The appropriate valuation approach for an oncology center (a medical practice that treats cancer) depends on the type of center it is, say Tynan Olechny and Will Hamilton (both with Pershing Yoakley & Associates). The two were speaking during a recent BVR webinar.

Three types: The oncology center could be a surgical center (e.g., removes a tumor), a medical center (one that administers drug treatments), or a radiation center (for radiation treatments). For example, the cost approach—and most commonly the net asset value (NAV) method—is most appropriate for medical oncology centers, they say. Insufficient cash flow for this type of practice makes the income approach challenging, and a lack of transaction data for similar entities makes the market approach a difficult one to rely on.

Olechny and Hamilton indicated that mergers and acquisitions, along with joint ventures, are being eyed by many oncology centers. They cited recent research from the State of Cancer Care in America 2015 (American Society of Clinical Oncology) that finds:

• 25% of oncology practices signaled they were likely to pursue hospital affiliations within the next year.

• 18% of oncology practices signaled they were likely to pursue affiliations with other private practices within the next year.

• 17% of oncology practices signaled they were likely to pursue affiliations with academic medical centers within the next year.

For more information, you can access a recording of the webinar, Valuing Oncology Centers, if you click here (purchase required).