Valuation & Transactions

Access high-level skills and deep industry experience for your valuation services

Healthcare organizations must answer to strict government regulations while handling business issues that are increasingly complex. Altegra Health provides professional, independent valuation services with the knowledge, experience, and sophisticated technologies to deliver accurate results. We perform fair market value assessments and provide strategic, analytical, compliance, and transactional support to healthcare organizations nationally. The total market capitalization of the compensation and transactions we have completed is well over $1.5 billion. From contemplation to execution, Altegra Health is a valued advisor to a number of the nation's most prominent health systems and health law firms, providing valuation services for all purposes of business assessment, regulatory compliance, Internal Revenue Service (IRS), and Office of Inspector General (OIG) concerns. Altegra Health has assisted medical centers, physician practices, as well as public and private healthcare (for profit and not-for-profit) companies with all stages of transactional support. Altegra Health’s client partnership approach is integral to our valuation and transaction services. Our valuation team blends traditional and technical valuation skills with deep industry experience and credentials. In addition, Altegra Health’s valuation team works cohesively with the other Altegra Health service lines to offer valuation opinions that consider current issues in revenue cycle, provider compensation, and regulatory compliance.


Compensation Valuation

Hospitals are more commonly paying specialists to provide coverage in emergency rooms. With over 15 years of analyzing these agreements, Altegra Health has developed a proprietary database of call coverage arrangements around the country. At Altegra Health, our FMV opinions around call coverage services account for the following:
  • The number of physicians on the call rotations
  • The specialty required to provide the coverage
  • Market compensation of the specialty
  • The number of calls the specialists receive per shift
  • The number of calls per shift requiring the specialist to present to the emergency room
  • The severity of the cases performed by the specialist and the malpractice associated with the severity
  • The pre and post discharge follow up work performed by the specialist
  • The payer mix of the cases requiring specialist intervention and/or the payer mix of the emergency room in general
  • Forms of compensation paid including per diem rates, per procedure rates, and activation fees
Our opinions comply with OIG Opinions 07-10 and 09-05.
In certain cases, Hospitals and other provider entities are required to have medical physicians and directors; while in other cases, an entity has made an operational decision to engage a medical director. Whatever the reason for paying the physicians, the compensation paid to the medical director must be at FMV and the arrangement must be commercially reasonable. At Altegra Health, our FMV opinions related to medical directorship services account for the following:
  • The specialty required to provide the services as opposed to the specialty actually providing the service
  • The legal requirements and operational rational for engaging the medical director
  • Hourly administrative compensation rates for the appropriate specialty
  • Required number of hours based on the scope of services provided and service line to which services are provided
  • Reasonableness of the required number of hours
Hospitals require certain specialists to provide clinical services to their inpatients. These specialists may include:
  • Hospitalists
  • Nocturnists
  • Neonatologists
  • Laborists
  • Surgicalists
  • Intensivists/Pulmonologists
  • Anesthesiologists and
  • Emergency Medicine Physicians
When a hospital’s payer mix and/or volume does not allow these physicians to earn a market wage, the hospital will enter into a collection guarantee or stipend. A collection guarantee generally has a true up clause offsetting professional collections against expenses and compensating for any loss. A stipend will be a fixed amount paid monthly regardless of collections and expenses. At Altegra Health, our FMV opinions related to collection guarantees and stipends account for the following:
  • The required coverage and number of full time equivalents (FTEs) required to provide such coverage and any required administrative services
  • Appropriate mix of experience of practitioners necessary to provide the services
  • Market compensation for the specialty providing coverage
  • Billing, malpractice, and other overhead costs necessary to operate a physician practice and
  • Sensitivity related to changes in collections and expenses
With the move from fee for service to fee for value, health systems have implemented clinical co-management agreements as a means of aligning providers’ goals and incentives. At Altegra Health, our FMV opinions related to clinical co-management services account for the following:
  • The appropriate mix of physicians required to manage the hospital department
  • The required number of hours necessary to manage the department based on scope and size
  • The reasonableness of the incentive standards set forth in the agreement and the effectiveness of the standards on causing change in practice pattern, which ultimately leads to improved care and reduced costs
  • Medicare roadmap for assessing the value of quality and rewarding providers for the improvement in the quality of care, and
  • The appropriate separation between base and incentive compensation
With the uncertainty around reimbursement, changing perceptions around quality of life for new physicians and involvement in Accountable Care Organizations, physicians are entering into employment agreements at rates not seen since the mid-1990s. Almost every health system has its own unique terms to its employment agreements:
  • The length of the guarantee may range from one year to five years
  • Productivity compensation may be set as a fixed amount per wRVU or percent of collections by specialty or different for each physician
    • wRVU compensation may be tiered based on multiple productivity thresholds
  • Revenue less expense models
  • Shift rate or hourly compensation for hospital based services
  • Quality incentive compensation may be based on patient satisfaction ratings or myriad quality, outcomes, and satisfaction measures
  • The amount of compensation paid for quality incentives may vary from a small percent of total compensation to over 40% of compensation
  • Compensation may be set aside for the management of care for capitated patient panels
  • Various other incentives including sign on or transition bonuses, loan forgiveness programs, relocation allowances, etc.
  • Payment for non-clinical services including:
    • emergency room call coverage
    • medical directorship, teaching, clinical research, and other academic services
At Altegra Health, our FMV opinions related to physician employment account for the following:
  • The specialty of the physician
  • The productivity of the physician
  • The professional collections, adjusted as necessary based on payer mix
  • The scope and level of services provided
  • FMV for the individual components and the reasonableness of aggregate compensation for all services
  • Benefits provided
Opinions can be established at the individual physician level or at the plan level.
Hospitals will occasionally engage an outside party to manage an ancillary service line of the hospital. These services lines will commonly include:
  • Wound care
  • Sleep Lab
  • Ambulatory Surgery
  • Dialysis
  • Others
At Altegra Health, our FMV opinions related to management services account for the following:
  • The cost to provide the services based on the scope of services, the staffing levels required to provide the services, and market compensation for the staff
  • Expected rates of return earned by market participants or provides of comparable services
  • Market fees provided for similar services
A hospital may have a need to engage physicians on a part time or full time basis. The form of these agreements is generally a professional services agreement (PSA). These agreements may be executed for the following purposes:
  • Telemedicine or teleradiology
  • Imaging interpretation services
  • Pathology/clinical lab services
  • [Others]
On occasion, a hospital may enter into a PSA for full time exclusive services provided by a physician as opposed to an employment agreement. These PSAs may be solely for physician time or they may include additional expenses such as benefits or overhead. Sinaiko actively values these types of agreements for physician integration plans and for foundation models in states with active Corporate Practice of Medicine laws. At Altegra Health, our FMV opinions related to clinical and professional services account for the following:
  • Market data for the provision of the services
  • Market data may include the review of reimbursement data including the review of paid claims from Altegra’s propriety database of paid claims.
  • Compensation and other expenses incurred for the specialty providing the service
Academic medical centers and those providing teaching services to residents and fellows will often request physicians on their medical staff provide teaching services and other administrative services, such as acting as chair of an academic department.
When performing clinical trials, a sponsor will have to pay for Institutional Review Board (IRB), start up, and other fees, compensation for the clinical investigator and support staff, and other expenses. In assessing FMV payments to systems and investigators, Altegra Health has provided services to:
  • Pharmaceutical companies
  • Medical device companies, and
  • Academic medical centers

