Industries

Health Care

Physicians and medical practices are facing a much more complex and challenging environment than ever before. Medical practices must start preparing to transition from fee-for-service reimbursement models to ones that are performance/value-based. Practices must also develop systems and processes that will ultimately allow them to be capable of clinically integrating with other providers across the health care spectrum. This is all happening in a health care market that continues to experience an unprecedented industry-wide consolidation and create greater competition.

The above changes, coupled with dwindling margins, increasing government regulations and greater operational and financial challenges, is causing many practices to remain uncertain as to whether they will have the financial resources to remain independent in the future. This is forcing practices to make important strategic decisions as to how they will practice in the future. Physicians are starting to evaluate their options and address critical questions: Should I seek hospital employment, join a super-group or consolidate with other practices? Do I join a PHO or an IPA? How do I prepare to participate in an ACO?

Gettry Marcus’ Health Care Consulting Group assists physicians and medical practices in evaluating their options and in helping them to develop long-term strategic plans. The Group consists of a team of financial advisors, all of whom are CPA’s, with a sole focus – health care. Our understanding of the health care market, combined with our comprehensive approach to the financial and operational management of our medical practice clients, is what allows us to provide insight into the issues health care providers face and to help them uncover real solutions.

Services Offered


Accounting, Audit & Tax
As the size of medical practices continues to grow, the accounting and tax issues become more complex. Lenders generally require financial statements that are prepared in accordance with generally accepted accounting principles (“GAAP”) rather than on a less complex tax or cash basis. Financial statements may also have to be reviewed or audited by the outside CPA firm rather than just compiled. This may be required pursuant to loan agreements or simply to provide additional fiduciary protection to the practice’s board of directors. Larger groups also generally have more complex tax issues due to the structure of the group and the manner in which revenues and expenses are allocated among the physician-owners. Gettry Marcus’ Health Care Group has a dedicated team of professionals that have extensive experience with these complex accounting and tax issues.

M&A Advisory Services (Sell-side)

Planning for the sale of your practice, whether to private equity, a larger “platform” health care entity, or a hospital or health care system, is an ongoing process and physician-owners who start planning early will likely maximize their practice’s selling price. Gettry Marcus works with physician-owners and their management teams to prepare for a future sale.  We help to identify those areas in a practice where there are opportunities to increase earnings and/or reduce risk, the two factors that ultimately impact selling price. When a prospective buyer is identified, we advise physician-owners in all phases of the proposed transaction, including deal structuring, tax planning, due diligence, preparing for the actual closing, and post-closing matters. Our approach gives physician-owners the confidence to know that they are achieving the greatest possible value for their practice.


Budgeting & Cash Flow Analysis
The ability of a practice to maintain steady cash flow has become increasingly difficult as reimbursements trend down, expenses continue to rise and the need to invest in new technologies continues to increase. For this reason, it is important for medical practices to develop budgets to maintain profitability, establish financial targets, determine financing needs and hold staff accountable for results. We assist practices in developing and using budgets to effectively manage the profitability and cash flow of their practices.

Fair Market Value Opinions
With greater clinical and operational integration of medical services among primary care physicians, specialists, hospitals and other ancillary service providers, there has also been an increase in shared-service and joint venture arrangements. These arrangements typically involve fees being paid by one entity to another, which must be at fair market value as defined by Stark and other federal and state regulations. We evaluate these arrangements and provide guidance, and an opinion, as to whether the fees paid are at fair market value.

Financial Reporting
Management should be provided with specific key financial indicators that allow them to understand revenue trends, identify where expenses need to be reduced or better managed, and address other financial matters in a timely manner. We can assist in setting up financial management reporting that provides physician-owners with relevant and timely financial information that can be used to better manage their practices and understand cash flow.

Business Valuation
Business Valuation

Group Formations & Practice Acquisitions
Gettry Marcus has the industry expertise and resources to help physicians evaluate potential practice acquisitions and to guide them through the entire acquisition process once a practice has been targeted. This includes advising on negotiations, assisting with deal structuring and terms, preparing financial projections, assisting with obtaining financing, providing due diligence services and advising on fair market value considerations.

Hospital & Joint Venture Arrangements
Hospital employment and/or the sale of a medical practice to a hospital may be a viable option depending on the practice’s financial resources, the willingness of the owners to take on additional risk, the age of the owners and various other criteria. We work with physicians to evaluate the financial aspects of proposed hospital employment/practice acquisition agreements and to advise them on the financial viability of such arrangements. This includes assisting with the structure and terms of the arrangement (working with legal counsel).

IPA & ACO Evaluation
As Accountable Care Organizations (“ACOs”) and other integrated delivery models such as Independent Practice Associations (“IPAs”) continue to evolve, physicians have new options for how they will practice in the future. Joining an ACO or IPA can be a feasible and, perhaps, necessary option for many medical practices. We can evaluate the inherent costs and financial risks, as well as the potential revenue-sharing opportunities, associated with these new integrated delivery models.

Medical Practice Business Valuations
As hospitals and integrated delivery systems continue to acquire medical practices, ambulatory surgery centers and other ancillary service providers through mergers and acquisitions, business valuations are commonly used to help establish an agreed-upon price between buyer and seller. Business valuations are also used in more traditional matters, such as physician buy-ins, buy-outs and for gift and estate tax planning purposes. In performing a business valuation for a health care entity, it is important that the valuator consider federal and state Stark and anti-kickback statutes. Gettry Marcus’ health care expertise coupled with a recognized team of business valuators provides a combination that gives an increased level of credibility to the practice valuations that we provide.

