa.net/?page_id=427
Posted at 02:00 PM in Healthcare Reform, Income Approach & Methods, Market Approach, Medicare, Music, Noncompete Agreements, Reasonable Comp, Regulatory Matters, Seminars & Publications | Permalink | Comments (0) | TrackBack (0)
Business Valuation Resources will be publishing a new book Guide to Valuing Physician Practices containing principal contributions by me along with several other authors on valuing medical practices, including a detailed look at various analytical approaches to such factors as CPT codes, RVUs, Technical Component Revenue and MGMA data. Here is the link
Posted at 05:00 PM in Income Approach & Methods, Market Approach, Medicare, Reasonable Comp, Regulatory Matters, Seminars & Publications | Permalink | Comments (0) | TrackBack (0)
My article with longtime colleague and collaborator Kathie Wilson on Understanding and Using the Technical and Professional Component of Ancillary Revenue will be published in the April Edition of Business Valuation Update. I am also pleased to report that another article I wrote, Why Transaction Structure Affects Value and Other Nuances of Valuing Medical Practices, will be published in the Spring edition of CPA Expert. Both pieces address issues I will also discuss in the March 16 seminar for VPS.
Thought for the Day: Always stand upwind of the fan.
Posted at 03:39 PM in Income Approach & Methods, Medicare, Reasonable Comp, Regulatory Matters, Seminars & Publications, Valuing Goodwill | Permalink | Comments (0) | TrackBack (0)
My colleague Kathie Wilson and I are working on an important new paper dealing with the interplay of reasonable compensation and intangible and goodwill value where a medical practice has revenue and profit from the Technical Component of Ancillaries. There are a myriad of reasons why this is important, including differentiating personal and enterprise goodwill in marital dissolution, determining reasonable compensation from MGMA data, and quantifying reasonable compensation when based upon work RVUs. We plan to include a checklist of items to consider as well as common examples including neurology and cardiology practices, the latter being of considerable import in the current wave of physician practice acquisitions.
I am also developing an equally important paper with another colleague on difficulties in, and solutions to, forecasting cashflow and assessing risk (discount rate) in healthcare industry valuation. More on this in a later post.
Posted at 09:23 PM in Income Approach & Methods, Noncompete Agreements, Reasonable Comp, Regulatory Matters, Seminars & Publications | Permalink | Comments (0) | TrackBack (0)
The IRS has posted a Guide Sheet for Examining Agents to be used in audits of tax-exempt entities, including hospitals. Of particular note are items 13 and 14 with respect to approval of compensation arrangements.
Payments to existing physician staff members (or physicians already located in the catchment area) such as those based on replication cost of Intangibles in a practice acquisition where the Income Approach shows no value could run the risk of being considered as compensation. Something to think about.
http://www.irs.gov/pub/irs-tege/governance_guide_sheet.pdf
Meanwhile, "back at the ranch," the instructor in Fair Market Value 101 is asking the students: "How many of you would pay $500,000 to replicate a business from which business you could earn no income?" Sampling of answers to follow...
Posted at 08:38 PM in Income Approach & Methods, Medicare, Reasonable Comp, Valuing Goodwill | Permalink | Comments (0) | TrackBack (0)
A colleague and I had an exchange on reasonable compensation today and it reminded me of a point I often see missed in valuation of small businesses and professional practices: the compensation assumption in a CCF or Excess Earnings Model is PERPETUAL and increases at the growth rate used to determine the cap rate. As such, any measure of reasonable comp based on entry level salaries is likley not relevant for a capitalization model and can also lead to significant error. This is due to the fact that professionals can experience a fairly rapid increase in salary from their intial year as they "ramp up" and reach a normal level of productivity in the workplace.
For physicians, some of this difference can be gleaned from the Merritt Hawkins Annual Survey as well as the difference in reported salaries in the MGMA data using All Physicians, Partner/Shareholder Physicians and Physicians with 1-2 years experience.
Similarly, a low initial salary followed by a "low or no" buy-in and high partner income can also be explained by a combination of recruiting demand and higher-than-entry-level long-term compensation expectation. The low buy-in price reflects the new professional's high perpetual income expectation and as such a lower level of profit or excess earnings from ownerhship.
Posted at 10:45 PM in Dental Practices, Income Approach & Methods, Reasonable Comp, Valuing Goodwill | Permalink | Comments (0) | TrackBack (0)
My article with Greg Anderson of Horne on WRVU Conversion Factors and the Fair Market Value of Physician compensation appeared in the November 15, 2008 edition of Health Lawyers Weekly from the AHLA. You can download it here.
Posted at 09:10 AM in Income Approach & Methods, Market Approach, Medicare, Noncompete Agreements, Reasonable Comp, Regulatory Matters, Seminars & Publications, Valuing Goodwill | Permalink | Comments (0) | TrackBack (0)
