Buying Physician Practice Medical Records - The Buyer's Decision Process
Darcy Devine • May 20, 2016
It used to be fairly common to discuss the value of a medical practice on a per chart basis. The practice's entire value was divided by the number of patient charts on the shelves - and that's how it was marketed and sold to potential buyers.
In today's world, there seems to be a lot of indecision about whether or not a buyer should even pay for medical records. Unless limited by law or other regulations, a buyer should identify and pay for assets (at a fair market value rate) that it wants to own post transaction. Not itemizing and providing consideration for an asset may cause confusion and problems between a buyer and a seller (especially if the seller works for the buyer) after the sale.
Just how valuable a medical record is depends on many different factors. From the buyer's standpoint, the value of a medical record is often related to the time and money he or she saves by having access to it. Many times, the buyer plans to convert the old system to a new system after the deal is done. But that doesn't mean the legacy system isn't valuable.
Needless to say, the decision process that a buyer uses to determine when and what it should pay for medical records can be complex, and old rules-of-thumb for medical records valuations are rarely applicable.
The infographic below summarizes some of the decisions that buyers have to make and the variables (paper versus electronic; cloud versus server; subscription versus perpetual license) that must be considered when determining the fair market value of medical records.
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:
