Physician practices across the country are being increasingly acquired by private equity firms. Amidst escalating operating costs, most medical practices are turning to private equity firms to raise capital, just to keep the lights on. There is ongoing fragmentation in the physician practice market which gives raise to a lot of questions. The most pressing question being- How do you know the true value of a medical practice?
To maximize the purchase price it is essential for medical practice owners to understand how the valuation process works. This will ensure they don’t lose ground and get the highest valuation for their medical practice. A private investor’s major incentive in investing in a medical practice is its growth prospects. Private equity firms focus on making their acquired physician practices more profitable.
They evaluate several key revenue cycle metrics to understand the financial stability and revenue growth of the
medical practice.
Payer mix
Net collections
Aging AR
Patient volume
Denial overturn rates
Medical coding efficiency
Current technology and processes
Ensure that real estate information and building security protocols followed are clearly documented.
Tangible and intangible property information such as intellectual property, proprietary technology used and licenses should be disclosed to the PE firm.
It is essential to clearly document all information pertaining to internal and external audits and compliance programs in place.
Large acquisitions are made based on the number of physicians on board. Board certifications, NPIs information on nurse practitioners and physician assistants must be specified.
Insurance information related to any liabilities and contingency plans must be shared.
Operational information should include patient volume, number of new visits, revenue per physician, billing-related details, wRVUs, gross charges, charge information and internal and external coding and billing audit information.
maximize valuation:
It is best practice to hire a revenue cycle management provider while planning to raise funds. Most independent physician practices have small in-house medical billing teams. It can be difficult to analyze hundreds of disparate data points and create cohesive reports that clearly illustrate the financial performance of a physician practice.
Forecasting revenue growth for a medical practice is highly complex and involves a strong understanding of key financial ratios, ability to run test scenarios by adjusting variables, and clear-eyed insights into major growth drivers.
Times of transition can be exceptionally challenging. SolvEdge can help. Our breadth of experience in the healthcare industry and proven competence will enable your physician practice to get the maximum purchase price from private equity. Our RCM experts thoroughly analyze the various components of your revenue cycle and put together highly analytical reports with multi-level drill-downs.
We also assist physician practices surmount the staffing challenges, typically faced, following an acquisition. Our revenue cycle experts can help you manage productivity fluctuations and backlogs. We partner with medical practices and present them in the best possible financial light!
SolvEdge is your day one partner. Take your next big step with us.
Let us unlock the true value of your physician practice.