Can you prove your healthcare firm is worth what you think it's worth?

The Business of Healthcare

(Re-posted with permission of the author.)

Potential buyers of healthcare firms won’t accept a company’s or practice’s stated value unless there's solid documentation that proves it. Conversely, poor documentation can destroy value.

Case in point: How would you feel if someone were trying to sell you a piece of medical equipment, but they had no original invoice, no proof of payment, no owner’s manual, and no product statement of warranty? I expect you’d be very suspicious of the true value of the equipment. Moreover, you’d be concerned about the risks associated with purchasing the unit without proper documentation.

Poor documentation decreases value because it increases risk, so buyers will expect to pay less for companies with poor documentation.

Here are some examples of good documentation from the buyer’s perspective:

  • Up-to-date corporate/LLC documents, such as Articles of Incorporate, By-Laws, permits, and registrations, members’ records, minutes of directors’ meetings, etc.
  • Updated policies and procedures manuals
  • Accurate and complete patient health records, preferably in an EHR
  • Accurate and transparent financial statements (i.e., historical balance sheets, income statements, and related general ledger account records)
  • Accurate and complete account receivable, inventory, accounts payable, and fixed asset reports
  • Original invoices, proofs of payment, owner’s manuals, etc. for all capital assets
  • Detailed and accurate employee records, including payroll, PTO, employment applications, background checks, etc.
  • Current commercial lease/rental agreements
  • Three to five years of bank statements
  • Full documentation of currently outstanding and retired loans and leases
  • Copies of all insurance policies, including workers’ compensation, malpractice, etc.
  • Three to five years of corporate tax returns and all related correspondence with the IRS and state taxing authorities
  • Trademarks and patent documentation or certification
  • Copy of strategic or business plan
  • Copies of all past legal issues, including past legal disputes, if any
  • A report from a coding audit to ensure correct CPT coding (if applicable).

Though not exhaustive, this list provides a framework for how to approach a solid documentation record for your healthcare firm. Keep in mind that there are no shortcuts to good documentation.

Good record keeping is a reflection of sound management practices, attention to detail, and company owner pride. Good documentation is invaluable in proving the value of your company/practice.

 

If you want to find out what your healthcare company is worth and what you can do to increase its value going forward, please email me at dcoit@vertess.com.

David Coit, Jr., DBA, CVA, CVGA, CMAA

480.256.0978