CPA.net

Second Edition of the Guide to Healthcare Valuation

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

2009 CMS "TOP 50" CPT Codes from Frank Cohen

Frank is one of the premier resources to CPAs in the healthcare consulting and valuation communities. He now has available at http://www.frankcohen.com/html/products.html the Top 50 CPT Codes by billed services  utilization (count) frequency, charge frequency and others for 2009. I order this material from Frank every year and it saves countless hours of analysis - already have 2009 on hand. Good valuation work work requires CPT analysis, particularly with the Medicare Bonus of 10% to Primary Care Physicians based on specified CPT codes.

Upcoming Healthcare Reform Seminars

Healthcare Reform - The Inside Scoop: What it Means to You, Your Small Business and Individual Clients.

On October 20, I will be reprising my half-day Seminar on the Healthcare Reform legislation for the Michigan Association of CPAs, which has been updated to reflect the barrage of tax announcements and insurance regulations that have been issued since the presentation was first given in June. The venue is the Baronette Renaissance in Novi.

The Massachusetts Society of CPAs will run the Reform Seminar again on October 25 at the Crowne Plaza in Natick. A third presentation will take place in Stockbridge on January 21, 2011 at the Red Lion Inn. 

This highly successful program offers attendees not only an update on tax issues but the unique perspective of a tax practitioner and healthcare industry consultant with extensive experience in negotiating insurance contracts on behalf of healthcare providers.  Learn about how health insurance actually works and why the Reform legislation promises to drive up the cost of insurance for small businesses dramatically, even as it increases the out of pocket costs for individuals.

Program materials will include the Chapter on the Reform legislation from my new Guide to Healthcare Valuation, co-published by the American Health Lawyers Association and Business Valuation Resources.

Center for Studying Health System Change: Boston Report

In a report released September 2, 2010 - that I have been awaiting since 2007 - the Center for Studying Health System Change confirms what many observers including myself have independently determined about the Reform in Massachusetts that was used as the Model for the Federal Reform: 1) Massachusetts is an anomaly of limited relevance to the Nation - which itself is a series of anomalies.  Academic Medical Center dominance along with specialist concentration and the highest per capita concentration of physicians in the country are at the  core of that limited relevance as is a high per capita income; 2) the cost inflation in the small group insurance market as a result of merging that market with the individual market has been nearly DOUBLE that anticipated - and I would maintain from my personal experience that it is closer to FIVE times the level indicated in the HSC report; 3)  Hospitals - the BIG winners in Massachusetts' Reform and again in the federal Reform - are driving the Cost Explosion Train; 4) reading between the lines, lack of Antitrust Reform, the threat of which was much ballyhooed during the purported debate on Federal Reform, has led to the ability of the provider community to raise rates willy-nilly (a technical term) which the Health Plans estimate contribute to 50% of the cost increase trend. The problem originates with the McCarran-Ferguson Act exemption for insurers, which led to provider consolidation in the 1990s and 2000's and the collapse of price competition; 5) MA Attorney General Martha Coakley - the victim of Senator Scott Brown's Senate Campaign - exposed the pricing anomalies in an incredibly detailed February, 2010 Report with data that only a government official with subpoena power or an experienced healthcare consultant could have obtained.

The mess created by 4 years of Reform in Massachusetts - which includes high unemployment unrelated to the Recession -  finally required remedial action by the Executive and legislative branches in the last 6 months. Facing likely defeat in his reelection bid, the governor instructed his insurance commissioner to deny rate increases in the merged small group market of 10% to 30%, which were partially allowed in settlements reached between June and August. The legislature voted to permit small business to form purchasing cooperatives - or association health plans, which were banned by the state in 1996! - this past July.

Read the Report here http://www.hschange.org/CONTENT/1145/

Read about the nonpartisan Center for Studying Health System here: http://www.hschange.org/index.cgi?file=about which is funded by the Robert Woods Johnson Foundation.

Sometimes, the Truth hurts.

Seminar and Conference Appearances Update

I'll be speaking on Monday August 2 in Washington DC for CPA Associates Intl at their annual valuation conference on Medical Practice Valuation in the post-Reform era and on the incorrect use of the Cost Approach in valuing practices.

I'll be speaking at the BVR Divorce Summit in Chicago on September 14 on Reform's impact on the Valuation of Medical Practices.

I'll also be speaking at the Michigan Association of CPAs 2010 Specialized Business Valuation Workshop & Simulcast on Tuesday, October 19, 2010 at the Ford Motor Company Conference & Events Center in Dearborn. The following day - on October 20 - I will be reprising my half-day Seminar on the Healthcare Reform legislation for the Michigan Association, which will be updated to reflect the barrage of regulations that have been issued since June.

The Massachusetts Society has me asked me to present the Seminar on the Healthcare Reform again and that will take place on October 25 at a location to be announced, likely Framingham or Natick.

