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Understanding a Medical Practice Appraisal
Dr. David Edward Marcinko; MBA, CMP™
By Hope Rachel Hetico; RN, CPH, MHA, CMP™
Much has been written, and much has been said about the goals, objectives, reasons, techniques and methodology used in professional medical practice appraisals, at the Medical Executive-Post.
And, even more actionable information is presented in our institutional 1,200 pages, 2-volume print guide Healthcare Organizations [Financial Management Strategies] http://www.stpub.com/pubs/ho.htm
In fact, this quarterly subscription journal, modestly priced at $525/year, contains more than 200 pages devoted to many sub-topics of this fluctuating and important practice management and financial endeavor. And, increasingly such detailed material is needed in the changing healthcare economic milieu http://www.stpub.com/pdfs/toc_ho.pdf
But, as a quick overview of a valuation report regardless of etiology, this checklist is an indispensable tool when pro-actively contemplating – or retro-actively reviewing – any medical practice appraisal engagement or practice worth analysis https://healthcarefinancials.wordpress.com/category/practice-worth
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Valuation Report Review Checklist |
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Does the report contain the following minimum criteria? |
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A clear description of the practice valuation assignment |
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a. |
The medical practice assets being valued |
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i. |
A description of the practice or medical partnership |
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ii. |
The size of the holdings |
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The restrictions or rights attached to the assets |
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b. |
The purpose and intent of the practice valuation |
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c. |
The valuation date(s) |
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d. |
The standard of value being used (e.g., fair market value, fair value) |
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A description of: |
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The healthcare entity or medical pratice |
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The form of the practice |
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ii. |
The history of the practice |
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iii. |
The services, specialty, markets, demographics and patients |
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iv. |
The practice’s management |
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v. |
The practice’s major assets [tangible and intangible] |
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The health industry and the local and general economy |
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Outlook for the local economy and the health industry |
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ii. |
Sensitivity to seasonal, specialty or cyclical factors |
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Marketplace competition |
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3. |
Financial analysis |
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a. |
Analysis of the practice’s financial statements |
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b. |
Adjustments to financial statements with explanations |
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c. |
Assumptions used in preparing economic projections |
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d. |
Comparison of practice performance relative to other specialties in its industry |
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4. |
Valuation methodology |
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a. |
Description of methodologies used and discussion of reasons for using them |
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b. |
Description of uses of discounts |
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c. |
Discussion of how capitalization rates and multiples of earnings were determined and used |
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Assumptions and limiting conditions |
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a. |
Statements of fact are true and correct |
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b. |
The valuation is the appraiser’s personal, unbiased, professional analyses, opinions, and conclusions |
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c. |
Statement by appraiser that he/she has no personal interest in the property being valued |
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d. |
Statement by appraiser that he/she relied on information supplied and did not verify it beyond the given |
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e. |
Valuation report is valid for the valuation date and purpose only |
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f. |
Not contingent on the outcome or disposition of the valuation |
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Does the report contain a logical progression leading to a conclusion? |
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Is the report signed by the appraiser? |
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Does the report include the credentials of the appraiser? |
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Conclusion
Remember, this is only the minimum data for analysis. And, although there are many reasons to have your medical practice appraised, and three major types of valuation engagements to obtain, the end result matters little if it is not read and understood within the context of its’ enterprise-wide applications. Therefore, your thoughts, opinions and experiences are appreciated?
Related Information Sources:
Practice Management: http://www.springerpub.com/prod.aspx?prod_id=23759
Physician Financial Planning: http://www.jbpub.com/catalog/0763745790
Medical Risk Management: http://www.jbpub.com/catalog/9780763733421
Healthcare Organizations: www.HealthcareFinancials.com
Health Administration Terms: www.HealthDictionarySeries.com
Physician Advisors: www.CertifiedMedicalPlanner.com
Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com or Bio: www.stpub.com/pubs/authors/MARCINKO.htm
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Filed under: Practice Worth, Surveys and Voting |
The Leading Business Education Network for Doctors, Financial Advisors and Health Industry Consultants 
Do Not Overpay for Physician Compensation
[Beware the IRS]
Recent industry surveys have reported that more than 75% of practices acquired fall short of projected productivity used in a valuation.
This fact coupled with exposure to IRS audit and intermediate sanctions has increased the need to value practices based on reasonable appropriate projections of practice collections and market rates for physician compensation.
Hope
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