Business Valuation

VAI provides business valuations of healthcare entities and assets. These are frequently performed for acquisitions and joint ventures of medical groups, hospitals and health plans. We understand the unique operational aspects of different healthcare settings and know how to reflect these in our valuation models. This approach differs from that of large valuation firms who favor uniform application of methods in order to achieve a high volume of valuations.

Business valuation is the process of determining the value of an asset or business enterprise. Clinical entities can be complex and the approaches used will vary based on the nature of the entity. Valuing institutional facilities, provider practices and technical service entities all require an understanding of the unique operational characteristics involved in each.

VAI takes the time to understand the specific facts and circumstances of the business and the transaction event requiring the valuation. Our approach to this process is consultative in nature, and helps to guide our clients in achieving successful outcomes while remaining in regulatory compliance.

Medical Groups & IPAs

Medical groups require a close study of the physician workforce and a forecast of future clinical production. This requires an analysis of work relative value units produced by clinicians and assumptions of payer reimbursement rates by procedure code.

Surgery Centers

Surgery centers derive their revenues from technical services. An analysis of case mix and case rates by payer is required to get an accurate assessment of future surgical volume.

Management Service Organizations (MSO)

Management service organizations serve a variety of purposes, typically in support of the administrative functions of clinical entities. It is critical to understand the specific assets and services housed in the MSO. This may include all administrative staff, tangible assets and service functions (credentialing, billing, utilization management).

Hospitals

The valuation of a hospital may involve the valuation of the facility entity as well as real property.

Health Plan

Valuations of health plans and risk-bearing organizations require an understanding of the managed lives by plan and product type.

VALUATION METHODS & APPROACHES

There are three generally accepted Approaches to valuation, with multiple Methods falling under each approach. Conceptually all approaches and methods fall into one of two categories: Intrinsic-pricing and Relative-pricing models. Intrinsic pricing implies a valuation based on the inherent attributes of the business (cashflow generated). Relative pricing implies a valuation based on relative values used to compare (market prices).

Valuation Approaches

Income-Based Approach
Market-Based Approach
Asset-Based Approach

Common Valuation Methods

Discounted Cashflow Method (Income-Based)
Merger and Acquisition Method (Market-Based)
Cost Replacement Method (Asset-Based)