What's Your Practice Worth Today?

Kenneth J. Terry, MA


September 04, 2009

In This Article

The Value of Primary Care

Michael La Penna, a healthcare consultant in Grand Rapids, Michigan, agrees that practice values have fallen in many areas, and he sees little value in primary care practices beyond their hard assets. Only "brand-name" specialty practices that earn substantially more than their peers are really worth much, he says.

Simons disputes this assertion, noting that primary care physicians are among the most highly recruited doctors, and that Medicare is starting to shift some money from specialists to generalists.

But La Penna points out that demand for primary care physicians may actually reduce the value of their practices. Where there's a shortage of primary care in a market, he says, hospitals may offer primary care doctors substantially more than they can earn on their own. As a result, the value of a practice diminishes because they and other physicians who want to earn more can simply go to work for a hospital. Also, where demand for physicians is high, it's relatively easy to start a practice, so doctors are less interested in buying an existing practice.

Specialty practices, on the other hand, may have substantial value because of their ancillary revenue streams and their value to hospitals, La Penna says. A well-established urology practice with lithotripsy equipment or a cardiology practice that brings in far more revenue than its competitors may be able to command a higher price than a lower-earning practice that is not considered a leader in the field.

Regional differences may also exist, he adds, because of the prevalence of managed care and certificate-of-need laws. "In Texas, an orthopaedic practice might be able to start a surgery center, while in Michigan, there's a CON [constitutional] law that prevents them from doing higher-end capital development. In New York, doctors can't really do anything because of the CON law."


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