Increasing Revenue and Brand Value to Position Practice Buyout

Whether it’s due to aggressive medical practice acquisition by hospitals and health systems or private practice doctors approaching retirement and wanting to sell their practice to outside buyers or to their partners, physician owners of the shrinking pool of independent practices want the best buyout price they can get. Who wouldn’t?

For too many sellers, they can’t negotiate their optimal buyout price because the value of their “assets” is limited. Because buyers can’t really know how many established patients they will retain after ownership transfer, the smart ones discount the value of patient retention by 20% - 50% in their acquisition negotiations.

What buyers do value is the ability of the purchased entity to consistently generate more revenue, to continually attract new patients and to provide the best mix of profitable services and procedures.

For insurance-based practices, the value of their contracts with payors is an important factor in establishing a buy/sell price. However, that value may also be discounted to some degree by the buyer because of the unpredictability of the constant changes in healthcare insurance – both of the patient side and on the provider side.

Marketing and Branding to Increase Practice Value

Practices that have a distinct, differentiated brand that is well-known and well-regarded in their markets are inherently more valuable for a buyer because the brand is an asset that can be inherited and leveraged irrespective of change in ownership.

Market penetration of a brand does not happen overnight. It’s generally a process of many years. A brand is much more than just a business name, logo or website. A brand is the sum total of customer experiences and perceptions. Your brand is ultimately based on your reputation and your reputation defines your brand.

But just having a quality brand is not enough to maximize the sale price of the business. Brand quality is hard to measure, so the business also needs a proven, ongoing marketing system that exposes the brand value on a constant basis and can show a track record of new patient acquisition as a direct result of external and internal marketing of the business and the brand.

In most industries, marketing is a fundamental business system and revenue strategy. Compared to other industries, the healthcare industry has been behind the curve historically.

But the healthcare industry is catching up fast, particularly for the health systems that must compete aggressively for market share. The marketing and branding strategies for independent practices are not evolving as quickly but the pace is still accelerating.

Cash-based medical specialties such as cosmetic plastic surgery and other aesthetic services have always needed to market in order to survive and thrive.

Insurance-based practices increasingly face similar requirements due to the rapid growth and prevalence of high-deductible health plans offered by employers and to individuals. Regardless of the ultimate fate of the Affordable Care Act, high-deductible plans are here to stay as more employers look to shift more of the financial cost of health insurance to their employees.

Whether you plan to sell soon or eventually, effective marketing and branding will increase your equity and value whenever you choose to sell.

 

Lonnie Hirsch is Founder and CEO of Hirsch Healthcare Consulting. (www. Over the past 30 years, Lonnie has worked with independent practices across the U.S. to help them attract more of the patients and cases they want and to grow the revenue and brand value. You can contact Lonnie by email at Lonnie.Hirsch@HirschHealthConsulting.com.