When valuation worlds collide: I-banker and HC attorney respond

BVWireIssue #110-2
November 9, 2011

When valuation worlds collide: I-banker and HC attorney respond

“First and foremost, let me be clear: I understand and respect the role that business valuation professionals play,” says R. Blayne Rush (Ambulatory Alliances), author of the article on ASC valuations that got some attention from ‘Wire subscribers last week. “I also respect and understand what point in the process that the sellers should involve one if their desire is to sell their surgery centers for the highest prices and best terms.” BV professionals interpret the market and I-bankers are “market makers,” Rush adds. “There are many different value worlds for an ASC; it all depends on the purpose of the ‘valuation.’"

Yet, “no one has challenged one of the biggest points of the article, and that is that market value (bona fide offers) can influence FMV,” Rush says. For example, if an ASC seller receives a bona fide offer, conservative or not, then any valuation professional who might be working on the transaction (on behalf of a hospital buyer or ASC management company), “should use that data in their fair market valuation,” Rush says. Thus, it’s to the owner’s benefit “to hunt down ‘any’ likely buyer prior to the hospital engaging a FMV professional.”

At the same time, says attorney Albert Hutzler with HealthCare Appraisers, Inc., “The Kosenske case makes it clear that FMV is not what the parties themselves agree to pay.” Admittedly, that is a Stark law case, which might not apply to an ASC purchase, Hutzler adds, “but it could apply if the doctors refer any ‘designated health services’ to the buyer (separately).” Moreover:

Even if Stark does not apply, the anti-kickback statute (AKS) still does, and though FMV is not absolutely required to satisfy AKS, it sure helps, as deals that are not FMV are considered to be evidence of payment for referrals and subject to much higher scrutiny. There have been numerous alerts from the Office of Inspector General (OIG) about sales of interests in business . . . for just this reason. The free-market economic value of a transaction is not the proper measure in the healthcare setting, which is hardly the free market [that the article] suggests, given that (i) there is a desire to separate medical decisions from financial considerations (which a free market cannot do); and (ii) the Federal government is the single largest buyer of healthcare services.

Healthcare Symposium renews its 2nd season: Undoubtedly, healthcare valuations are among the most complicated, requiring practitioners to keep current with regulations and techniques in that ever-changing world. Following a highly successful inaugural season, BVR has just launched the 2012 Online Symposium on Healthcare Valuation, a series of monthly presentations that will focus on valuing everything from hospitals, skilled nursing facilities, and medical labs to medical practices in marital dissolution cases. Tune in to the first session: Damages for Violating Noncompetes and Other Claims Involving Physicians, Hospitals & Healthcare Facilities, featuring series curator Mark Dietrich and Kevin Yeanoplos (Bruggeman and Johnson Yeanoplos) on Tuesday, Nov. 15.

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