« Cases

Valuation of a Start-up Physician Practice Association and ACO


Health system in dense, competitive market


To conduct a business valuation of a start-up IPA, ACO, and affiliated care and data management company, with innovative payer contracts and strong growth in physician members. The health system was seeking to develop its physician network and make a leap forward into ACO contracts.


The health system was interested in acquiring a start-up independent practice association (IPA) that was participating in the Medicare Shared Savings Program (MSSP) and had several commercial contracts which included population health management components. The physician-sponsored IPA and ACO, just a few years old, were experiencing rapid growth in membership, and represented an opportunity for the health system to align with private physicians. The start-up entities required capital and additional human capital investment.

Veralon prepared a business valuation and supporting analyses, obtaining input from health system and IPA management. The discounted cash flow methodology, under the income approach, required a robust understanding of the MSSP. The performance-based commercial payer contracts required the development of assumptions and financial projections, and consideration of highly technical valuation issues.


The health system and the IPA successfully executed a detailed Memorandum of Understanding and are currently conducting due diligence in anticipation of executing closing documents. Veralon provided a comprehensive business valuation report on the purchase price, its allocation, and other transaction components.