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Understanding Goals and Objectives
By Dr. David Edward Marcinko; MBA, CMP™
By Hope Rachel Hetico; RN, CPHQ, MHA/MBA, CMP™
Much has been written, and much has been said about the goals, objectives, reasons, techniques and methodology of professional medical practice appraisals online 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 $535/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 valuation determinants, goals and objectives, 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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How to Determine the Kind of Medical Practice Valuation Required
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Determine the purpose for which the medical practice valuation is required. |
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No |
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Estate or Financial Planning |
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Is the doctor looking for a full or abbreviated report? |
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Is timing critical to the completion of the valuation? |
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Is value required for buy/sell agreement? |
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Does the buy/sell valuation meet the provisions of IRC §2703? |
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Is insurance being purchased based on business valuation? |
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Estate or Gift Taxes |
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What is the date of death or date of gift (and alternate valuation date)? |
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Be sure valuation uses the “fair market value” standard of value (for estate or gift valuations). |
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Sale of the Practice Business |
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Are valuation experts knowledgeable of industry transactions? |
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Is entire practice for sale or only a portion? |
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Is the doctor taking advantage of the annual $12,000 gift exclusions and lifetime exemption to get shares of stock into the hands of his or her family? |
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Be sure the appraisal of the practice is done with reasonable care to avoid penalties under §6662 of the IRC. |
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Recapitalization |
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Is recapitalization using a combination of preferred and common stock in the conventional preferred stock freeze scenario? |
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Does the recapitalization meet the provisions of §2701 of the IRC? |
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Be sure that the shares received in the recapitalization are equal in value to the shares being given up. |
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Divorce |
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Is adequate information available to the appraiser to complete the valuation? |
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Be sure the appraiser is knowledgeable of the court cases governing medical practice and related business valuations in divorce matters in the state in which the action is being heard. |
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If client or spouse is a partner in a professional practice, is the appraiser familiar with the valuation of professional and practice goodwill and how they apply in this particular case? |
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Shareholder Dispute |
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Be sure the doctor understands the rights of shareholders under the business corporation laws of the state of incorporation of the business. |
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Be sure appraiser is familiar with the court decisions involving dissenting shareholder actions in the state in which action is being heard. |
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ESOP |
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Has doctor engaged an advisor who is thoroughly familiar with the intricacies of ERISA and how they impact the establishment of an ESOP? |
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Is the medical practice appraiser experienced in the valuation of shares for ESOP purposes? |
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Is the doctor taking advantage of the tax deferment and other tax benefits available in a sale of his or her shares to an ESOP? |
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Incentive Stock Options and Phantom Stock Plans
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Is the doctor taking advantage of the benefits of stock incentive or phantom stock bonus plans available to key employees of closely held businesses? |
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Charitable Contribution
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If the doctor interested in donating company stock to charity, will the value be more than $12,000? |
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If donation of stock is worth more than $12,000, be sure the doctor obtains an appraisal from a qualified appraiser and signs IRS Form 8283. |
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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, the end result matters little if it is not 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: http://www.stpub.com/pubs/authors/MARCINKO.htm
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Filed under: Practice Management, Practice Worth |
The Leading Business Education Network for Doctors, Financial Advisors and Health Industry Consultants 
Dear Dave, Hope and ME-P
I once had a client, let’s call him George Farmer, a primary care physician in Florida, who learned something about practice valuation, terminology and accounting the hard way.
Dr. Farmer asked his accountant to appraise his business and, when he was ready to sell; his attorney brother-in-law drew up the sales contract for him. Farmer was pleased that the practice quickly sold for its full asking price.
What he didn’t know, but would soon discover to his horror, is that accounting value or “book” value — the figure his accountant gave him — is far different than the fair-market value [FMV] that he could have received for his long years of toil.
Was the CPA wrong? Not really. Was the doctor incorrect? No. Both were merely operating under a different set of terms and definitions, without knowledge of each other’s perspectives. Whether you’re valuing a practice for sale or considering becoming an owner, it is critical that you understand how medical practices are valued.
PS: I also gave him a copy of your dictionary series. It’s great for clients.
Lemont
[The Consultant]
http://www.HealthDictionarySeries.com
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