BVR’s Guide to Physician Practice Finance and Valuation, Fourth Edition

April 2024 Hardcover, PDF (594 pages)

Mark Dietrich

Business Valuation Resources, LLC

The Healthcare industry is as dynamic and ever-evolving as modern medicine is. BVR’s Guide to Physician Practice Finance and Valuation, 4th edition, isn’t just an update, it’s a completely reworked look at the key issues impacting healthcare valuation. Keep up on the latest insights relating to regulatory changes, insurance considerations, the lingering effects of both inflation and COVID-19, how Stark regulations influence the industry and much more! 

Garner expertise from renowned healthcare valuation thought leader Mark Dietrich's more than 45 years of experience through groundbreaking research, real-world examples, and in-depth explanations throughout the recently updated publication. The fourth edition, authored with edits solely by Dietrich, provides you with nearly two dozen illustrative exhibits and is ideal for healthcare administrators, appraisers, and attorneys with current and comprehensive "how-to" guidance on valuation approaches in this evolving industry. Ensure that your next valuation is every bit as dynamic as the healthcare industry itself!

  • Readily avoid common valuation mistakes and debunk myths of “survey says” surrounding physician compensation and ensure you use reliable methods for accurate valuations.
  • Efficiently navigate complex healthcare regulations and understand the impact of health insurance, Stark regulations, Medicare, Medicaid, and the Affordable Care Act on physician practice value.
  • Painlessly handle specific situations and get clear guidance on valuing practices for marital dissolution and tax purposes.
  • Master physician practice valuation methods and learn the market approach, discounted cash flow, and more to make the most precise valuations.
  • NEW! A chapter on calculating damages for lost income in physician disputes which will help you mitigate errors in measuring lost earnings and analyze how Current Procedural Terminology® codes are applied to physician compensation.
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  • Gain unrivaled insights with the author's 45+ years of medical practice valuation experience.
  • Expand your knowledge with a new in-depth chapter that covers a variety of issues specific to damages engagements involving physicians or their relationships with a practice or health system.  Various examples are provided to highlight common areas where mistakes are made in measuring such critical elements as “but-for” earnings or analyzing pre- and post-violation compensation.
  • Understand regulatory changes with a refreshed chapter that covers updated Patient Medical Records, HIPAA, and State Medical Records Law in Valuation and Litigation as well as a completely revised Case-Based Understanding of Valuation Issues Under Stark and the AKS 
  • Build your professional expertise with several chapters focusing on the selection and application of the correct valuation methods in a range of scenarios.
  • Master excess earnings and capitalization of cashflow methods with comprehensive explanations of these methods and why it is essential to ensure both values match.
  • Spanning 13,000 words and nearly two dozen illustrative exhibits, an all-new, comprehensive chapter examines the health insurance industry from the view of the payers (Medicare, Medicaid, commercial insurers), employers, consumers and physicians. 
  • Take a comprehensive look at the market concentration of insurers by state and metropolitan statistical area.

Goal of the Guide

Using the Guide

About the Author



Part I. The Healthcare Marketplace

Chapter 1. Overview

1.0 Introduction
2.0 Current Recruiting Data
3.0 Physician Compensation
4.0 Ancillary Investment
5.0 All Healthcare Is Local
6.0 Other Sources of Market Information in the Guide

Chapter 2. COVID-19, Inflation Impacts

1.0 Introduction
2.0 Impact of Inflation

Chapter 3. Regulatory Overview: Current Developments

1.0 Summary of the December 2020 Stark Regulations
2.0 Major Move by DOJ in Antitrust Area
Chapter 4. Healthcare Market Disruptors
1.0 Private Equity in the Market 
2.0 Growth of Urgent Care
3.0 Growth of Ambulatory Surgery Centers (ASC)
4.0 Hospital Employment of Physicians

Part II. Regulatory

Chapter 5. Understanding Health Insurance, the ACA, and Their Impact on Physician Practices

