I was wondering if there’s a company out there who evaluates the market valuation of anesthesia groups? Or is there a way to determine their worth. Thanks in advance!
Anesthesia group market worth evaluation
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a = total profit generated this year (revenue - salaries of all docs and all other expenses)
b = total profit generated last year
c = total profit generated two years ago
d = total profit generated three years ago
market value = a + (1/2)b + (1/3)c + (1/4)d
I mean not exactly, but it's basically how much money comes in beyond that required to retain the people doing the work and severely discount that over the years.
yes, AMCs will offer to buy out your business for whatever they value it at.
And no, nobody else is going to value it for you.
D
deleted162650
Shouldn’t “a” be essentially zero? Any money left on the books at the end of the year is gonna get taxed twice.
I'm just saying the value of the business (that someone else would pay you to buy it) is the money that remains after expenses with a discount rate for looking out more years.
D
deleted162650
Ya I get that. But after the docs take their salaries, the business should have no money left (unless you like paying corporate taxes on top of income taxes). It’s all pass through income to the docs, so that formula doesn’t really work.
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You can get a ballpark valuation based on future income forfeited x prevailing multiple.
For example, if the practice revenues are $10mil/yr and you are willing to pass on 20% in perpetuity, and the prevailing multiple is 8, then the practice is worth $16million ($2milx8). If the partners are willing to forfeit 30% of all future income, then the practice would be worth $24mil ($3milx8). The multiples I’ve heard have been as low as 6 and as high as 10.
Any of the big investment banks could come out, look through your books and give you an assessment.
For example, if the practice revenues are $10mil/yr and you are willing to pass on 20% in perpetuity, and the prevailing multiple is 8, then the practice is worth $16million ($2milx8). If the partners are willing to forfeit 30% of all future income, then the practice would be worth $24mil ($3milx8). The multiples I’ve heard have been as low as 6 and as high as 10.
Any of the big investment banks could come out, look through your books and give you an assessment.
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Do the math with the salary the AMC would pay you.
the salary you'd have to pay to keep them working there. Yes groups distribute all that money at the end of the year, but if you were bought out you'd keep that leftover as corporate profit after paying what was necessary in salary to be fully staffed.
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What corporate tax? Businesses may have a pile of money left over if they have any obligations to pay in January.
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For s-corp, from tax point of view, the book can't have any money left on 12/31. I usually get one extra check from my group at the end of year. Otherwise the s-corp needs to pay tax on the leftover before distributing to the owner(s).
You can roll over $ if it is c-corp. (docs don't do c-corp).
I got nothing on Jan. 15 because minimal money collected from Jan. 1 to Jan. 15.
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What are you really trying to ask here? Have y’all been approached for a buyout or trying to sell to the hospital? Your question has been answered several times, I don’t know if any companies that specifically do this.
AMC expansion has slowed to a crawl at least in my neck of the woods. Haven’t gotten any calls in over 2 years at our practice (5 years ago they would all come by almost bi-annually with varying offers).
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As mentioned above, investment bankers that put these deals together should give you a good idea.
dude why are you always whining on here? Go get some T pellets
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Can you provide a reference? Thanks.
D
deleted162650
Don’t ya think that’s a question better directed to your group’s accounting firm at this point.
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This is what I don’t understand. They just give you an advance on your salary? How is this ”buying your business for what is worth?”
Their two sources of “profit” are a) taking 5/10/20% of the Docs’ salaries and, b) obtaining higher insurance pay rates than the independent group had (and maybe or maybe not giving the Docs back a cut of that) Take that, multiply times 4/7/higher, and you pretty much get your “valuation”. (You can get in the nitty gritty of EBITDA, etc., but the basics are the 2 variable above).
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what do you think an anesthesia business is worth? We all work on hospital contracts that are time limited and can be not renewed and we can get replaced. If my group was valued on a price/sales model that you'd used for something like a normal retail business we'd have a value of $500M to $1B. Yet that'd be silly to offer to buy us out for that much money because hopsitals we work in could just kick out whoever buys us and then they would be left with nothing.
