Throughout history, mankind’s ability to recognize patterns (especially potentially dangerous patterns) in the environment and respond quickly was crucial to survival. The study of evolutionary psychology describes how mankind has evolved into pattern-recognizing machines that connect dots and draw conclusions out of patterns we think we find in nature. In a similar way, hospital valuation… Read More

Healthcare Financial Reporting Over the past several years, M&A activity in the hospital sector has increased to a level not seen since the 1990s. The consolidations are being driven by many forces, not least of which is the Affordable Care Act (“ACA”), and much of this consolidation is occurring with not-for-profit health systems. As the… Read More

When it comes to compensating physicians for clinical-based services, hospitals have several choices. For the past several years, the work relative value unit (RVU) model has stood out as the model of choice. The basic premise of the model is to align physician effort (as measured by work RVU productivity) with compensation levels through use… Read More

A report released in mid-August by the Treasury revealed that the budget deficit has declined by 38% for the first 10 months of the government’s fiscal year when compared to a year earlier. The narrowing of the deficit is attributable to increases in revenue receipts and across-the-board spending cuts. In the first 10 months of… Read More

Unprofitable Hospital Valuation Influences The most widely recognized metric for valuing a healthcare service enterprise with multiple facilities is the Enterprise Value / EBITDA metric.  EV/EBITDA multiples of companies with a portfolio of facilities may not tell the full story of an enterprise’s value. Since non-profitable or break even facilities do not add to a… Read More

Physician Compensation Valuation For many appraisers, questions about the effective period of a valuation opinion are fairly uncommon. A business enterprise valuation for traditional purposes (i.e., transactional, tax, divorce, litigation, among others) is typically dated as of a specific point in time and based on data that is reasonably available as of the date of… Read More

As physicians continue to weigh the benefits and drawbacks of independent ownership and hospital employment, changes in the healthcare industry are gradually pushing physicians toward alignment with health systems. Data from the American Hospital Association has indicated that the number of physicians employed by hospitals has increased 34% from 2000 to 2010 and approximately 25%… Read More

Part One: Trend and Bend When I think of the trend and bend (or just bend), I’m always reminded of the classic line by Irwin M. Fletcher as aircraft mechanic G. Gordon Liddy “c’mon guys, it’s so simple, do you need a refresher course, it’s all ball bearings these days”. Neither the quote nor the… Read More

This outline is a brief summary of the tax amortization benefit (“TAB”) and how it is incorporated into business valuations. A brief history of the TAB will be provided, followed by the definition, followed by the formula to calculate TAB. We must then understand when utilizing TAB is appropriate. Upon understanding the history, calculation, and when to… Read More

In 2010, the Centers for Medicare and Medicaid Services (“CMS”) dealt cardiologists a significant cut in technical reimbursement for their primary in-office ancillary services (such as echocardiography, nuclear medicine, etc.). Further, CMS eliminated lucrative consultation codes replacing them with lower-reimbursed E&M codes. Given these reimbursement cuts, it would seem logical to observe a decline in… Read More