August 2023: ROC Monthly Masterminds Call
August 2023: ROC Monthly Masterminds Call
Enhancing Your Selling Strategy: Uncovering Value Drivers and Riding Market Trends
Exploring Exits, Private Equity, and Growth Funding?
Thanks to Vasanta, Head of Healthcare Investment Banking at Matrix Capital Markets Group, for insights on boosting business value and tracking investment trends.
Vasanta expanded our horizons in behavioral healthcare, sharing growth and selling insights and pitfalls.
Access Recording:
Passcode: 6+50J*wy
Summary of Covered Topics:
Coordinating Business Aspects for Effective Marketing and Operations
Significance of Diversified Operations
Long-term Perspective on Growth Strategy
Reassessing Payor Contract Value
Capital Markets Perspective – July 2023 – View Here
Investors Pursue Entities with Clearly Stated Goals
Investors are looking for a steady, cohesive organization across all operational departments.
For behavioral health entrepreneurs considering selling their business, navigating the sea of information can be daunting. What's attractive to one buyer might be different from another.
Apart from a successful healthcare business, other vital company traits must be pondered, as discussed below.
Clean & Compliant Operations
Precisely outline your corporate objectives and benchmarks. The source of buyer apprehension often lies in compliance concerns. Documenting your compliance protocols and structures is advisable. This provides potential buyers with a clear understanding of the associated risks in acquiring the company.
Accreditations
It's common knowledge that certifications sustain business operations, and purchasers seek facilities boasting a minimum of one accreditation, like Joint Commission or CARF. This serves as the initial point of discussion to engage a potential buyer.
Patient Acquisition
Where are your patients coming from?
What’s the average length of stay?
How are your patients leaving?
Infrastructure & Framework
Is the current timing appropriate for your business to be sold, considering its scale? Alternatively, should you consider a sale five years down the line?
Where might your business require additional resources to facilitate growth? Conversely, could an excess of tools become a hindrance?
Revenue Cycle Management
To put it concisely, buyers do not show a distinct preference for either in-house or outsourced revenue cycle management. Their concern lies in its effectiveness and seamless operation.
Consider:
Are you presenting substantiated data for incoming patient claims?
Is your RCM process efficiently functional?
Solution: Work with an accounting firm that understands healthcare, and a bonus if they understand behavioral health. As we all know, this space has many nuances, and using someone with experience in our industry will help decrease these nuances.
Cash-Based vs. Accrual-Based Accounting
When seeking funds or debt, there's a rush to convert cash-based financial records into accrual-based accounting. This shift is driven by the fact that cash-based accounting records revenue upon collection, while accrual-based records it when services are rendered.
In cash-based accounting, revenue is recognized later, after the service is provided. Accrual accounting promotes faster growth, although it raises concerns about potential overcharging over time.
Despite the initial challenges of early accounting expenditure, it's advantageous to adopt accrual accounting sooner, preferably a year before contemplating a sale, to benefit your business in the long run.
Patient & Operational Structure Mix
Differentiation can be a game-changer. Consider diversification in:
Payor Contracts
Prioritize quality: A multitude of payor contracts isn't valuable if they don't yield patients.
Rates: Ensure rates cover costs or more.
Levels of care
Type of patients
Management
Cohesive leadership: Are key players collaborating effectively? Is staff turnover consistent?
Marketing Strategy
Payor contracts are not magical. You still need to market your business and quickly get the patient into the door. Couple all your operational strategies with a good marketing strategy.
Standarziation in KPIs
Beyond the basics, showcase unique KPIs.
For example, does your leadership team follow any specific leadership development training, such as EOS, or something that tracks performance in your business and the people involved?
Stand out by optimizing these facets for a well-organized and thriving business.
Value-Based Care Readiness
"We provide great care." While likely accurate, payors encounter this assertion regularly. What tangible evidence supports your claim?
Allocate resources to adopt technology that substantiates and demonstrates your value proposition to external stakeholders. Developing your own applications isn't essential, especially when specialized organizations excel in this domain. Efficiently invest in technology to bolster your credibility and efficacy in the value-based care landscape.
Impact of Company Legal Structure
Is it significant for potential buyers? The answer varies. It holds crucial importance for you as it directly influences your business's taxation.
Opting for an LLC eases the acquisition process, but alternative structures are plausible. In the case of an S Corp, conversion is required for acquisition.
Note: Prior to considering any legal structure switch, consult your legal counsel and accountant. Selling after conversion is feasible but subject to a specific time period in the new structure.
Additional Resources:
Curious and want to learn more? Contact Vasanta below:
Vasanta B. Pundarika - Connect on Linkedin.
Head of Healthcare Investment Banking
Matrix Capital Markets Group, Inc.
Coming Soon
Tuesday, September 12th: Masterminds meeting with outcomes leaders in behavioral health that will help put action into how to build better relationships with payors.
This is how we work together to improve the future - sharing ideas and information, all with a common goal. Make your voice known!