Support for a Complex Transaction Between a Health System and a Major Orthopedics Practice
Client/Profile
An academic medical system
Challenge/Situation
To determine the fair market value of the physical therapy and orthotics divisions of a seven-site orthopedics practice, as well as the fair market value of compensation for the professional practice under the terms of a practice lease (management services arrangement) between the practice and the health system. We needed to consider the post-transaction compensation model that would be acceptable to the physicians while being consistent with fair market value.
Process
Through detailed financial analysis, Veralon developed appropriate financial statements for each division, enabling the application of valuation approaches to determine fair market value for the physical therapy and orthotics practice divisions. We assessed the practice’s historical expenses to determine the fair market value of the compensation under a management service agreement between the health system and the practice.
Results
The transaction closed. The medical system acquired the physical therapy and orthotics businesses, and select radiology equipment; employed the 18 physicians of the practice; and entered into a management services agreement with the practice.