Look beyond dollar signs to determine the real value of your home health or hospice agency
Editor’s Note: Today’s post is the second in a series of blog posts based on industry insight and analysis shared during Simione Healthcare’s recent Leadership Summit 2020, a virtual conference. Simione Healthcare Consultants Principal David Berman is used to being asked how much a home health or hospice agency is worth – and not just in his official capacity leading mergers and acquisitions. He’s often asked, as part of casual conversations that pop up among peers and acquaintances, or in between sessions at trade conferences and seminars, for a quick and rough idea of an agency’s real value. His answer: “Value isn’t always measured in dollars.” With more than 20 years of experience in business integration and financial improvement initiatives, Berman looks beyond dollar signs and profit margins to assess a complex balance of risks and market potential to determine the real value of an agency. He shared some of those valuation factors with attendees at Simione’s recent Leadership Summit 2020, explaining that potential buyers looking to acquire an agency can be both savvy and skittish. “Buyers look at actual income, sustained growth, market opportunities and assessment of risks,” Berman said. The actual worth of an agency is determined by evaluating those and other factors. Growth potential One of the first steps in a solid valuation process is what Berman calls "a deep dive into the data" to look at not only how well an agency is performing in its market, but for untapped opportunities within the market. Thorough analysis may yield a few surprises, Berman said. As an example, a market already supporting multiple providers may appear at first to be saturated, with no room for additional providers. "But it may also mean there is room for an aggressive provider because there is no brand loyalty in that market," Berman said.
A thorough valuation will determine growth potential within the market by evaluating what competitors are doing or not doing, what referral patterns show, trends and recent developments. Growth potential can be measured to some degree by hospital discharges and readmissions within the market, Berman said. “Is there a provider offering a continuum of services? If not, that’s an opportunity, too.” What’s the risk? Buyers are more comfortable with consistency and proximity to national norms within the industry than with unusually high performance, Berman said. In fact, growth outpacing the industry norm may actually work against an agency, lessening its value by creating distrust in the eyes of potential buyers. An agency’s employees become part of the valuation, Berman said. When key positions are filled and turnover rate is low, an agency’s value increases. But positions which go unfilled, owners who take on too many roles themselves and high employee turnover constitute high risk in the eyes of buyers, Berman said. Next Monday in this series: Selling Your Agency? Here's How to Prepare Previously: Add Value to Your Agency
Need our help? If you're looking for a professional valuation to determine your agency's worth, or interested in learning more about how you can add value to your agency prior to a future sale, Simione Healthcare Consultants can help shore up revenue management, develop a strategic plan for growth and improve compliance. Give us a call at 1-844-215-8823 to get started immediately or simply learn more. Increase your agency profitability A well-trained staff can increase your agency’s profitability. Check out the helpful staff training products in The Solutions Shop, the online store for Home Health Solutions, a Simione Coding Company.
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