Physician Practice Acquisition Valuations – A Primer on Fair Market Value

Published by ByrdAdatto In the era of healthcare reform, physicians are increasingly choosing to merge or sell their professional practices to larger groups or hospital affiliated entities instead of navigating the increasingly complicated regulatory environment on a stand-alone basis. Beginning in 2010, the Affordable Care Act (“ACA”), the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), and the Centers for Medicare and Medicaid Services (“CMS”) have drastically reshaped the landscape of the insured population in the US and set in motion fundamental shifts in the way in which healthcare providers are paid for their services. Many solo practitioners are finding that the new regulatory environment has increased their administrative burden and are therefore increasingly considering selling or merging their practices as a way to remain competitive. When contemplating a transaction with a physician practice, the regulatory environment is not as straightforward as it used to be. The Stark Law (42 C.F.R. § 411.351), the federal Anti-Kickback statute (42 U.S.C. § 1320a-7b), and the Private Inurement Statute (Regs. 1.501(c)(3)-1(c)(2)) individually and collectively regulate the price at which a transaction can occur involving a physician practice and a larger physician practice, hospital, or health system (or other non-profit entities in the case of the Private Inurement Statute). Click to continue.