Issue 04 - Medical & Allied Health Services
If you are working in a medical practice, or have the opportunity to purchase an equity stake in a medical practice, it is imperative that you have an understanding of its business value.
A medical practice in many ways is just like any other business. A well run and profitable medical practice will be a source of future profits, and those future profits will have a present day value.
Understanding and measuring this value can assist in important decision making scenarios such as:
- Preparing a business for sale
- Succession planning including entry and exit of equity holders in the business
- Planning to acquire a new business
- Obtaining additional finance and assessment of lending capability
- Retirement planning following the sale of a business
The fair market value of any business is simple enough to describe. It is the agreed price upon which a knowledgeable and willing, but not anxious, buyer would pay for a business from a knowledgeable and willing, but not anxious, seller. How that price is actually calculated in practical terms is not so simple.
Unlike the market for most consumer goods, each business is uniquely different and therefore may result in vastly different valuations.
Factors which can influence the business valuation of a medical practice can include:
- The geographic location of the business including visibility to traffic, adequacy of parking, and aesthetic & professional presentation
- Quality and tenure of employees, particularly any professional staff or practice managers
- Goodwill and brand recognition for the name of the practice
- Efficiency of systems and processes which translate into greater net profit
- The state of equipment used and need for major repair or replacement
Unlike the market for real estate, there is little publically available information regarding business sales, especially in the small-medium business sector. Therefore it is difficult to benchmark your valuations against "similar" businesses. Two businesses which from the outside may appear similar could have different valuations based on details which would only become apparent during an in-depth review of business systems and financial performance.
There are many ways in which a business can be valued, the most common of which is by multiplying the businesses Future Maintainable Earnings (FME) by a Capitalisation Rate (or multiple) which reflects the ongoing risk of the business achieving the FME. If you are seeking to grow the value of your business there are only two ways this can be achieved:
- Increase your Future Maintainable Earnings:
- Grow revenue through expansion, organic growth or acquisition
- Reduce costs and increase efficiencies to increase profit
- Reduce your risks to increase your Capitalisation Rate:
- Review and implementation of systems, policies & procedures to ensure business consistency
- Engage in marketing to build brand goodwill
- Maintain the state of your premises and equipment
- Invest in and develop your team members
If you would like to find out more regarding the value of your business, and discuss ways in which you can grow this value, please contact Brentnalls SA to discuss a Business Value Assessment.
The Government has released its response to the National Mental Health Commission's Review of Mental Health Programme and Services. The response sets out a reform package aiming to place individual needs of patients at the centre of the mental health system. The reforms focus on a number of concrete actions:
- Contestable mental health services will be commissioned, not delivered, through the recently established Primary Health Networks (PHNs);
- Coordinated packages of care will be created for people with severe and complex needs and flexible support for mild and moderate needs;
- A new Digital Mental Health Gateway will optimise the use of digital mental health services;
- A new approach to suicide prevention,
co-ordinated by PHNs.
The reforms will be rolled out over a three year period between 2016 and 2019 and delivered within the existing funding. These reforms create a high degree of uncertainty for the mental health providers who rely on the funding from the Better Access and Mental Health Nurse Incentive Programs.
Click here for full report or fact sheet.
It has been reported by Australian Doctor that the Primary Healthcare Advisory Group's reform paper is expected to be forwarded to the Federal Health Minister very soon. The report will be a blueprint for the future funding of GP chronic disease care and the core elements are expected to align closely with the RACGP Vision for general practice and a sustainable healthcare system.
The keys recommendations are reported to include;
- A voluntary enrolment scheme for patients with chronic conditions, based on the 'medical home' concept.
- Restricting access to chronic disease Medicare items and Medicare-funded allied health services to patients who have enrolled.
- A three tiered bundle payment model allocated according to the patient's acuity, complexity and risk of hospitalisation.
While the Government will still need to determine their response to the recommended reforms, it appears almost certain that there will be a significant change to the funding model for chronic disease management. Once the details are known general practices will need to revisit their strategy for the management of chronic disease.
This year Stefan Sapio, Alex Cianca, Alex Sacca, Gavin Mitchell, Danny Haydon from Brentnalls SA joined forces with Clare Medical's Dr James McLennan, Dr Tod Owen, Dr Morne Scheepers and Dr Gerry Considine (missing in photo) to raise a total of $3,358 for Movember.
The National Biennial Practice Managers Salary Survey 6th Edition is now available.
The Survey can be used to provide a credible benchmark in terms of salaries, benefits, employment conditions, qualifications, professional development and core responsibilities of Practice Managers in all States and Territories of Australia.
To order please click here
For more information please visit www.apna.asn.au/onlinelearning
APNA Education Calendar (Events Search)