1.0 Introduction
2.0 Reform Components
3.0 Medicare National Coverage Determinations (NCDs)
4.0 Medicare Advantage
5.0 Medicare Accountable Care Organizations (ACOs)
6.0 Understanding Health Insurance Markets
7.0 ACA Insurance Market Changes and Expansion
8.0 Capitation
9.0 Medicaid Expansion
10.0 Chapter Summary
Appendix 1: State Breakdown of Insurance Coverage
Appendix 2: State Breakdown of Medicaid Model

Chapter 6. Patient Medical Records, HIPAA, and State Medical Records Law in Valuation and Litigation

1.0 Introduction
2.0 The Health Insurance Portability and Accountability Act of 1996 
3.0 State Laws on Maintenance and Disposition of Medical Records
4.0 Review of Valuation Issues
5.0 Conclusion

Chapter 7. A Case- and Settlement-Based Understanding of Valuation Issues Under Stark and the AKS

1.0 Introduction 
2.0 Principal Statutes Related to Valuation Fraud
3.0 Qui Tam Relators
4.0 United States of America et al ex rel. Parikh v. Citizens Medical Center
5.0 United States of America ex rel. Michael Reilly, M.D. v. North Broward Hospital District, et al.
6.0 Bradford Regional Medical Center
7.0 United States v. Campbell (Summary by Timothy Smith, CPA/ABV)
8.0 United States of America et al. ex rel. Thomas Reed Simmons v. Meridian Surgical Partners, LLC, et al.
9.0 Jennings v. Flower Mound Hospital Partners, LLC
10.0 United States of America et al. ex rel. David Barbetta v. DaVita, Inc.
11.0 United States ex rel Allison v. Sw. Orthopaedic Specialists, PLLC, et al.
12.0 United States ex rel Thomas Fischer v. Community Health Network, Inc.
13.0 Chapter Conclusion

Chapter 8. Understanding Physician Billing Codes

1.0 Introduction
2.0 RVU (Relative Value Unit) Analysis
3.0 Established Patient Office Visits
4.0 RVU Calculator
5.0 Analysis of Coding Issues
6.0 Modifiers
7.0 Surgical Practices
8.0 The AMA’s CPT® Book
9.0 Healthcare Common Procedure Coding System (HCPCS)
10.0 Conclusion

Part III. Valuing the Practice: Methodology

Chapter 9. Choosing and Using the Right Valuation Methods for Physician Practices

1.0 Chapter Introduction 
2.0 Market Approach: Alleged Comparative Practice Sales Method
3.0 Relative Value Unit (RVU) Analysis
4.0 Accounts Receivable
5.0 Physician Practice Discount and Capitalization Rates
6.0 Discounted Cash Flow (DCF)
7.0 Terms Make the Deal
8.0 Chapter Summary
Appendix 1: Checklist of Factors to Consider When Evaluating Relevance of Out-of-Market Transactions
Appendix 2: Fair Market Value: A Complicated Standard

Chapter 10. An In-Depth Review of the Correct Use of the Excess Earnings and Capitalization of Cash Flows Methods

1.0 Introduction
2.0 Net Tangible Assets
3.0 Use of the Capitalization of Cash Flows in Conjunction With the Excess Earnings Method
4.0 Conclusion
5.0 Control Adjustments to the Excess Earnings Valuation Model?
6.0 Cost of Capital
7.0 Chapter Conclusion

Chapter 11. The Cost Approach and the Debate About the Value of Intangibles Not Supported by Cash Flows

1.0 Introduction
2.0 Context
3.0 Actual Transaction Terms Define the Characteristics of the Appraisal Subject
4.0 Application of the Income Approach
5.0 Application of the Cost Approach in Valuing Intangible Assets
6.0 Application of the Asset-Based Approach
7.0 Application of the Market Approach
8.0 Reconciling Value Indications From the Approaches to Value
9.0 Arriving at a Conclusion of Value
10.0 Correctly Estimating Liquidation Values
11.0 Conclusion
Appendix. Assessing Intangible Value in a Physician Practice Acquisition

