Cost Approach for Cardiology Practices

December 21st, 2010 | Income Approach & Methods | Medicare | Noncompete Agreements | Reasonable Comp | Regulatory Matters

It continues to astound and confound me that valuation errors in 2010 look like the errors in the mid-1990s that inspired me to write the Medical Practice Valuation Guidebook. From a standpoint of accepted valuation theory and practice, the idea of a going concern premise of value – which REQUIRES an income-producing enterprise- and no value under the Income Approach is an OxyMoron. Any representation by an Appraiser that the standard of Fair Market Value on a Going Concern Basis is represented by sole reliance on the Cost Approach and in addition is in acccord with Professional Standards, is, at best, WRONG.

It seems to be that the Stark Law builds upon the original definition of Fair Market Value – usually referenced to Revenue Ruling 59-60 – and then restricts it to those circumstances where the buyer and seller are not in a position to benefit from referrals. Since that original definition precludes a Going Concern premise when there is no income from the enterprise, any further evaluation is moot.

As Mr. T used to say “I pity the fool.” And I would add, all his followers…

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