What's a Medical Practice Worth?

The most important variable when evaluating a medical practice is physician compensation. If you can isolate the cash flow that is paid to you as an owner of the practice versus an employee of the practice that is the Achilles heel of this valuation. Medical practices sell for 35x multiple on earnings. 3x when the practice is specialized, and more towards 5x when the practice is internal or family medicine.

Lower multiples within that range might be seen in a medical practice consisting of older physicians in a specialty affected by managed care, for example, whereas a valuation of a practice consisting of younger, primary care practitioners who will benefit from managed care might use a somewhat higher multiple. Medical practice owners are not seeing the traditional financial returns they’d seen in the past. That leaves an opening for private equity that can acquire say, a hundred practices and in theory, achieve the economies of scale inherent in a larger organization.

Things like bulk purchasing, insurance, centralized billing, and IT services, all make physicians practice ideal targets for the right acquirer.

If you like what you heard, be sure to subscribe!

I am starting this channel to educate people on valuations and how to use them to their advantage. 

If there is a topic that is of interest to you please comment below and I will do my best to give you the latest and greatest on it.

Bharat Kanodia, ASA 
Bharat has valued over 2000 businesses, real estate, industrial, and financial assets including governmental infrastructure, public and private companies, and various unique real estate assets. He has signed off on over 4,500 valuations with $2.6 trillion in assets globally. Bharat lives in the San Francisco Bay area with his family and enjoys sailing, golfing, skiing, and horseback riding. 

DON’T FORGET TO FOLLOW:
INSTAGRAM:   / whatsitworthtv  
WEBSITE: http://www.veristrat.com
FACEB00K:   / whatsitworthtv  
LINKEDIN:   / veristratinc.  

EPISODE 4 BLOG: https://www.veristrat.com/blogvaluat...