Christina Rodriguez: In this segment we are talking to Christopher Majdi, with Medical Practice Appraisers and Transition Consultants.
Q: What is your background and qualification?
A: I am a Certified Healthcare Business Consultant and hold a Master of Science Degree in Healthcare Administration. I have been involved in the valuation, sale and financing of healthcare practices for 10 years.
Q: How are medical practices valued?
A: There are multiple approaches within Income, Asset, and Market-based approaches which are relevant to healthcare practices. Applying the proper approaches and methods is just the first element: There are vastly different dynamics which are relevant for different specialties. Service mix, payor mix, and reimbursement trends also vary by the medical market where the practice is located. We are experts in analyzing these items and can make the distinction, and translate this into a valuation opinion.
Q: What information is needed for an appraisal
A: Primarily historic financials and clinical data. The quality of reporting in each practice and facility we value is different. I need to dig deep to get the information I need to complete a credible analysis and report. And if we are valuing a practice for a sale, this is often the same information usually required by the buyer or a source of financing for due diligence.
Q: Are there any rules of thumb which can be applied in valuing a practice?
A: Short answer, no. The biggest problem I see is when appraisers try to make sweeping generalizations about health service disciplines. One example is vision care....I recently reviewed an appraisal written by a general business appraiser for an Ophthalmology practice, and the appraiser had used metrics pertaining to Optometric practices. You can see fallacy here and the danger in not being competent in your field. We only value healthcare practices, and we have a deep knowledge which distinguishes us.
Q: What do you anticipate the future of healthcare looking like?
A: There are a lot of naysayers who have been predicting the demise of private practices for years. I don't want to minimize the fears out there, but healthcare reform will touch every provider regardless of where they practice, and I would argue that there are a lot of private practices that will do very well in the future if properly positioned. The key to survival in the future of healthcare is being nimble.
Thank you for your insight Chris.