I'll be presenting two sessions at the AICPA National Healthcare Industry Conference in Vegas this November. One session will deal with antitrust issues in transactions and negotiations between physicians, hospitals and networks, with a focus on the new Accountable Care Organizations (ACOs) as well as what can and cannot be shared with respect to fees and how it is accomplished. My co-speaker will be healthcare antitrust attorney Jim Reeder of Vinson and Elkins' Houston office. The second session with my friend and colleague Tim Smith of Healthcare Appraisers will deal with Fair Market Value issues in healthcare valuation and compensation, again with a focus on ACO and other integration transactions. Time permitting, I hope to introduce a new Primary Care Compensation Model I am developing for the ACO market.

Finally - for now - I'll be speaking at the AICPA National Valuation Conference in Washington DC.  I'll be sharing the session with my friend and colleague Carol Carden of Pershing Yoakley, who is also Chair of this year's Conference. The topic is Factors in Forecasting Cash Flow and Estimating Cost of Capital in Healthcare and will be based upon our joint paper in the June 2010 issue of Business Valuation Update.

AICPA Webinar: Healthcare Reform - What Does It Mean For Business

I will be posting additional resources here for the May 12 webinar

CBO letter to Congressman Lewis stating that "discretionary" costs in the range of $115 billion necessary to administer the Reform legislation were not included in the scoring of the legislation. This will increase the deficit and eliminate any claimed reduction in same.
http://www.cbo.gov/ftpdocs/114xx/doc11490/LewisLtr_HR3590.pdf

American Medical Association study of insurer market concentration http://www.ama-assn.org/amednews/2010/03/08/bil20308.htm, http://www.southernstudies.org/AMA%202007.pdf

Centers for Medicare and Medicaid 2009 Statistics containing detaled infromation about Medicare recipients, physicians, etc.
http://www.cms.gov/ResearchGenInfo/02_CMSStatistics.asp

Barclays Capital Managed Care Industry Analyst Joshua Raskin, one of most insightful individuals on Health Insurance and Medicare Advantage. Reports are available through brokerages such as Fidelity.

Health Affairs podcast of a webinar they did with four former CMS officials, including Bruce Vladek, Tom Scully and Gail Walensky, on CMS and Reform
http://www.healthaffairs.org/issue_briefings/2010_04_09_cms/2010_04_09_cms.php

FTC/DOJ July 2004 White Paper on Anti-Trust issues in the Healthcare Industry.
http://www.ftc.gov/reports/healthcare/040723healthcarerpt.pdf

Tax Foundation Analysis: Health Care Reform: How Much Does It Redistribute Income?
http://www.taxfoundation.org/files/ff222.pdf

AICPA Healthcare Reform Webinar May 12

I'll be one of the three panelists on the American Institute of CPAs national webinar on the Healthcare Reform legislation on May 12. We'll be looking at the historical backdrop for the legislation, new benefit requirements, impact on healthcare providers, impact on small business and CPAs advising them, and the array of new taxes required to fund the legislation.  Meanwhile, let me say that the Kaiser Family Foundation website has a wonderful collection of white papers analyzing various aspects of the legislation.  Also, Health Affairs has a podcast of a webinar they did with four former CMS officials, including Bruce Vladek, Tom Scully and Gail Walensky, on CMS and Reform - fascinating.

http://www.healthaffairs.org/issue_briefings/2010_04_09_cms/2010_04_09_cms.php

New Book: Guide to Valuing Medical Practices!

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

http://www.bvresources.com/physicianvaluation

Articles and such

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.

The Market Approach and Market Data

I had several discussions today concerning alternatives to the Income Approach when valuing medical practices for sale to a hospital. At the risk of repeating myself, the hypothetical investor of the fair market value standard is interested in income returns; is risk adverse (see any text book discussion of the CAPM and diversification); views normalization adjustments cautiously, and does not anticipate synergistic opportunities from the investment, e.g., a lower cost of capital than the target entity on a stand alone basis, revenue to the acquirer over and above that available to the target on a stand alone basis, etc. Synergistic expectations are a feature of Strategic Value, not Fair Market Value. As such, they are not consistent with appraisal for the healthcare industry where Stark, the AKS, or tax exemption issues are present.

One issue that sometimes presents itself in an appraisal is the relevance of the Market Approach. My article Healthcare Market Structure And Its Implication For Valuation Of Privately Held Provider Entities: An Empirical Analysis appeared in the Summer 2008 Edition of Business Valuation Review and addresses many of the peculiar issues that exist with this Approach in the Healthcare Industry. In order to use "comparable" transactions in a regulated healthcare valuation, the appraiser must be cognizant of the underlying motivations of the parties who engaged in the reported transaction. If the value of past, present or future referrals were considered in the determination of the transaction price, the data would be "tainted" and not an appropriate source of a multiple, of course. For transactions that are not fully reported - which is just about all of them - there is insufficient data from which the appraiser can assess the motivations of the transacting parties. Furthermore, as I have said many times, "The Plural of Anecdote is not Data." Finally, there is a substantive question as to whether "market" data available only to a restricted audience is appropriate for use in a fair market value appraisal. "Market" data contemplates hypothetical buyers and sellers who have reasonable access to relevant facts. Confidential data is not consistent with that requirement.