GOING BEYOND OTHERS' LIMITS
706.617.7182
Blog Layout
Consolidation Trends Impact Perfusion Services Appraisals
Darcy Devine • November 4, 2016
Hospital acquisitions of cardiothoracic surgery practices have changed the perfusion business. It used to be fairly common for private practice surgeons to employ the perfusion staff they work with in the operating room. However, as hospitals have bought out surgery groups and employed the surgeons, they have also taken perfusion in-house or outsourced it to private (not-physician-owned) perfusion companies. Based on classified ads being posted for vacant and new positions, it appears that hospitals and private perfusion companies are now doing most of the perfusionist hiring in this country.
As a result of this trend, opportunities to value perfusion services come along less frequently for appraisers than before. (Third-party FMV opinions for perfusion services are often requested by hospitals when the cardiothoracic surgery group has a financial interest in the perfusion provider.) When the opportunity does arise, an appraiser will be met with the same challenges that have always existed with these types of reviews - such as dealing with daunting medical terminology and inconsistent service offerings.
Overall, perfusion services agreements tend to be one of the more knotty types of agreements to review for FMV, and we believe the consolidation trend will make them knottier. First off, private vendors in this segment don't seem to publish pricing like vendors in certain other segments are starting to do. And, with more in-house arrangements, appraisers' proprietary transaction databases are drying up. Without good market data, appraisers valuing perfusion-related services will likely focus more heavily on cost or build-up methodologies that analyze and aggregate the value of component resources (labor costs, etc.).
Although a cost or build-up methodology is a reasonable approach, without market data it is hard for an appraiser to sanity-check his or her results. Plus, FMV determinations may be made without knowledge of or consideration for premiums and/or savings that vendors are passing on to their customers. All-in-all, perfusion definitely seems to be an area of the healthcare industry where consolidation has changed what appraisers are being asked to value and the valuation approaches that are being applied.
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:
