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Top 10 Most Valuable Intangible Assets in Healthcare Services
Will Hamilton • January 3, 2019
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. Market data related to the value of these types of assets is scarce since they’re rarely sold separately, and when they are, the financial terms are seldom disclosed publicly.
One important public source of market data for many of these intangible assets are the valuations prepared for purposes of creating a post-transaction balance sheet in a business combination (aka a purchase price allocation). This type of analysis involves allocating the purchase consideration from a merger or acquisition to the individual asset categories, including identifiable intangible assets.
We maintain a database of intangible asset valuations from publicly available purchase accounting, including the relative value of each identified intangible asset of the acquired organization.
The following is a list of the top 10 most valuable intangible assets from our database, by industry segment, as a percentage of the business enterprise value. Per FASB, certain intangible assets, such as assembled workforce, are not recognized separately from goodwill in a business combination, and therefore have been excluded. Customer and patient relationships are typically not transferable on an individual basis, and have also been excluded.
- ACO/IPA/PHO Provider Networks: According to the sample in our database, at the median, over half of the value of an ACO, IPA, or PHO was attributed to its provider network.
- Hospital-Based Physician Group Facility Contracts: Hospital-based physician groups such as hospitalists, emergency physicians, anesthesiologists, and pathologists derive much of their value from their contracts and relationships with their facility partners.
- Radiation Oncology Certificates of Need: With only three radiation oncology CONs in our database, the sample size is small, but nearly 40% of the business enterprise value was attributed to the CON in these deals, at the median. This is significantly higher than the relative CON values for other segments such as IRFs, ASCs, or home health agencies.
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:
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:
Earlier this year, radiation therapy provider SightLine Health reached a $11.5m settlement with the DOJ in a lawsuit alleging it knowingly violated the federal physician self-referral and anti-kickback laws.