Part IV.  Valuing the Practice: Compensation

Chapter 12. Understanding Physician Compensation Plans

1.0 The Engine That Drives the Practice
2.0 Productivity-Based Compensation Formulas
3.0 Equal Compensation Models
4.0 Straight Salary or Fixed Compensation
5.0 Other Factors in Allocating Compensation
6.0 Chapter Conclusion
Appendix: Compensation Plan Illustrations

Chapter 13. Debunking the Myth of ‘Survey Says’

1.0 Executive Summary
2.0 Introduction
3.0 Failings of the Surveys
4.0 Myths of Physician Mobility
5.0 Impact of Local Supply, Demand, and Cost of Living
6.0 Physician Distribution, Mobility, Fair Market Value, and Compensation Surveys, Part 1
7.0 Physician Distribution, Mobility, Fair Market Value, and Compensation Surveys, Part 2
8.0 Geographic Concentration of Physicians and Disparity in Insurer Payments
9.0 Chapter Conclusion

Chapter 14. Using Work RVUs to Establish Fair Market Value of Physician Compensation

1.0 Introduction
2.0 The RVU Method
3.0 Regulatory Impact
4.0 Conclusions and Recommendations
Appendix. RVU Method Example for an Orthopaedic Practice

Chapter 15. Reasonable Compensation and Personal Goodwill for Physicians Under the Internal Revenue Code

1.0 Overview 
2.0 General Factors in Assessing Reasonable Compensation
3.0 Independent Investor Standard of Exacto Spring (aka Heitz)
4.0 Mulcahy, Pauritsch, Salvador
5.0 Who Owns the Intangible Assets?
6.0 Specific Intangible Assets
7.0 Norwalk v. Commissioner
8.0 Martin Ice Cream
9.0 Larry E. Howard
10.0 Mathews v. Commissioner
11.0 H&M Inc. v. Comm’r
12.0 IRS Technical Advice Memo 200244009
13.0 Specific Case Law Involving Physician Compensation
14.0 Factors Specific to Tax-Exempt Entities
15.0 The IRS Exempt Organization Division Continuing Professional Education Texts
16.0 The Derby Case
17.0 Physician-Specific Factors in Assessing Reasonable Compensation
18.0 Impact of Noncompete Agreements
19.0 Trade Secrets and Similar Provisions
20.0 Applying the Independent Investor Test to Physician Practices
21.0 Understanding and Documenting the Reasonable Compensation Analysis
22.0 Payer Contract Rates for Services
23.0 Return on Labor and Return on Investment in the Final Analysis
Appendix. Analyzing the IRS Reasonable Compensation Job Aid for IRS Valuation Professionals

Part V. Special Issues and Situations

Chapter 16. Identifying and Valuing Noncompete Agreements and Personal Goodwill

1.0 Introduction
2.0 Enforceability of Noncompetes
3.0 Reasonable Compensation
4.0 Categories of Intangibles
5.0 Mechanics of Valuation
6.0 Payment Terms and Probability of Competition
7.0 Key Conclusions

Chapter 17. Buy-Ins, Buyouts, Owner Agreements, and Other Types of Valuations

1.0 A Series of Group Practice Buy-In Considerations
2.0 Reality Checks
3.0 Solving the Two-Person Practice Buyout Dilemma
4.0 Strategies for Creating Merger Value
5.0 Structures for Successful Mergers
6.0 Concierge/Membership Practices
7.0 Chapter Summary

Chapter 18. Valuations for Marital Dissolution

1.0 Introduction
2.0 Case Law
3.0 Chapter Conclusion

Chapter 19. Damages for Lost Compensation, Lost Profits, and Violation of Noncompete Agreements

1.0 Overview
2.0 Basic Factors to Consider
3.0 Other Issues in Measuring Damages
4.0 Conclusion

Glossary of Terms