Fair Market Value Opinion for Mobile Cardiac Service
Client/Profile
Midwest academic medical center
Challenge/Situation
To develop a fair market value assessment for a new cardiac care technology that the client proposed to offer to small to medium-sized cardiology practices on a mobile basis. The practices would be unlikely to be able to obtain this technology on their own due to the high cost of equipment and operations, the need for trained technologists and a lack of experience in interpreting the exams.
In-house counsel involved Veralon to get support in determining how to price this innovative new service being offered to referring physicians.
The hospital developed a business model on the premise that the cardiology groups would want to have access to this technology through leasing arrangements. Veralon was asked to develop an opinion on the fair market value and commercial reasonableness of the contemplated lease arrangements and on the value of related services to be provided by the hospital and by the cardiology groups.
Process
Our work considered the revenue generating capacity of the new service, as well as how payers were likely to treat the service. We also considered the costs that each physician group would incur, including:
- Space on which to park the mobile unit;
- Electricity and telecommunications required to operate the equipment;
- Supervising physician services; and
- Nursing services.
Results
Veralon completed the valuation and concluded that the business model was a fair market value and commercially reasonable arrangement. The hospital pursued development of the mobile business model.