During the past month, baytechIT put the focus on practice consolidation, courtesy of our sister company, akiro. As one of the healthcare industry’s more unique and innovative M&A transaction consultants, akiro specializes exclusively in medical practice transactions by bringing decades of negotiation experience together under one roof.
This blog, “What Does Fair Market Value and the Tour de France Have in Common?” is the second of three pieces they’ve curated putting the spotlight on healthcare M&A best practices. If you haven’t read the first installment you can do so here.
Don’t try this at home
How many times have we heard those words?
For those of us who had enjoyed the Tour de France this past summer, we watched as riders adopted a new dangerous move called the Super Tuck to shave seconds off their times. The cyclist actually slides his backside forward off the saddle and onto the top tube of the bike. He moves his hands to the top of the handlebars, nowhere near the brakes, and lowers his chin over the stem. Risk of a crash is exponentially elevated and there are calls to cycling’s governing body to ban it in competition for the expressed reason that non-professionals may try it with potentially calamitous results.
The same is true for physicians that enter into transactions without engaging a third-party to assist with preparing their practice for sale including review of coding practices, updating IT systems, enhancing revenue and understanding the fair market value of the practice. Attempting to prepare a practice on your own is only slightly less dangerous than not doing it at all (there are risks of over-coding, using funds and resources with little return and under-valuing the practice). Failure to use a third party creates huge potential liability risks for even minor structural problems between the parties. Moreover, after the agreements are in place, the arrangement needs to be retested routinely to conform to both commercial reasonableness and fair market value on a recurring basis.
Much like the risk of the Super Tuck, which increases with the incline and speed of the rider, the risk of entering into transactions or agreements without third party validation increases with the complexity of the transaction. Third parties conduct the required analysis in tandem with internal resources. This can have the benefit of both saving money and educating staff on the structural issues and problems to be aware of for the transaction or agreement.
Amateur Super Tuckers be warned, don’t try this at home!
akiro can provide health care providers with ongoing fair market value services to ensure updated compliance with regulatory and legal requirements. akiro is a sister company of BaytechIT. If you have any questions about post-transaction valuations or the services provided by akiro, please contact David Audibert at email@example.com.