Goodwill value of medical practices istrending down

BVWireIssue #121-4
October 24, 2012

Intangibles as a percentage of total purchase price for medical practice and related industry businesses (those in SIC 80, generally) have decreased over the past 12 months, according to Charles Wilhoite (Willamette Management Associates), who also spoke at the ASA’s recent confab in Phoenix. One explanation for the downward trend: As more hospitals and other large providers acquire medical practices, patients have become less loyal to a particular physician and learned to adjust to a new insurance plan. As the patient base becomes less stable, less value is attributable to the professional goodwill of any medical practice—not just those subject to acquisition.

Other trends in the medical practice industry include:

  • Higher debt-to-equity ratios;
  • Slower growth; and
  • Lower profits, due in part to the impact of physician compensation (and what else the owners might have taken out of the business).

Get current on all the trends and valuation techniques. On October 30, join Timothy Smith (Touchstone Valuation) for Valuing Physician Employment Arrangements, Part 10 of BVR’s Online Symposium on Healthcare Valuation. As hospital-physician integration increases, new studies are questioning many of the traditional methods and assumptions when valuing current physician compensation/employment arrangements under an FMV analysis. Smith will review this new data in depth to provide current best practices.

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