Consolidation Trends Impact Perfusion Services Appraisals

Hospital acquisitions of cardiothoracic surgery practices have changed the perfusion business. It used to be fairly common for private practice surgeons to employ the perfusion staff they work with in the operating room. However, as hospitals have bought out surgery groups and employed the surgeons, they have also taken perfusion in-house or outsourced it to private (not-physician-owned) perfusion companies. Based on classified ads being posted for vacant and new positions, it appears that hospitals and private perfusion companies are now doing most of the perfusionist hiring in this country.

As a result of this trend, opportunities to value perfusion services come along less frequently for appraisers than before. (Third-party FMV opinions for perfusion services are often requested by hospitals when the cardiothoracic surgery group has a financial interest in the perfusion provider.) When the opportunity does arise, an appraiser will be met with the same challenges that have always existed with these types of reviews - such as dealing with daunting medical terminology and inconsistent service offerings.

Overall, perfusion services agreements tend to be one of the more knotty types of agreements to review for FMV, and we believe the consolidation trend will make them knottier. First off, private vendors in this segment don't seem to publish pricing like vendors in certain other segments are starting to do. And, with more in-house arrangements, appraisers' proprietary transaction databases are drying up. Without good market data, appraisers valuing perfusion-related services will likely focus more heavily on cost or build-up methodologies that analyze and aggregate the value of component resources (labor costs, etc.).

Although a cost or build-up methodology is a reasonable approach, without market data it is hard for an appraiser to sanity-check his or her results. Plus, FMV determinations may be made without knowledge of or consideration for premiums and/or savings that vendors are passing on to their customers. All-in-all, perfusion definitely seems to be an area of the healthcare industry where consolidation has changed what appraisers are being asked to value and the valuation approaches that are being applied.

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