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| Dear Friend,
Healthcare valuations are coming down. If you're looking to do a sell-side deal, the time is now. And, because interest rates will be going up, potential buyers need to get moving.
That's the subject of this past Monday's blog post, Fed Insiders Signal That the Time to Deal is Now. Follow that link to the blog or just keep reading for the rest of the story:
If you've been following both financial and healthcare industry news, you know that recent developments are putting significant downward pressure on healthcare facility valuation. There’s little reason to expect that healthcare services deals won’t be similarly impacted.
USPI's second large tranche of surgery center acquisition from SurgCenter Development, the 92 facilities plus other acquired interests deal announced in November, was valued by parent company Tenet Healthcare at an all-in 7.x times EBITDA multiple.
Translation: Those expecting high single-digit multiples for single facilities are dreaming.
Current lending caps imposed by commercial lenders for single facility deals are at multiples ranging from 2.5 times to 3.x times EBITDA. That's at the current near-zero Fed rate.
Although the announcement by Federal Reserve Bank Chair Jerome Powell on December 15, 2021, revealed no immediate interest-rate hike, the indication announced was that interest rates will increase in 2022. Subsequently, The Wall Street Journal reported that Fed insiders state they are looking at 3 timed hikes in 2022.
Any increase in the Fed rate will further impact valuations because it will lead to a decrease in lender-supported debt to EBITDA multiples, meaning valuations will further decline.
Translation: If you are interested in selling an interest in a facility or in any other asset, a physician practice, for example, the time to deal is now. The flip side is true, too, as buyers won’t likely see near-zero interest rates again in their lifetime.
If you are motivated to move quickly, please contact me to set up a time to talk. |
| | | Business Life in the Time of Coronavirus Mini-Series
The coronavirus crisis caused a short term economic crisis for many medical groups. Our mini-series shows you the way out. Plus, many of the concepts discussed are applicable during both good times and bad.
[If you haven't already seen them, follow this link to watch our entire series.] |
| | Watch Tuesday's video here, or just keep reading below for a revised, more polished transcript:
Let's talk about confidentiality provisions, especially those in a contract between a medical group and a hospital.
The prime example would be in an anesthesia contract, a radiology contract, a pathology contract and so on, an exclusive contract with a hospital or a hospital system.
But, these days, with so many office-based physicians having made themselves into virtual "hospital-based" physicians by way of contracts with hospitals, the lesson applies to them, too. For example, to a cardiac surgery group that has some sort of contract with a hospital to function within a hospital’s cardiac clinic.
Normally when you think of a confidentiality provision, you see it as a way to protect your confidential information - your rate information, perhaps some specific staffing information, some of your methods and processes. You want the other side – in this case, the hospital - to hold the confidential information that you share with them as confidential. And almost every single hospital contract, at least every one that I have seen, has a confidentiality provision running the other way.
In other words, the hospital thinks that somehow or another you’re going to have their data, and they don’t want you sharing it. They don’t want you taking their information to another facility because, they argue, it would make it easier for the other facility to compete with them.
But there’s another use for a strong confidentiality provision protecting your information in a contract with a hospital: Should the hospital turn to an RFP and replace you – in other words, you don’t “win” the RFP – you’ve created an additional leverage point for you to attack the RFP process because it almost goes without saying that the hospital will have mined your confidential information for the data it distributed in seeking requests for proposals from other groups.
If you take a look at reported cases from multiple states, you’ll see that many attacks on the RFP process fail, but there are reported cases in which the issue isn’t so much the RFP process itself, as the breach by the hospital, and then in turn their agents, the consultants they’ve hired to shepherd the RFP process, of your confidentiality rights.
It creates another leverage point for you in connection with potential litigation, and even more so in protecting what truly is your confidential information.
Think about this: There are multiple levels on which to view confidentiality provisions. They are absolutely not simply "boilerplate" to be ignored.
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| | How to Deploy the Secret Sauce of Opportunistic Strategy
Webinar On Demand
They say that COVID-19 has changed the world, creating the "new normal." Many of your colleagues and many hospital administrators are running scared.
Others, leaders like you, know that crisis means opportunity.
Let me provide you with the strategic tools and insights that you need in order to seize opportunities, whether they’re in the context of your current business relationships, the expansion of your business activities, or the creation of new ventures.
You will learn:
•Defense as a defective default: It’s necessary, but not sufficient.
•Exploiting weakness: Drop the guilt and identify opportunity.
•Flat line negotiation is fatal: Understand its myths and limitations.
