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Valuing Healthcare Non-Compete Covenants

Non-compete provisions are an important component of many healthcare deals and service arrangements, as they provide protection by restricting the counter-party from engaging in competitive activities. Non-compete clauses occasionally have to be valued for business combination accounting, covenant buyout transactions, or disputes related to a breach. In healthcare specifically, financial consideration for non-compete covenants is further complicated by the healthcare fraud and abuse laws that are intended to prevent payments for referrals. Non-compete covenant buyouts can receive intensified regulatory scrutiny when the parties are in a position to refer patients to each other. A common exam

ASC Valuation Multiples: The Impact of Size

Occasionally we'll hear a selling owner of an ambulatory surgery center cite valuations of publicly-traded companies or multiples from recent M&A activity involving large national operators like Surgical Care Affiliates, AmSurg, or Covenant Surgical Partners as support for a 10-12x multiple in a deal for a single facility. While these valuations are not completely unheard of, they're definitely the exception rather than the rule. For example, a newer facility in a great market, with recent and expected future growth from a diverse group physician-investors, and minimal out-of-network exposure, might be able to approach these multiples. We maintain a database of surgery center transactions, a

Dear CMS: Fair Market Value Doesn’t Fit in a Box

Earlier this week, Modern Healthcare reported on comments made by Seema Verma at the Federation of American Hospitals' policy conference in Washington. Ms. Verma discussed CMS’ plans to roll out changes to Stark regulations that include clarifications to the regulatory definitions of volume or value, commercial reasonableness, and fair-market value. The updated regulations are expected to be released toward the end of this year. As a physician compensation consultant and appraiser, I’m very curious about the upcoming clarifications. Efforts have been made in the past to clarify “fair market value”. Back in 2004, the newly issued Stark Phase II regulations included a safe harbor methodology f

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