This presentation discusses hot topics in Healthcare Valuation. Learn more at http://www3.cbiz.com/valuationgroup

1. Hot Topics in Healthcare Valuation
PRESENTED BY:
Dave Thompson, Managing Director
Kevin Walker, Managing Director

2. • National scale and resources with local presence
– 5,200 associates
– 19 major markets
– 140 offices in 36 states
• 72 MMP offices
About CBIZ

3. • CBIZ is one of the nation’s largest…
– Accounting providers, as ranked by Accounting Today
– Benefit Specialists, as ranked by Business Insurance
– Brokers of business insurance, as ranked by Business Insurance
– Valuation companies
About CBIZ

4. CBIZ Healthcare Valuation Depth of Services
• Allocation of purchase price studies
• Annual cyclical insurance appraisals
• Breach of contract
• Certificate of need
• Compensation modeling
• Fair market value rent analysis
• Fair market value under Stark Law
• Insurance valuation for risk management
purposes
• Joint venture/leasing arrangements
• Litigation support/dispute resolution
• Management service agreements
• Mergers, acquisitions & joint ventures
• Physician compensation
– Call, medical director, stipends, clinical services
• Property records & reconciliation
• Purchase price analysis
• Real estate valuation
– (hospitals, MOBs, ASCs, etc)
• Reimbursement analysis
• Shareholder disputes
• Shareholder litigation
– Fraud; breach of fiduciary duty in the agreement
to buy/sell

5. • Business Valuation and Fair Market Value Analysis
• Litigation support
• Hospital Physician Alignment Strategies
• Physician Joint Ventures and Employment Models
• Compliance, Billing and Coding Reviews and Education
• Due Diligence Reviews
– Physician and Specialty Hospital Transactions
• Medical Staff Development
• Attestation on Projections for Joint Venture Offerings
CBIZ Healthcare Division Services

6. About Our Professionals – Dave Thompson
• Development of physician compensation formulas, incentive
plans, contractual agreements and conflict resolution
• Valuation of physician practices
• Valuation of clinical co management agreements
• Valuation of joint venture entities such as imaging centers,
surgery centers etc.
Dave Thompson is a Managing Director of the Healthcare
Division of CBIZ MHM. He provides consulting services to
physician practices, hospitals and other healthcare providers
as they develop strategies for changes taking place in this
volatile healthcare marketplace.

7. About Our Professionals – Kevin Walker
• Development of physician compensation formulas, incentive
plans, contractual agreements and conflict resolution
• Valuation of physician practices
• Valuation of clinical co management agreements
• Valuation of joint venture entities such as imaging centers,
surgery centers etc.
Kevin Walker has over 25 years of experience in healthcare finance and
consulting. He spent six years with a major public accounting firm auditing
healthcare entities, twelve years working in operations, administration,
accounting and finance roles for large physician practices and now focuses
much of his time on valuation of medical practices, the evaluation and
development of physician compensation and incentive plans, and
consultation to health systems who are integrated or look to integrate with
and/or employ physicians. Kevin also consults with physicians regarding
practice mergers, health system integration and transition planning.

8. General Overview – Business Valuation &
Compensation Valuation
• Rev Ruling 59-60
• General Market Value
• Stark
• Anti Kickback
• IRS – Tax Exempt Status
Fair Market Value
“Not been determined by any manner that takes into account volume or value of
anticipated or actual referrals”

9. General Overview – Business Valuation &
Compensation Valuation
• Not explicitly defined
• An arrangement is generally considered commercially
reasonable if it is a sensible, prudent business
arrangement from the perspective of the parties
involved, even in the absence of potential referrals.
Commercial Reasonableness

10. General Overview – Business Valuation &
Compensation Valuation
• Understand what we are valuing
• Consider
– Income – sum of present value of expected future benefits
– Market – comparison to what is actually being paid in the
market place
– Asset (cost) approach – value of underlying assets or
resources
High Level Requirements:

11. • Market Approach
– Results in practice incurring a loss when applied using income
approach
– How is difference reconciled?
– How does attorney know which value can be relied on?
• The Seller (physician practice)
– Recognizes hospital will realize substantial upside when
converts to ancillary profits to provider based billing and wants
that considered in the valuation
Common Issues – Appraisers & Attorneys

12. • Can value be assigned to intangible assets if the
discounted cash flow method results in a value of zero?
– Workforce
– Charts
• Can future ancillary business be considered in the cash
flows when considering the Discounted Cash Flow
method of determining FMV?
Common Issues – Appraisers & Attorneys

13. • Can Business Valuation be determined on an income
approach and the Compensation be determined using the
Market Approach?
• Impact of Stacking on a FMV analysis
• Understanding the proper use of Market Data
– Should you use local, regional or national data?
Common Issues – Appraisers & Attorneys

14. FMV & Commercial Reasonableness
• Considers that all business transactions must aid
organizations in accomplishing their strategic,
operational and/or financial objectives
• Considers the aggregate terms of the overall
arrangements and asks the question: “Does this deal
make sense”?
Commercial Reasonableness

15. • Commercial reasonableness assesses the overall
management, including qualitative considerations such as
strategy and operations
• Fair market value primarily assesses the financial aspects
of the arrangements (range of dollars only)
Summary

16. • Management
• Outside Valuator
• Attorney
Responsibility of the Parties