Valuation of a Medical Practice

by Tinsley, Reed; Sides, Rhonda W.; Anderson, Gregory

• ISBN13: 9780471299653
• ISBN10: 0471299650
• Edition: 1st
• Format: Hardcover
• Copyright: 1999-04-28
• Publisher: Wiley

Summary

What is a medical practice worth? The answer depends, in part, on whom you ask. Purchasers would say value is based on what they plan to bring to the table; sellers assume it's simply a matter of formula applied uniformly across the board. In actuality, both are correct-to a degree. While there are basic guidelines used to ascertain values, valuation must be determined on a case-by-case basis, as each has a unique set of circumstances that ultimately affects final outcome. Covering the specific issues that impact valuation, Valuation of a Medical Practice takes you through the entire process, highlighting pitfalls and mistakes that are commonly made and that should be avoided. Written by Reed Tinsley, Rhonda Sides, and Gregory D. Anderson, leading experts in the field, this comprehensive resource clears up the ambiguous question of what exactly constitutes the value of a medical practice. As the authors stress, there are two main points to keep in mind: The strength of the practice's income stream and what it produces for the owner(s) is what creates true value. The key to a successful valuation is deciding whether or not the practice's future income stream will mirror its present income stream.Along with case examples, sample valuation letters, and checklists for gathering data, as well as an exhaustive appendix and glossary of terms, Valuation of a Medical Practice has complete details on: Regulatory issues-Medicare fraud and abuse, private benefit/private inurement, the Stark Law. Special issues-gross revenues, referral patterns, payer mix, practice efficiencies and transition, productivity. Getting started-engagement preplanning and planning, requesting pertinent data. On-site inspection and owner interview-fixed assets, personnel, accounting system, supply inventory, marketing, physician and management issues. Completing the process-reporting, reviews, reconciling valuation methods, applying premiums and discounts, obtaining client representations.Straightforward, accessible, and exhaustive, this is an important resource for anyone involved in the valuation of a medical practice. When it comes to valuing a medical practice, the parties involved often disagree on how it should be best assessed. Written by leading authorities in the field, this comprehensive resource clears up any confusion by examining and explaining the key issues involved in the valuation process, as well as common pitfalls and mistakes that should be avoided. Packed with sample valuation engagement letters, checklists for gathering data, and helpful case studies, Valuation of a Medical Practice covers all the essential bases, from regulatory issues and operating costs to capitalization and fixed assets-in short, everything needed for an accurate valuation.

Author Biography

REED TINSLEY, CPA, serves as shareholder in charge of Horne CPA Group's Houston office and is instrumental in the firm's Physician Services Division. A member of the Editorial Advisory Board for Physician's Marketing and Management and editor of the CPA Health Niche Advisor, he is also cochair of the CPA section of the IPA Association of America. RHONDA SIDES, CPA, is the Senior Manager of Horne CPA Group in Nashville, Tennessee. She specializes in practice valuation, cost accounting, operational assessments, and financial feasibility issues related to group and integrated delivery system development. A member of the Georgia and Tennessee Societies of CPAs, the American Institute of CPAs, and the Healthcare Financial Management Association, she is also a candidate member of the American Society of Appraisers. GREGORY D. ANDERSON, CPA, CVA, a shareholder in the Horne CPA Group's Hattiesburg office, is a member of both the firm's Physician Services Division and the firm's Business Valuation/Litigation Support Division. He has presented programs on medical practice valuation topics to organizations of physicians, health care managers, and attorneys, and has served on the Valuation Quality Control Committee of the American Medical Advisory Group and on the Editorial Board of Healthbeat, the firm's physician services publication.

Table of Contents

Introduction	1	(17)
Regulatory Issues and the Valuation Process	17	(6)
Medicare Fraud and Abuse	17	(1)
Private Benefit/Private Inurement	18	(2)
The Stark Law	20	(3)
Special Issues Pertaining to the Valuation Process	23	(34)
Gross Revenues	23	(10)
Operating Costs	33	(4)
Same Service Utilization	37	(1)
Productivity	38	(2)
Medical Specialty	40	(2)
Referral Patterns	42	(1)
Payer Mix	43	(2)
Competition	45	(2)
Reimbursement	47	(1)
Practice Efficiencies	48	(1)
Practice Transition	48	(4)
Contracting Relationships	52	(1)
Summary	53	(4)
Beginning the Valuation Process	57	(30)
Preplanning the Engagement	59	(5)
Requesting Pertinent Data	64	(16)
Engagement Planning	80	(5)
Summary	85	(2)
The Capitalization Rate	87	(18)
Capitalization and Discount Rates	88	(15)
Summary	103	(2)
Valuation Methods	105	(40)
Three Approaches to Valuation	106	(2)
Common Valuation Methods	108	(21)
Methodology Issues	129	(12)
Valuation of Other Assets	141	(3)
Discussion of Valuation Software	144	(1)
On-Site Inspection/Owner Interview	145	(20)
Appointment Scheduling	146	(1)
Computer System	147	(1)
Medical Records	148	(1)
Telephone System	148	(1)
Accounting System	149	(2)
Personnel	151	(1)
Fixed Assets	151	(1)
Inventory of Supplies	152	(1)
Marketing	153	(1)
Facility	153	(1)
Physician and Management Issues	154	(2)
Summary	156	(9)
Completing the Valuation Process	165	(24)
Reconciling Valuation Methods	166	(3)
Testing for Reasonableness	169	(2)
Applying Premiums and Discounts	171	(5)
Obtaining Client Representations	176	(1)
Reporting	176	(7)
Reviews	183	(1)
Other Issues	184	(2)
Summary	186	(3)
Sample Reports	189	(50)
Appendices	239	(30)
Glossary	269	(4)
Index	273