Physician Compensation Arrangements
With hospitals and large integrated delivery system directly employing physicians, it has become all the more important for physician-owners to offer competitive compensation packages to physicians as part of their overall effort to retain and attract top doctors in their field. Practices also risk becoming less profitable if they do not fully understand the financial implications of their existing and proposed compensation models. Compensation arrangements, whether based on productivity, the performance of specific clinical or administrative responsibilities or other practice objectives, should align practice goals with those of the physicians. We help practices to evaluate various compensation arrangements and to assist with the transition to the new compensation structure.

Physician Succession Planning
As baby boomers face retirement, there is a much greater need for medical practices to establish a formal policy and approach for partner succession. Having a formal policy, which may include a partner track for younger physicians, is essential if a practice is to remain competitive in retaining and attracting physicians. We work with physician-owners to develop a formal succession plan, working through the difficult financial and emotional issues that are typically encountered when undergoing this exercise.

Revenue-sharing Evaluation & Analysis
As group medical practices continue to grow in size through mergers, acquisitions and consolidations, the methodology used by physicians to share revenues from certain ancillary services, commonly referred to as designated health services (“DHS”), must be evaluated to make sure such revenues are shared in a manner that complies with both Stark and federal and state anti-kickback regulations. Gettry Marcus’ Health Care Group has extensive experience in this area, working work with physician groups to develop revenue-sharing models that comply with federal and state regulations.

Strategic Planning
In order for medical practices to be able to compete in a future world that will require them to clinically integrate with other health care providers and to begin the transformation from a fee-for-service to performance-based reimbursement system, they must start to develop long-term strategic plans. As part of this process, they have to understand the benefits, costs and risks associated with different health care delivery models. We work with our health care clients to develop well thought-out strategic plans that provide for an understanding and assessment of options and a timeline for implementation. The strategic planning process can also encompass budgeting and capital expenditure planning, financing, practice acquisitions, partner shareholder and buy-out agreements, development of ancillary service lines and joint venture arrangements.

Practice Leaders

LEE FERBER
lferber@gettrymarcus.com
516-364-3390 x206

Industry Affiliations

HEALTH CARE Case Studies

Audit

Assignment:
Retained by several large group practices, each with revenues in excess of $50M dollars, to audit their financial statements.

Result:
These audits included addressing specific accounting and audit issues unique to the health care industry. We presented our findings to the groups’ audit committees, which included recommendations for additional procedures and internal controls, many of which were adopted by management.

Business Valuation

Assignment:
Retained by major New York hospital systems to value both single-specialty and multi-specialty groups under consideration for acquisition by the hospital systems.

Result:
We performed due diligence procedures on the targeted practices and prepared projections of future earnings to determine the practices’ fair market value for potential acquisition. Based on our findings, the hospitals were able to successfully negotiate and close on these transactions.

Equitable Profit-Sharing Allocations

Assignment:
We were retained by several large group practices to develop profit-sharing allocation methodologies for the physician-owners of the practices.

Result:
Working directly with the management of several large practices, each comprised of 40+ physician-owners, we developed and implemented profit-sharing allocation methodologies. The results provided for an equitable distribution of profits, which were ultimately accepted by management.

Fair Market Value Opinion

Assignment:
We were retained by several hospitals to provide fair market value opinions.

Result:
We used our established methodologies to perform fair market value assessments for the fees to be paid for the outsourcing of various departments, including nuclear imaging, emergency room, and hospitalist programs. Our assessments allowed the hospitals to move forward with their outsourcing plans.

Financial Reporting

Assignment:
A large medical laboratory was in need of improved financial reporting.

Result:
We developed and implemented more meaningful financial reporting, which allowed management to better assess and monitor the lab’s profitability.

Group Formation

Assignment:
Called upon by several single-specialty and multi-specialty groups to assist with consolidating several practices into a single large group, commonly referred to as a “mega-group” or “super-group”.

Result:
We were intimately involved in all aspects of the group consolidation, including governance issues, financial modeling, banking and financing, internal controls and selection of a management service organization, as well as additional operational issues up to and including a successful launch.

Practice Acquisition

Assignment:
A major New York hospital required benchmarking and other financial analyses to evaluate the finances of a targeted medical practice.

Result:
We worked closely with hospital’s management in analyzing the financial results of a large single-specialty medical practice, which included specific benchmarking analyses. Our professionals advised the hospital’s CFO and attorneys in structuring a purchase of that practice, which included structuring the compensation arrangements between the hospital and the physicians. Our efforts resulted in a successful transaction for the hospital.

Revenue Allocation Analysis

Assignment:
We were retained by a major health care law firm whose client, a large multi-specialty medical practice, required the services of a specialist to develop an acceptable revenue allocation methodology for the practice’s physicians.

Result:
We developed a methodology for the sharing of designated health service (“DHS”) revenues amongst the physicians in the practice. As part of the engagement, we considered various allocation methodologies, each complying with both federal and state regulations, including those promulgated under Stark. In the end, the practice-owners were able to agree on an accepted allocation methodology, which was then implemented.

Start-Up Projections

Assignment:
We were engaged by several large radiation treatment and diagnostic imaging facilities to prepare start-up projections for proposed facilities.

Result:
Working closely with investor groups, we developed projections using both industry-wide benchmarks and specific revenue and cost data provided by management. Our efforts allowed the investor groups to raise additional capital and attract physicians to work in the facilities.

Strategic Planning

Assignment:
We were engaged to develop long-term strategic plans for physician groups.

Result:
We worked with both lead physicians and management in developing strategic plans that addressed such critical areas as new clinical service offerings, practice acquisitions, capital expenditures, long-term financing, and exit strategies for the more senior physicians. This allowed practice owners to develop strategies for future growth and stability.

All Case Studies