Maximizing Medical Group Valuation: Top Strategies to Increase Your Practice Group's Worth

As an operator of a group of medical practices, knowing your group's worth can inform decision making and provide a baseline for potential additional investments. Surely, not the only metric you should be tracking, but valuation is intrinsically tied to nearly every other key performance indicator (KPI). Keeping costs stable, while increasing quality of patient care, employee satisfaction, efficiency of processes and systems - and so on, will positively impact your group’s value. Of course stable cost is a pretty big caveat. But let’s first look at understanding what a medical practice group is worth and then we can dig back into the top ways to increase its valuation.

Medical Practice Group Valuation: An Overview

The value of a medical practice group depends on various factors, including overall revenue, profitability, location, competition, patient base, and more. Some of the most commonly used methods for valuing a medical practice group include the income approach, the market approach, and the asset-based approach.

The income approach looks at the group's future earnings potential, considering factors such as projected revenue growth, expenses, and working capital. The market approach compares the group to similar groups that have recently been sold in the same area, taking into account any differences in size, location, and other relevant factors. The asset-based approach considers the value of the group's tangible assets, such as equipment, real estate, and inventory.

To properly measure what your group’s true value is, it is important to actually have clear visibility into the business of each individual practice. The more you know, the better positioned you are to determine your fair market value.

To properly measure what your group’s true value is, it is important to actually have clear visibility into the business of each individual practice. The more you know, the better positioned you are to determine your fair market value.

Top Ways to Increase Medical Practice Group Valuation

Performance visibility

As mentioned above, a critical aspect of increasing medical practice group valuation is ensuring that you have clear and accurate data about each practice's performance. This includes information on revenue, expenses, patient volume, and more. By tracking this information consistently across all practices, you'll be better equipped to identify trends, make informed decisions, find areas to improve efficiency, and demonstrate the value of your group to potential investors.

System and data unification

Having a unified system for tracking and managing the business data can also help to increase your medical practice group's valuation. By having all of your systems speaking the same language and simplifying reporting and monitoring, you'll be able to quickly access the information you need to make informed decisions and drive growth across all practices. Additionally, unified systems can help to streamline processes and reduce administrative overhead such as double-work, freeing up time and resources for other initiatives.

Focus on growth and profitability

To increase the value of your medical practice group, it's essential to focus on growing your revenue and improving profitability across all practices. This could involve expanding your patient base, offering new services, improving patient satisfaction, and of course uncovering and implementing cost-saving measures. By demonstrating a commitment to growth and profitability, you'll be better positioned to attract potential investors and increase the value of your group.

Unify your technology

The impulse to simply invest in a new technology to increase the value of your medical practice group may be tempting but trying to implement a new electronic health records (EHR) system, telemedicine platform, or other technology solutions may cause more problems than it solves. Many practices prefer to use the systems they are on and rather than forcing standardization, it is often more efficient to unify the existing systems so that they can be managed together while improving patient care and streamline operations across all practices.

Reduce risk

While uncovering and addressing risks may require an initial investment, the potential payback is enormous. Medical practices across the country are at great risk for security breaches, non-compliance to privacy and payment regulations, and key-man concerns. Key man risk when an organization places the trust of knowledge, skills, and important relationships in the hands of one or a few employees. If this “key man” leaves, or threatens to leave the business, they will take their knowledge with them, leaving an unprepared business open for risk.

Expand the business

Offering additional services or expanding to additional locations will also increase value if the associated costs are accounted for. Ancillary services, especially those that can be provided by non-physician staff not only provide additional revenue streams, but can also improve the patient experience. This approach can also provide a differentiator to other competing providers. And while expanding to new locations may be daunting and expensive, there may also be opportunities to expand business within existing footprint by expanding hours, catchment areas, or leveraging technology and process improvements to streamline patient scheduling.

The Importance of Maximizing Your Medical Practice Group's Value

Understanding the value of your medical practice group and implementing strategies to increase its valuation is crucial for the long-term success of your organization. By tracking performance, unifying data and systems, focusing on growth and profitability, unifying technology, reducing risk, and expansion opportunities, you can take control of your group's future and increase its value.