Q&A: Is capitation the right call?

A: Practice value primarily comes from the income available to a buyer above what he or she could earn in simple employment (referred to as "dividends"), without risking savings or a loan to make a purchase. That's the money that would be used to pay off the loan and provide a return on investment.

The easier way for you to increase value may be to add an employed midlevel provider or two or some ancillary services that would increase dividends without increasing your personal workload or hours. For example, increasing your hours from 30 to 40 per week has no effect on value, but making the same money in 20 hours has a positive effect.

Medical Economics Consultant Keith Borglum, CHBC (left), of Professional Management and Marketing, has been a licensed practice broker, appraiser, author, and management consultant to physicians for more than 25 years, is based in Santa Rosa, California, and practices nationally. Send your practice management questions to mepractice@advanstar.com
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