TCIV: Exit planning, creating value, and how patient outcomes drive better bottom lines

In a lot of ways, developing a plan to exit a business is similar to planning treatment, Bruce Vanderlaan, managing director of Mertz Taggart, told attendees at the Treatment Center Investment and Valuation Retreat on Tuesday in Scottsdale, Arizona. “What do you think the success rate would be if you provided treatment without a plan? What would your success rate be if you told a client to find a treatment plan on the Internet and do it yourself?” he said. “I think you’d agree that your success rate would be pretty low.” And yet, a study published in Forbes finds that 88% of business owners surveyed said they have no formal plan for how they will exit their business, Vanderlaan said. There are four options for transitioning out of a business – a sale to an outside buyer, a sale to those inside the organization, a transfer to family members or liquidiation – and Vanderlaan shared with TCIV attendees a series of keys for treatment center executives to plan their exits once they choose the way they prefer to move on. Among Vanderlaan’s recommendations: Put an exit plan in writing. Establish goals of what success should look like. Use plain language. Keep it current and review it with advisors annually. An advisory team should include tax, legal, financial and business professionals who meet as a group. Address potential risks that could affect the business. Vanderlaan noted it’s also important to have a specific dollar figure required for financial freedom targeted, share exit objectives with spouse/domestic partner as well as business partners to reduce anxiety, and have a clear vision of a life after exiting the business that will be personally fulfilling. Diversify to build value Diversification was a major theme of the presentation on increasing valuation by Jonathan Wolf, president and CEO of Pyramid Healthcare. Treatment center executives looking to build the value of their businesses can benefit from increasing the range of services they offer within a market. This allows patients to move up and down within the continuum of care as needed. By providing more options, providers can keep patients in care longer, Wolf said, adding that warm handoffs and a seamless flow of information within an organization are appealing both to payers and prospective buyers. Diversification is also a way to help control risk on a number of fronts, Wolf said, including: Establishing a mix of various revenue streams Having multiple smart leaders so that no one member of an organization’s leadership team is relied upon disproportionately Operating in multiple markets and geographies Other factors that could drive up the value of a treatment center and make it more attractive to a potential buyer, as outlined by Wolf: demonstrating an ability to source clients ethically and consistently (and not relying too much on Internet-based marketing), as well as an ability to demonstrate consistent, replicable growth and an ability to integrate acquisitions at scale. Patient outcomes power financial success For treatment centers, improving their financial bottom line starts with improving patient outcomes, said Dominic Sirianni, CEO of Delphi Behavioral Health Group. High patient satisfaction rates are linked with better patient outcomes, he said, and to be financially healthy, treatment centers should work from the vision and mission of helping patients first. “Coming from the clinical side of things, a lot of times the money side is viewed as negative, but it’s not,” he said. “It’s what gives you the ability to grow and hire better people to perform these outcomes. Have a good client-to-staff ratio, site leaders and clinicians who are focused on the patient. Those things are not at odds.”