You could use a cashflow model (which is kinda what they do) but then you need to adjust the physician salaries down so that there is some cash left over as profit for the company making the purchase. But then again, those cashflows are only as good as keeping the hospital contracts which can go bye bye really quickly so they discount the future cash flows severely.
So what most of the AMCs do is cut your salary by a certain amount, have you sign a contract to work for a few years, and give you the difference in salary you are giving up as a lump sum up front that is taxed at long term capital gains rate instead of income tax rate.
Literally the only thing that keeps private groups having ongoing value is the relationships they have with their hospitals to ensure that those contracts keep getting renewed. Gotta make yourself irreplaceable by a competing group of faceless corporation. Have docs on committees, be chief of staff, sit on the hospital board, etc. Those things don't pay money directly, but they keep you integral to the hospital.
This post is so funny. The AMCs are all trying to get brought out themselves these days! And local/smaller individual anesthesia practices still leftover are trying to evaluate what their buyout would be.
Mednax/American anesthesiology is struggling big time. They are so short staff in many places. It’s funny hearing these guys talk about how they just have to respond to shareholders and not private equity investors. All spin
Team health/Sheridan (envision/amsurg) financial books being hidden after being taken private as well.
Usap/welsh Carson still hasn’t found an ipo market. There is only so much “growth” they can obtain with acquisitions because there are only so many practices still left with greater than 50% private insurance payor mix. (Same problem Mednax ran into circa 2014)
bottom line is you make BIG money WHEN YOU SELL. That’s business 101 in any industry. Many of my neighbors are independently wealthy. All sold their small business in their mid 40s and early 50s.
Mednax/American anesthesiology is struggling big time. They are so short staff in many places. It’s funny hearing these guys talk about how they just have to respond to shareholders and not private equity investors. All spin
Team health/Sheridan (envision/amsurg) financial books being hidden after being taken private as well.
Usap/welsh Carson still hasn’t found an ipo market. There is only so much “growth” they can obtain with acquisitions because there are only so many practices still left with greater than 50% private insurance payor mix. (Same problem Mednax ran into circa 2014)
bottom line is you make BIG money WHEN YOU SELL. That’s business 101 in any industry. Many of my neighbors are independently wealthy. All sold their small business in their mid 40s and early 50s.
So essentially both the group and AMC feel the group has to be worth whatever you save on taxes in the lump sum payment?
No. If there is a sale, that kinda by definition means both sides agreed on that valuation. My group turned down every offer we got because we felt we were worth more than anybody offered.
D
deleted941485
The whole thing became a daisy chain just getting packaged and repackaged and sold again and again and again. Sometimes 3-5 years later. This is ludicrous.
We had a great group at our place but they had other plans like selling out. Good luck to them because they sure as hell left a mess for everybody else.
Remember most of Mednax anesthesia buyouts occurred 2010-2013. So most of the buyout former partners got the last laugh selling stock in 2014-2015!
They aren’t idiots.
mednax bought most people out with straight cash, there was no stock involved
My friends group got a bunch of stock but they were one of the first buyouts. Plus cash.
I think they probably graduated from the stock to straight cash pretty quickly
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I unfortunately know many who agreed to significant amounts of stock over cash. Didn’t really work out for them, but they didn’t feel like they had much choice.
Makes you wonder how awful it must be to have USAP stock when the price is nebulous at best, plus you can’t really do much with it.
Makes you wonder how awful it must be to have USAP stock when the price is nebulous at best, plus you can’t really do much with it.
I was gonna say the same thing.
The sap guys here say the usual: "the older guys keep buying more and more stock every chance they get!"
Anything to shamelessly pump up any shred of value in the stock to keep the Ponzi scheme going.
At this point, Anesthesiologists are a commodity. If anyone wants to outcompete you, they do so on price and not quality because quality is largely consistent at this point .You cannot make yourself irreplaceable by being on committees because ANYONE can be on a committee. I saw a group in the MIDWEST get replt.aced and one of the Anesthesiologists was the Chief of Staff.
having said all that.. everything is FUBARED.... and Im being serious.
