MRG Newsletter May 2018

Nontraditional Partnerships in M&A



Manage Resource Group continues to see a spike in activity associated with I&A services and has noticed that hospitals and providers are looking at nontraditional partnerships within M&A activity.


Mergers and acquisitions between health care providers have more than doubled in the last ten years, with a particular rise in nontraditional partnership transactions, such as:

  • Joint venture agreements
  • Minority investments
  • Clinical affiliations
  • Timeshare agreements

Traditional partnerships were driven by the needs of smaller organizations and physician practices, where they could improve clinical programs and services by merging with a larger health system. The move to nontraditional partnerships stems from long-term care strategies and value-based care across all organizations, with health systems leading the way in expanding their reach to patients and implementing these ideals across facilities.


Changes in healthcare partnership are also facilitated by changes in health services legislation, especially in terms of leasing arrangements for healthcare providers. Stark Law required that physicians enter a formal lease providing exclusive use of their premises and equipment to the lessor, usually a hospital or physician group. These leases had a one year minimum and prohibited the physician and lessor from sharing space and equipment during the term.  This led to inefficient, inflexible, and impractical arrangements for all parties involved.


In 2016 the Center for Medicare and Medicaid Services added a Timeshare Arrangements exception to Stark Law, permitting the sharing of space, equipment, supplies, and services on non-exclusive leasing terms between healthcare providers. As an alternative to a full-time lease, timesharing makes it easier for physicians and hospitals to share resources on an as-needed basis and expand available services for patients without transferring ownership of properties.


Hospitals and health systems will continue to make strategic alignments with providers along the continuum of care allowing for creative teamwork within the industry. Such partnerships result in the centralization of essential functions such as IT, purchasing, and human resources for larger organizations, while increasing resource availability and data collection power to small physician practices.


In a continually consolidating healthcare environment, traditional mergers and nontraditional counterparts should all be considered and weighed to determine the best route of action to fit the needs of physicians, hospitals, and patients.

MRG Projects:

  • I&A services for Respiratory Clinic in KY
  • Desktop Appraisal for Diagnostic Imaging Group in WI
  • Resale and salvage clean sweep project for OH Hospital
  • Remote I&A service for MI Health System

MRG Appraisal of the Month:

1 qty Siemens 1.5T Espree MRI System with Syngo A40 software

FMV: $600,000.00

MRG Fun Facts:

Many hospitals in China don’t label the fourth floors of their buildings because the words “four” and “death” are too similar in Chinese.

Mergers and Acquisitions are off to active start for the 1st quarter of 2018

Manage Resource Group has seen a spike in activity for 2018 from clients they have worked with to provide tangible asset inventory and appraisal services.  As the merger and acquisition activity continues to heat up, we thought it might be a good opportunity to review a few valuable points if your facility plans to engage in M&A as part of their strategic initiative.


Inventory & Appraisal Services for FFE/Tangible Assets

When selecting a firm to conduct I&A work, make sure of the following:

  • They are using USPAP Uniform Standards of Professional Appraisal Practice for FMV
  • They provide a third party unbiased/objective view of the assets
  • Request examples of deliverables showing reports and methodology to the valuation engagement
  • Request that firms outline their process for engagement and expectations for timelines to conduct site visits and sending deliverables
  • Request references outlining comparable projects

Understand the appraisal methodology that will be applied to the assets.  Fair market value is the estimated value of an asset between a willing seller and a willing buyer.

  • Fair market installed/in-use value is typically used for continued use of the asset in its current state
  • Fair market liquidation value is typically used if the assets needs to be liquidated to the open market

Consider what demographics will be captured on assets during the inventory.

  • Facility, Room, General Description, Manufacture, Model, Serial Number etc. should typically be included
  • Obtain a condition assessment of the asset to understand its viability after the purchase

There are many scenarios to providing asset valuations but applying some of the general guidelines outlined above will help you determine the best direction for your organization.  If you are interested in learning more about tangible asset valuations, please contact one of MRG’s sale professionals at 888/557-4797 or and we would be happy to discuss needs or questions you might have.