•Negotiation reality: Learn to identify and deploy on multiple planes to affect the outcome.
•Maneuver: Harness the power of maneuver, both in overall strategy and in specific negotiation strategy.
Others see a crisis and freeze in fear. Learn how to see the opportunities and obtain the tools to increase your odds of obtaining them.
The price to attend is $479. The cost of not attending is astronomical. |
| | | Wednesday - Exploiting the Power of First Impressions - Medical Group Minute
Watch the video here, or just keep reading below for a slightly polished transcript:
First impressions matter, and this is more than simply a social rule.
Last week, a new notebook computer that we had ordered arrived at the office. We have other computers, from Macs and other Apple products to a number of PCs that we use for various functions.
In ordering the new notebook computer, my office administrator evaluated what it would be used for and chose a Dell over a Mac because of the programs it must run. Because of our good experience with Mac products, especially their design and user interface, we knew there'd be a trade-off -- but here's the point about first impressions:
As I began to open the lid of the new Dell notebook for the first time -- just an inch or two open -- I could see that the stickers placed on the lower right hand of the computer's face were put on crooked. What do you think my immediate impression was of the Dell? Yes, that it's sloppily and cheaply made. My overall impression was focused through the initial lens.
What first impressions are you and your group giving to patients, referring physicians and hospital administrators? What can your group do to construct, manage and exploit the power of first impressions? Have you tied the creation of first impressions together with the provisions of your partnership/shareholders agreement, employment agreements and subcontracts, and the group's compensation plan?
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| | | Listen to the podcast here, or just keep reading for the transcript.
Running a hospital based group as "service" for the hospital, functioning as a sort of clearinghouse for income and expenses, severely limits your group's future.
It limits the willingness, and the ability, of your group to pursue outside opportunities. That's chiefly because there is tremendous pressure to pass through to the owner, and often to the non-owner, physicians all available income, instead of immediately investing in, or creating the capital reserves necessary to pursue, other opportunities.
Additionally, "service" groups often suffer from the mindset that the group was formed to provide services at only that hospital, thus taking off the table completely the consideration of other opportunities, even if the group were able to deal with the notion of holding back what would otherwise be income available for distribution.
Of course, "service status" results in a severely weakened position vis-a-vis the hospital, which knows that your group's very existence depends on renewal of its exclusive contract. That is a horrible position for your group to be in, both in terms of the concessions that the hospital may demand, and that your group may be forced to give - not to advance its position in some other respect, but merely to save its own life.
You spend your professional life saving others, literally. Why not save your own at the same time? |
| | | Calibrate Your Compass
Read our exclusive RedPaper to guide you through this evolving situation.
The coronavirus crisis caused a short-term economic crisis for many medical groups. Our RedPaper shows you the way out. Plus, many of the concepts discussed are applicable during both good times and bad.
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| | Help Us Help You With Helpful Content
What tailored content would you most like to see during this
time? How can we focus on solutions to your most pressing strategic concerns?
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| | | | We all hear, and most of us say, that the pace of change in healthcare is quickening. That means that the pace of required decision-making is increasing, too. Unless, that is, you want to take the “default” route. That’s the one is which you let someone else make the decisions that impact you; you’re just along for the ride. Of course, playing a bit part in scripting your own future isn’t the smart route to stardom. But despite your own best intentions, perhaps it’s your medical group’s governance structure that’s holding you back.
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| In fact, it’s very likely that the problem is systemic. The Medical Group Governance Matrix introduces a simple four-quadrant diagnostic tool to help you find out. It then shows you how to use that tool to build your better, more profitable future. Get your free copy Free.
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| | | | Whenever you're ready, here are 4 ways I can help you and your business:
1. Download a copy of The Success Prescription. My book, The Success Prescription provides you with a framework for thinking about your success. Download a copy of The Success Prescription here.
2. Be a guest on “Wisdom. Applied. Podcast.” Although most of my podcasts involve me addressing an important point for your success, I’m always looking for guests who’d like to be interviewed about their personal and professional achievements and the lessons learned. Email me if you’re interested in participating.
3. Book me to speak to your group or organization. I’ve spoken at dozens of medical group, healthcare organization, university-sponsored, and private events on many topics such as The Impending Death of Hospitals, the strategic use of OIG Advisory Opinions, medical group governance, and succeeding at negotiations. For more information about a custom presentation for you, drop us a line.
4. If You’re Not Yet a Client, Engage Me to Represent You. If you’re interested in increasing your profit and managing your risk of loss, email me to connect directly. |
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