What's Your Practice Worth Today?

Kenneth J. Terry, MA

Disclosures

September 04, 2009

In This Article

Introduction

Between the recession and proposed healthcare reform, many physicians wonder whether their practices would have much value if they decided to sell them. Experts agree that well-established practices with solid revenues are still worth more than the value of their hard assets. Opinions differ, however, on how much practices are worth and whether that worth is headed up or down.

Overall, reimbursement cuts and an increase in the number of physicians seeking employment have depressed practice values. But the competition of hospitals for market share and their efforts to lock in physicians in preparation for changes in Medicare payment policies have supported practice worth in some areas.

Practice values vary in different markets, and the acquisition strategies of local hospitals explain most of these differences, says Alan B. Simons, a Philadelphia-based principal in the healthcare valuation practice of LarsonAllen LLP. Where hospitals are competing for market share, he says, "Values are being pushed higher. In less active markets, practice values are fairly minimal."

Stephen Messinger, a principal with ECG Management Consultants in Arlington, Virginia, disagrees. "Because of regulatory requirements, there's been little upward pressure in practice valuations, despite the fact that we're seeing more and more physicians being hired by hospitals and big groups. Part of the reason is that we're not usually seeing the bidding wars that we used to see for practices."

Across the country, there is downward pressure on practice values, partly because of reimbursement cuts by Medicare and private payers, Messinger says. The shakiness of their income stream is driving more physicians to seek hospital jobs "to get a steady paycheck," Messinger says. "The growth in supply of physicians seeking employment is having a suppressive effect on the market for medical practices."

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