When Valuing Pathology Services - A Little Legwork Goes a Long Way
Darcy Devine • April 20, 2016
After 20 years of providing valuation services, I’ve concluded that no two pathology services agreements are exactly alike. In one, the hospital is buying a basket of professional services from a pathology group. In another, the hospital is buying a different basket of professional services while also selling something to the group. It’s like a Rubik’s Cube with a zillion different possible combinations. As a result, when valuing pathology services, an appraiser must first figure out who is buying what basket from whom. The second step is to determine what exactly is in those baskets—especially the big basket marked “PART A SERVICES.”
To help keep things clear, I recommend that the valuation deliverable include a detailed summary describing the services being provided under the agreement. The summary should include information about who is providing the services, the time and effort involved, and any sources of reimbursement for the services. Download the infographic for more details.
We ranked the 30 largest healthcare services and information technology deals of 2018, according to our database, by valuation multiple. The lowest reported price to EBITDA multiples (10x or lower, sorted alphabetically) are listed below.
We ranked the 30 largest healthcare services and information technology deals of 2018, according to our database, by valuation multiple.
We ranked the 30 largest healthcare services and information technology deals of 2018, according to our database, by valuation multiple. The highest reported price to EBITDA multiples (15x or higher, sorted alphabetically) were as follows:
Healthcare services organizations rely on a variety of intangible assets to create business value, including patient and customer relationships, medical records, trade names, assembled workforce, licenses and certifications, non-compete clauses, proprietary technology, software, and others.
For those of you who’ve been involved in a transaction where the only asset transferred is a certificate of need, you’ve probably found that market data is scarce for CON-only deals.
CON Laws, Scope of Practice Restrictions, and Provider Non-Compete Clauses Targeted in New Trump Adm
On Monday, December 3, 2018, the Department of Health and Human Services (HHS) – in collaboration with the Departments of the Treasury and Labor, the Federal Trade Commission, and several offices within the White House – released a report detailing recommendations for improving choice and competition in the healthcare industry.
One of the questions we get asked a lot is how valuations have changed over time.
One of the many benefits of tracking healthcare transactions closely and maintaining a very large database of deals where we can get reliable price to EBITDA and revenue multiples is that it provides insight into profit margins for segments where other financial benchmarking information is sparse.
The most important component of a valuation of an accountable care organization (or other multi-provider network that relies on risk-based shared savings models) is the revenue forecast, which involves “probability-adjusting” future shared savings payments in some manner.
CMS' offers a helpful online tool that shows provider market saturation levels at the national-, state-, and county-levels for the following health services:
