Medical Business Valuation Issues 

The Medical sector is part of the larger health care and social services industry that has grown by more than 4% pa in the past five years.  It includes:

• General practices

• Dental, optometry and ophthalmology services

• Physiotherapy services

• Hospital services

• Aged care and social services​

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For medical practice business valuations, there is often the notions of  professional goodwill  and practice goodwill.  Professional goodwill is the degree to which revenue is based on the the individual practitioner’s reputation, trust and the reliance of patients on the person rather than the practice. 

 

Practice” goodwill relates to the business' ability to generate ongoing EBITDA without relying on key medical practitioners. 

 

Key factors that influence the business valuation include location, integrated IT systems, key staff, procedures and recurring client base.

 

There is an increasing trend for smaller practices to amalgamate or merge to achieve economies of scale and cost efficiencies.  In some cases groups are forming strategic alliances and using different legal structures. 

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