Business Valuation for a Joint Venture Rehabilitation Hospital
Client/Profile
Community hospital that is part of a regional health system in Pennsylvania
Challenge/Situation
To prepare a business valuation for the hospital’s acute rehabilitation service line in preparation for a joint venture with a national rehab provider.
The rehabilitation unit was being managed by the national rehab provider. The Unit was consistently running near full occupancy and there appeared to be enough market volume to support a bigger unit. The hospital client and the management company were considering a joint venture for a freestanding rehabilitation facility that would include a 40-bed acute rehabilitation unit.
Process
Typically, valuations are prepared for a complete enterprise, rather than an operating department. Our work needed to consider the implications of facility cost and overhead allocations, and ensure that the revenue streams were correct. Veralon also had to consider the potential impact of reimbursement changes in acute rehab care. Finally, since the joint venture partner was an experienced provider of rehab services, Veralon had to establish credibility with the company in terms of the valuation process and results.
Results
Veralon completed the valuation under significant time constraints, and arrived at a valuation conclusion that was acceptable to all the parties. The joint venture partner was very positive about doing a venture with our hospital client. Veralon’s valuation was used exactly as it was calculated and served to facilitate negotiations between the parties.