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

When considering the valuation of urgent care centers, it becomes evident that a comprehensive approach is essential to making informed decisions, whether it’s an acquisition or a disposition. Recently, a client approached our firm seeking guidance on evaluating a cluster of three urgent care centers they were interested in acquiring. Given the limited financial data available, it quickly became apparent that the revenue generated per visit fell below industry benchmarks for a sound acquisition. This scenario serves as a vivid example of the significance of thorough due diligence and astute valuation practices when dealing with urgent care centers.

Key Considerations for Comprehensive Urgent Care Center Valuation

A multitude of critical factors warrant careful examination when embarking on an urgent care center valuation. Let’s delve into these key considerations:

  1. Volume Analysis: Quantifying the patient volume is a pivotal aspect. It’s imperative to gauge how many patients these centers are serving and how frequently. This data offers insights into the centers’ popularity and potential for growth.
  2. Competitive Landscape: Understanding the competitive environment within which these centers operate is vital. Who are their competitors, and how do they fare in comparison? Such analysis can help reveal the unique strengths and weaknesses of the target centers.
  3. Location Demographics: The demographic profile of the area surrounding the centers is a crucial determinant. Factors like population density, income levels, and age distribution play a pivotal role in projecting the future patient flow.
  4. Payor Contracts: Contracts with payors hold a significant sway over the financial health of urgent care centers. Evaluating the terms and coverage agreements with insurance providers provides clarity on revenue stability and potential fluctuations.
  5. Staffing and Operational Costs: The composition of the workforce and associated expenses directly influence profitability. Efficient staffing and cost management contribute to a resilient bottom line.
  6. Value Drivers: Beyond financials, identifying the intangible elements that contribute to the centers’ value is vital. Factors like reputation, patient experience, and community engagement can significantly impact their long-term success.
  7. Discount Rates and Market Multiples: Employing appropriate discount rates and market multiples is essential for accurate valuation using the income and market approaches, respectively. Thorough research ensures the conclusions drawn are well-founded.
  8. Shift in Patient Behavior: The increasing adoption of higher deductible health plans has led to a surge in patient visits to urgent care centers. This shift in consumer behavior adds another layer of complexity to the valuation process, emphasizing the need for precision.

In the ever-evolving landscape of healthcare economics, particularly in the realm of urgent care, meticulous valuation is a necessity. As patients become more discerning about their healthcare choices, the demand for urgent care centers continues to rise. If you’re engaged in contemplating transactions involving such centers, seeking guidance from a seasoned valuation consulting firm becomes paramount. Their expertise aids in navigating complexities and ensures well-informed decisions.

Our approach centers around the discounted cash flow method, which hinges on predicting future cash flows by meticulously analyzing pertinent data. This includes a thorough assessment of historical financials, enabling a comprehensive understanding of anticipated volume, revenue per visit, and operational costs.

In your quest for a valuation partner, prioritize those who demonstrate a commitment to comprehensive evaluation, covering all the crucial aspects outlined above. By doing so, you position yourself for results that align with your expectations and facilitate confident decision-making.