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What to consider when conducting an Urgent Care Center valuation

12/12/2016  |  By: Chris Lovin, CPA/ABV/CFF, CFE, Shareholder, Practice Leader Business Valuation/Litigation Support

Chris Lovin, Practice Leader of LBMC's Business Valuation/Litigation Support explains what you should consider when conducting an Urgent Care Center valuation.

A client looking to acquire a group of three urgent care centers approached me to assist with a preliminary valuation as they were drafting a letter of intent.  The client had very limited financial information from which to establish a valuation; however, our initial review revealed the revenue per visit was far lower than we typically recommend for an acquisition. This scenario illustrates the need for quality due diligence and valuation when contemplating an acquisition or disposition of an urgent care center.

There are several key elements that you must consider when conducting a proper urgent care center valuation.

  • Volume analysis
  • Competitive landscape
  • Location demographics
  • Contracts with payors are key elements of a proper evaluation
  • Staffing and related costs and other value drivers
  • Appropriate discount rates and market multiples should be researched to reach valid valuation conclusions using the income and market approaches, respectively. 

As more consumers move toward higher deductible health plans and become responsible for more out-of-pocket of healthcare expenses, patients are taking advantage of urgent care centers. If you're considering a transaction involving urgent care centers, you need an experienced valuation consulting firm to provide expertise and help you move forward with your decision.

We rely primarily on the discounted cash flow method to value urgent care centers and support our valuation with market multiples extracted from urgent care center transactions.  We assess the probable future cash flow potential of a particular urgent care center by reviewing relevant data. As part of our analysis, we review historical financial statements to understand risks related to expected volume, revenue per visit, and costs associated with providing services.

So when looking for a provider who can assist with your valuations make sure they are covering all these areas to make sure you have the results you are looking for.

To find out more about LBMC's business valuation services, visit us at http://www.lbmcaudittaxadvisory.com/services/business-valuation

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