Support our online development, and advance our onground research initiatives in free market economics, as we seek to showcase the brightest Next-Gen minds.
THE ME-P DISCLAIMER: Posts, comments and opinions do not necessarily represent iMBA, Inc., but become our property after submission. Copyright © 2006 to-date. iMBA, Inc allows colleges, universities, medical and financial professionals and related clinics, hospitals and non-profit healthcare organizations to distribute our proprietary essays, photos, videos, audios and other documents; etc. However, please review copyright and usage information for each individual asset before submission to us, and/or placement on your publication or web site. Attestation references, citations and/or back-links are required. All other assets are property of the individual copyright holder.
Understanding USPAP Standards
Dr. David E. Marcinko; MBA, CMP™
Hope R. Hetico; RN, MHA, CMP™
When a medical practice changes ownership, both the buyer and seller need to understand how industry regulation impacts practice value, as well as have an appreciation for accepted appraisal definitions and methodologies used by qualified appraisers to estimate value.
Uniform Standards of Professional Appraisal Practice [USPAP]
USPAP standards are promulgated to provide the minimum requirements to which all professional appraisals must conform. USPAP requires the three recognized approaches to value (the income, market, and cost approaches) be considered to estimate value.
History
In the fall of 1994 and 1995, the IRS first issued training guidelines pertaining to the valuation of physician practices. These guidelines suggest that appraisers consider all three of the general approaches to valuation as required by the USPAP.
Valuation Approaches
Specifically in transactions involving physician organizations, the IRS implied: 1. The discounted cash flow (DCF) analysis is the most relevant income approach. 2. The DCF must be done on an “after-tax” basis regardless of the tax status of the prospective buyer. 3. Practice collections must be projected for DCF based on reasonable and proper assumptions for the practice, market, and health industry. 4. Physician compensation must be based on market rates consistent with age, experience, and productivity.
Conclusion
And so, what is your experience with the above USPAP regulations, or are they new to you?
NOTE: For comprehensive institutional information on this topic, please subscribe to our premium, 1,200 pages, 2-volume quarterly print subscription guide: Healthcare Organizations [Financial Management Strategies] http://www.stpub.com/pubs/ho.htm OR www.HealthcareFinancials.com
Speaker: If you need a moderator or a speaker for an upcoming event, Dr. David Edward Marcinko; MBA is available for speaking engagements. Contact him at: MarcinkoAdvisors@msn.com
Share this:
Filed under: Practice Worth | Tagged: Health Law & Policy |
The Leading Business Education Network for Doctors, Financial Advisors and Health Industry Consultants 
USPAP does not require that all three approaches be utilized in all cases. Rather, an appraiser must use the approach(es) deemed applicable in a particular assignment, required to yield credible results.
Even if the IRS wants all three approaches, if one or more of the approaches is not relevant, it would be a violation of USPAP to use the inappropriate approach, as that could lead to assignment results that are not credible.
LikeLike
Sam may be technically correct in his comments above.
However, how does one decide what is most “appropriate” or “relevant.”
So, the IRS and USPAP guidlines must be used with care, medical experience and foresight. Excellent point, however. Feel free to visit these sites for additional info:
* National Assn of Independent Fee Appraisers
* National Assn of Review Appraisers and Mortgage Underwriters
* American Society of Appraisers
Good thoughts, all!
-Joe
LikeLike