Pediatric Practice Valuation Service

 

Valuation Framework:

PMI works with clients on a regular basis to address concerns in a practical way.  The framework is very simple:

  1. The practice determines a fair formula/methodology to establish the practice’s value based on a variety of cultural and operational factors;

  2. Once the methodology is approved, specific financial data is used to calculate the value;

  3. Each year the practice updates the previous year’s financial data knowing that any buyout that occurs during the subsequent 12 months will be paid based on the amount agreed upon by the shareholders. 

Because PMI works exclusively with Pediatric practices from around the country, we have been a part of every imaginable practice valuation method being used.  If you need help determining the value of your practice, please contact PMI. 

Our standard practice valuation package is $1,250 and includes:

  1. Initial consultation with the practice representative;

  2. Review of financial data and calculation of practice value;

  3. Follow-up discussion with practice representative to review how the valuation was determined.

PMI also provides mediation services between partners to act as a third-party and resolve concerns individually with each shareholder during this process. 

 

Valuation Philosophy

The approach PMI takes to determine the value is to establish the added benefit of owning the practice instead of being employed.  For example, if a shareholder makes $250,000 for a given year and an employed physician at the same practice makes $180,000, the added benefit for owning the practice is $70,000.  

Much like the stock market, PMI's approach projects this value by a multiple of years.  While Apple, Chevron and Microsoft stock prices may be based on the expected 10-15 years of earnings, PMI remains conservative with a multiple of 1-2.5 years projected earnings when valuing a medical practice.  In the same example used above, the benefit of owning the practice is $70,000. Multiplying that for 1.5 years shows a value of $105,000. Add to that the value of your practice equipment and deduct the practice’s outstanding liabilities to finalize a practice value.

 

Valuation Considerations

There are a variety of adjustments in the formula that may need to be made, including:    

  • Taking average shareholder salary for the previous 2 or 3 years;

  • Adjusting Average Shareholder Compensation based on whether Meaningful Use or PCMH  monies that have already been received;

  • Adjusting Average Shareholder Compensation based on whether the shareholders may have previously taken lower salaries to fund practice projects that are expected to generate additional earnings in the future;

  • Adjusting the Years of Projected Earnings or Average Shareholder Compensation to account for upcoming large capital expenditures;

  • Adjusting for a variety of nuances in the shareholder compensation formula. Other Shareholder Concerns.

 

Qualified consultants are available for mediation on a wide spectrum of issues facing Pediatric organizations. Many Pediatric practices from around the country rely on PMI to help them navigate the valuation and physician shareholder process. Feel free to contact us if we can be of assistance to you, too.

 

11206 Sunlit Bay Drive

Pearland, TX 77584

Phone: (888) 253-0413

Fax: (281) 377-5939

© 2018 Physician Intelligence, LLC