20. Industry Series 1: Healthcare Valuations: The New, the Old, and the Ugly

General Valuation
Field of Study: 
CPE Credit: 
Knowledge Level: 
Basic knowledge of, or general experience in, forensic accounting, business valuation, or litigation

Monday, November 5, 2018

With recent healthcare reform initiatives, a major paradigm shift is taking place in the healthcare industry, which not only impacts providers, but also their professional consultants. The passage and implementation of MACRA, as well as the cancellation, revision, and addition of value-based reimbursement (VBR) programs, is driving the future of how healthcare services are reimbursed in the U.S. healthcare delivery system. The historical tools (e.g., vertical integration, participation in the delivery of healthcare through medical directorships and other executive/administrative positions) utilized by providers in an attempt to play in a game (i.e., to be reimbursed for services provided) in which the rules are constantly changing are being challenged by government regulators who are basing their arguments on the concept, termed the Practice Loss Postulate, that the acquisition of a physician practice, which then operates at a 'book financial loss', is dispositive evidence of the hospital's payment of consideration based on the volume and/or value of referrals. Despite this uncertainty of the playing field (that is, the healthcare delivery system), the number of healthcare transactions continue to rise, providing increased opportunities for consultants and appraisers. These transactions must meet both the separate and distinct thresholds of Fair Market Value and Commercial Reasonableness. It is important that professional advisors understand not only the quantitative factors, e.g., monetary (cash) returns, but also the qualitative factors, e.g., the avoidance of cost and the generation of social benefit, when considering the Commercial Reasonableness of these transactions.
After this session attendees will be able to:
(1)   Identify challenges to providers under current value-based reimbursement programs and initiatives; (2) Learn established strategies to be utilized in overcoming these challenges faced by providers; and, (3) Define the Commercial Reasonableness threshold parameters as required by regulators and provide various qualitative and quantitative factors involved in considering the Commercial Reasonableness Analysis of the implementation of these strategies.