Facilities will find a competitive market if they meet certain quality of earnings criteria such as a diversified, in network revenue stream; support from sustainable practices with succession plans in place; and reasonable access to growth opportunities. It is possible to gain a strong valuation without one or more of these characteristics if the facility represents strategic value to a particular buyer, but overall we see buyers taking a more conservative approach.
As has been the trend in recent years rising costs, modest reimbursement increases and the near elimination of the out-of-network model have led to an environment that requires sustainable, high volume and strong management to drive success. As a result, consolidation has increased as scale is now a pre-requisite for success. Smaller facilities can be attractive to buyers but, but as noted they need to represent some strategic value or an opportunity for consolidation into a larger center.
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