“I see 2009 as being an unbelievably exciting time in health care,” Cindy Collier, chief executive officer and founder of Cindy Collier & Associates Valuation Solutions located in Myrtle Beach, South Carolina, told Law Education Institute, Inc’s (LEI) 26th Annual National CLE Conference®. According to Collier, new technology trends are coming together at the same time as the incoming congressional and presidential administration, which should have “tremendous impact” on healthcare valuations.
One area to watch, for instance, is practice goodwill. Collier told the audience in Vail, Colorado, that she sees tremendous differences between medical practices that adapt new technologies, personnel, etc. to create a platform for transition and others that still focus on the physicians’ attributes and fail to develop the latest medical resources.
(To keep up with the latest professional and regulatory standards, consider BVR’s Guide to Healthcare Valuation, co-edited by Collier and Mark Dietrich, CPA, ABV. Thirty-five articles—from emerging trends in healthcare to choosing (and using) the right valuation methods and benchmarking data for physician practices—make this new, comprehensive resource a must-have for analysts who conduct or are considering healthcare valuations. For the table of contents and introduction, click here or to order click here.)
There will be pitfalls to navigate as well. Benchmarking for physician services continues to create a lot of confusion in the valuation industry, Collier explained. Valuation analysts are applying the data without always understanding “what it is and how to use it,” she said, cautioning BV practitioners to “Remember that when you’re benchmarking compensation, you need to make sure the benchmark and the reported compensation is within the relevant range of compensation that is subject to your report.”
Productivity is the most critical piece of compensation data. “The most common wrong assumption,” according to Collier, is to use median compensation when production (gross revenues, collections, types of procedures performed) for the subject practice may be in the 75th percentile. “It’s so important to know exactly what the practitioners do and how they use their staff,” she said.
Collier says she is also seeing a lot of valuation reports that assume the specific company risk is a certain number—which they use repeatedly. Too many analysts may still be pulling this number “out of the air,” she said. “That’s an area where we still need work.” In her healthcare engagements, Collier uses a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) to assess the practice and its particular risks. Plus, she spends at least half a day on site, talking to personnel, learning who does what, looking at the equipment, ascertaining procedures, physician and patient demographics, etc., in addition to analyzing key records (financial statements, tax returns, depreciation schedules) in line-by-line detail. “If they’re not generating the correct monthly reports, I’ll talk directly with the [systems provider] to make sure the practice is producing what it needs.”