Mark O. Dietrich, CPA/ABV is a summa cum laude, Beta Gamma Sigma graduate of Boston University where he also earned an MBA with high honors; he holds a Master in Taxation degree from Bentley College as well. Mark’s web address, www.cpa.net, is the leader in medical practice valuation information. In addition to being Technical Editor and co-Editor of this Business Valuation Resources Guide to Healthcare Valuation, he is a contributor to other BVR publications including the Goodwill Guide and Lost Profi ts Guide. Mark is author of the Medical Practice Valuation Guidebook, co-author of PPC’s Guide to Healthcare Consulting, a contributor to PPC’s Guide to Business Valuation and author of more than 100 articles on valuation, taxation, managed care and the healthcare regulatory environment in the Journal of Accountancy, CPA Expert, Business Valuation Review and the ABA’s Health Lawyer, among others.

Cindy Eddins Collier, MHA, MSA, CPA/ABV/CFF, CVA, CMPE, is the Chief Executive Officer and Founder of Healthcare Valuation Solutions located in Myrtle Beach, SC, which provides valuation and strategic fi nancial management consulting services to health care companies throughout the United States. Professional consulting services focus on health care business valuation, fair market valuation of physician services, valuation of intangible assets, economic loss assessment, health care business accounts receivable management, mergers & acquisitions, fi nancial analysis and research, strategic management, physician integration, purchase and/or sale of medical practices, medical device companies, long-term care companies, and hospitals, and litigation support. Clients include a variety of physician practices, ambulatory surgery centers, dental practices, long term care businesses, dental practices, university and community hospitals, integrated delivery systems, medical device companies, healthcare technology companies, medical service providers, pharmaceutical and biotech companies, professional associations, attorneys, consultants, and managed care payers.

10/05/2009
More Thorough Medical Practice Valuation Includes Goodwill and Other Assets

Pearlstein v. Pearlstein, 2009 WL 1272410 (Ohio App. 11 Dist.) (May 8, 2009) In this case, the husband owned a 25% interest in a medical practice that was some 50 years old. Both parties presented qualified experts at trial, who considered the accounts receivables, patient records, equipment, furnishings and lease rights, as well as net tangible assets. They both valued the practice under a capitalization (gross account receivables) approach. Only the husband’s expert valued the practice under the market and income (excess earnings) approaches.

In particular, under the excess earnings approach, the husband’s expert valued the doctor’s 25% interest at $256,000. Since he believed that revenues would remain relatively stagnant while expenses increased, he discounted for any future growth rate (the court opinion does not reveal what percentage he used) and applied an overall negative value to earnings. Read more

10/05/2009
Doctor Tries to Avoid Divorce Valuation of Practice in S/h Dissolution Suit

Like so many owners of professional practices, the four doctors in this case spent about 30 minutes discussing and drafting the provision of their partnership agreement that determined a repurchase formula in case a physician left. However, 20 years later when it came time to repurchase the retiring doctor’s stock, they could not agree on its interpretation. Read more

Often the most important variable in a business appraisal assignment is the selection of what constitutes reasonable compensation for employee-owners. For closely held businesses, in many instances, no single operating expense impacts the bottom-line profit as much as officers’ compensation. Clearly, an expense that is discretionary to the owner in terms of its magnitude, timing and method of payment, may represent not only compensation for services rendered, but may also be a disguised dividend or a distribution of profits. The amount of profits determined to be “reasonable” for tax reporting purposes can easily be manipulated by adjusting officers’ compensation.

This article is intended to provide fundamental guidance for practitioners whenever employee-owner compensation is subject to review and adjustment.
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