Two-midnight rule discontinued for inpatient payment cuts

The Centers for Medicare and Medicaid has discontinued enforcement of the two-midnight rule.  This move followed a notable court case related to the cuts as well as intense industry criticism.  There will be a one time pay increase as a result, in order to compensate hospitals for previous cuts.  In 2017 hospitals also will see ...

Verity Health System outlook revised to “Stable”

Verity Health System (fka Daughters of Charity Health System) has received a revised outlook from Standard and Poor's of "stable" from "negative".   This marks a positive step in the turnaround the $1.4 billion dollar distressed system which includes 6 major hospitals located throughout California.  In 2014 and 2015 the system reported operating losses of $12.1 million and $59.2 million respectively. The ...

Valeant Pharmaceuticals Turmoil

Valeant Pharmaceuticals is always an interesting company to read about.  Over the years the drug maker has frequented the news with talk of takeovers, failed bids, C-suite and board drama, shady business practices, and activist investors.  In its most recent drama-filled episode, Valeant's share price has fallen over 88% from its 52 week high in part due ...

Physician Goodwill & Purchase Price Allocation

In a recent California court case, Monarch Healthcare and physician Margo Jaffe Orr, MD squared off regarding a non-compete issue.  Dr. Jaffe sold her medical practice to Monarch for $34,700 in a deal which purportedly included all tangible and intangible assets.  However, the purchase price allocation afforded all of the purchase consideration to furniture, fixtures, equipment and ...

MedPAC Report to Congress

The Medicare Payment Advisory Commission released its annual report to Congress on March 15th, noting that most indicators of hospital payment adequacy were good but also found that the average Medicare margins were negative and expected to decline. The commission recommended that inpatient and outpatient hospital payments should be increased.  It also recommended a controversial proposal to reduce ...

Medical Office Building Valuation & Real Estate Syndication

Medical office building syndication is a common investment and alignment strategy.  This involves the formation of an entity which possesses real estate so that individual investors may be offered fractional ownership.  How these entities are formed, the way in which ownership offering is structured, and control and governance issues can make these entities tricky to value. Two major areas ...

Normalization Adjustments in Medical Practice Valuation

The valuation of closely-held medical practices generally involve normalization adjustments to financial statements.  One major area of normalization I encounter relates to payor reimbursements, incentive and risk pool payments.  The prevalence of non-recurring items related to the ACA and health plan expansion may or may not require adjustment depending on the nature of these payments.  This is where ...

Physician Median Compensation

Physician compensation models often rely on published survey information.  Common sources include the MGMA (Medical Group Management Association), AMGA (American Medical Group Association), and Sullivan Cotter.  Overuse or misuse of the median compensation figures from these surveys is an issue which health systems and compensation valuation experts encounter on a frequent basis. Two well known ...

Kindred and Select Medical Transaction

Kindred and Select Medical agreed to a transaction involving the "swap" of 5 hospitals.  In the deal, Kindred will acquire 5 long term acute care hospitals from Select and will sell four transitional care hospitals.  The leased hospitals acquired by Kindred are located in Indiana, Texas, and Colorado.  Kindred will divest hospitals it owns in ...