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)
Budgeting & Cash Flow Analysis
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.
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.
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.
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.
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.