Business Valuation

The value of a hospital will generally be based on the number of bed licenses the hospital owns and the type of programs offered by the hospital. Accordingly, value is closely correlated to number of beds and amount of revenue per bed. A hospital with successful neurosurgery and cardiovascular programs, for example, is worth more than a hospital without these programs.
With the passage of the Patient Protection and Affordable Care Act (PPACA), physicians are unsure as to the future of governmental and non-governmental (e.g., managed care) reimbursement. In addition, the cost to implement IT solutions to handle reporting requirement is a significant burden on smaller practices. Both of these issues combined with others has resulted in practices looking to affiliate with health systems. Altegra Health performs both fixed asset appraisal and business valuations related to physician practices. Our business valuation take into account the following:
  • Historical financial performance
  • Historical productivity levels of individual physicians
  • Historical reimbursement rates by payer and by procedure
  • Strategic plans of the practice including addition of physicians and services
  • Capacity constraints of practice locations and staff
  • Negotiated future compensation rates in consideration of Derby et. al v. Commissioner [T.C.M. 2008-45 (Feb. 28, 2008)]
Our business valuations also consider any regulatory writings included the IRS 1997 CPE text and the 1992 McCarty Thornton letter. As practice continue to work toward developing processes to comply with PPACA, certain practices have begun to develop significant intellectual property around the management of populations. Altegra Health has valued practices with both medical home and Accountable Care Organization (ACO) solutions.
Altegra Health is actively involved in transactions involving other ancillary services including:
  • Ambulatory surgery centers
  • Imaging centers
  • Dialysis centers
  • Management and billing organizations

Fixed Asset Valuation

Whether integrating a recently purchased entity or updating your records, Altegra Health provides fixed asset inventory services for physician practices, hospitals, skilled nursing facilities, and other healthcare providers. Altegra Health can work with an inventory system that you own or work with our own inventory system to tag physical assets with bar codes and create or update an existing fixed asset listing.
Altegra Health will review your real property assets to assess whether any personal property assets can be segregated for tax purposes.
Altegra Health provides fixed asset valuation as part of a purchase (e.g., physician practice acquisition at fixed asset value) or for purchase price allocation.

For more information, contact:

Thomas Cuccia Managing Director, Valuation Services (310) 776-4500