Book Review: Guide to Healthcare Valuation (2010 Edition)

I am currently reading the Guide to Healthcare Valuation (2010 Edition), published by Business Valuation Resources (BVR) and the American Health Lawyer’s Association (AHLA). This is a great resource written by Dietrich and a number of other experienced authors. They cover a wide array of healthcare valuation topics and industry subsectors; it’s hard to find this collective wisdom all in one place. The book is thick…921 pages inclusive of appendices. A valuation book of this size typically means you’re in for a monster technical read, but this book is refreshingly different. There are plenty of practical insights and applications offered by multiple authors over diverse chapters. I was impressed by the 2009 edition of this book, which I would also recommend, and the 2010 edition clearly builds on the first issue in a major way. As I get through more of the book I’ll update this blog with reviews about specific topics and chapters. I’m especially looking forward to the chapters devoted to ambulatory surgery, dialysis, home health, and imaging. Stay tuned.

Timing the selling process can make (or break) the deal

Proper timing of the selling process is hardly a new topic of discussion but is an area which is extremely important in achieving the successful sale of a medical office. Unfortunately, timing is a factor which is often overlooked and can be extremely detrimental to marketability and practice value if executed improperly. Practice sale situations are commonly driven by other factors within a larger transition plan for the retiring doctor. It is imperative that the practice be brought to market early enough to achieve the objective. While timing to market may not guarantee that the clinic will sell, it can increase the probability that full value can be realized. Even small, marginally profitable practices can have inherent value which can may be capitalized upon if priced and marketed properly. The most unfortunate cases of ill timing occur when mature, premium practices lose tremendous value. This can occur when sellers hold out too long to bring the practice to market, wait for "perfect deal" to materialize (which may never occur), or simply get burned out and lose the desire to maintain the practice at full productivity. While a practice in decline may still attract a Buyer, the Seller will need to make an appropriate discount to asking price and recognize that obtaining financing for the acquisition will be much more challenging. Overall it is important for Sellers to 1) Prepare the practice for sale in advance 2) Bring the practice to market in a timely manner 3) Maintain the business at full capacity throughout the process 4) Be flexible in a buyer's market 5) Be willing to act when a good selling opportunity presents itself 6) Rely on a trustworthy sales adviser and be willing to take advice. The transaction process is not perfect, but a successful outcome is more likely when the a proper approach and mindset are brought into the selling process.

Forbes.com - The Worst-Paying Jobs for Doctors

An article from Forbes.com regarding the disparity in pay between primary care physicians and specialists: physician employment. This article also discussed student loans which are posing a potential burden on physicians who enter the workforce. Some of the salary data which I've observed myself in the field is even lower than the amounts cited in the article: "At $180,000 for pediatricians and $175,000 for family practitioners, primary care providers make an awful lot less than the typical orthopedic surgeon, who makes $519,000, or a urologist, who earns $400,000, according to the Merritt Hawkins data. That disparity has contributed to a serious shortage of primary care doctors. The American Medical Association predicts a shortage of 35,000 to 40,000 primary care physicians by 2025." Much of the same information regarding physician pay and physician supply has been covered in a variety of media outlets. From my perspective, all of this information is interesting to note as it relates to the value of physician practices. I see truth to these concerns but the overall doom-and-gloom which is preached when it comes to the appraisal of medical clinics is blown out of proportion (in my opinion). There is such a wide range of variation as it relates to specific practices and regions that it's impossible to apply these broad observations of american healthcare to every practice in this country. That's where an appraiser's competency plays a role in determining the degree to which these variables apply to the specific project.