Chapter 25

Valuation of Healthcare Service Businesses

Performing valuations of healthcare service businesses and interests in those businesses requires fundamental business valuation expertise. It also requires special knowledge of the key economic drivers, trends, healthcare niche issues, and unique regulatory environment prevalent in the healthcare industry. This chapter provides insight into how these unique characteristics impact the valuation of healthcare businesses. We do not focus on the fundamental mechanics of performing a valuation but rather on the unique considerations that must be made in healthcare valuation. We also provide two detailed case studies to illustrate these nuances at the end of this chapter: an ambulatory surgery center (Addendum 1) and a hospital (Addendum 2). These case studies are only general examples since the procedures, methods and amount of detailed analysis can differ from engagement to engagement depending on the purpose and scope of the engagement.

The healthcare industry has its own language. Exhibit 25.1 contains a glossary of terms that may be reviewed to provide a foundation for understanding the healthcare industry.

Exhibit 25.1 Glossary of Terms

INDUSTRY BACKGROUND AND TRANSITION

From 1990 through 1998, transactions in the industry ...

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