Archive 2010-23: Valuation of Physician Practices




Archive Webinar: 2010-23: Valuing Physician Practices

Panelist: Mark O. Dietrich, CPA/ABV

Webinar 23 Original Broadcast Date: March 16, 2010

Mark is an experienced negotiator, with numerous contract and merger and acquisition transactions to his credit, with values from under $1.0 million to
in excess of $100 million. These include capitation contracts with HMO’s, representation of physician groups in sale and affiliation negotiations with
Hospitals, Integrated Delivery Systems and Physician Practice Management Companies. He has also testified as an expert witness in civil and marital
litigation and qui tam matters.

Learning Objectives:

  • The participant will learn about what valuation approaches and methods work and those that don’t including inappropriate use of the cost or net
    asset approach
  • The participant will learn about the current wave of medical practice acquisitions
  • The participant will learn the rules established and hard lessons learned from the physician practice consolidation of the 1990s – some of which
    have been forgotten and, unfortunately, repeated
  • The participant will be given a summary of Mark’s forthcoming article on Technical Component Revenue (with Kathie Wilson, CPA/CVA) and its impact
    on reasonable compensation and personal and enterprise goodwill and various tax provisions that impact the valuation of physician practices

Webinar Outline:

  • Valuation approaches and methods and levels of reliance
    • Guideline company transaction method and supporting databases
      • Review and opinion of the healthcare transaction databases
      • Are transaction multiples any good
    • Discounted cash flow method
      • Rate of return inputs
      • Reliance on the past vs. projecting for the future
      • Regulatory affects on future cash flows
    • Capitalized earnings/cash flow method
      • Weighting of historical earnings – pros and cons
      • Is this method ever better than a DCF
    • Cost or net asset approach
      • When is it a good approach
      • When is it a bad approach
      • Relationship of net assets with cash flow availability and returns

• Hospital acquisitions of physician practices

o Why is the Cost Approach not appropriate for valuing intangible assets if there is no intangible value under the Income Approach

§ The IRS CPE Texts of the 1990s and the 2008 Derby case

o Inurement, Stark and Anti-Kickback risks

o When is a stock purchase treated as an asset purchase for tax purposes and how that impacts your valuation conclusion: section 337(d)(4)

o Why a cash-basis medical practice is converted to the accrual method upon transfer of 80% or more of its stock to an accrual method taxpayer:
section 448

o Working capital peculiarities that influence preparation of a DCF and assessing the presence of working capital excesses or deficiencies

• Technical component revenue

o What is technical component revenue

o How can you identify it and analyze it

o A quick review of RVUs: work, practice expense and malpractice

o What the heck is “incident to” billing and why does it matter

    • The impact on reasonable compensation for physician services and personal and enterprise goodwill: key factors in any valuation engagement

Included in this downloadable package are:

  • Audio/Video file
  • Webinar transcript
  • Webinar slides
  • Original Webinar handouts

The archive webinar is in a Adobe Presenter PDF file that allows you to view the video of the webinar with the synced audio so that you see the
presentation just as it was presented “live.” The Presenter format also allows for easy navigation through the webinar so you can quickly go to a
specific section in the presentation. To view the Webinar Presenter file, you must have Adobe Reader software version 9 or higher. You can download the
free current version of Adobe Reader at Please note that CPE is only available for live webinar broadcasts.

Additional information

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