Doctors don’t just make money from salaries. Doctors often own their medical practices and those practices make money. A medical practice is an asset whose value can be divided in an Illinois divorce. A Medical Practice Appraisal Must Begin With Defining What Is Being Valued What is a medical practice worth? Well, it depends. A medical practice does not have a single value that can be determined by using the same formula in every case. What matters is the purpose of the valuation. A court valuing a spouse’s ownership interest, a physician selling a practice to another physician, and a hospital purchasing selected practice assets are not necessarily valuing the same property. In Illinois, the court must determine the fair market value of the property being divided in the divorce. Section 503(k) of the Illinois Marriage and Dissolution of Marriage Act provides that “the court shall employ a fair market value standard,” and the valuation date is usually the date of trial, unless the parties agree to another date or the court orders one. 750 ILCS 5/503(k). Before an appraiser begins any calculations, the appraisal assignment should identify: These are not technical details that can be looked into after the appraisal is finished. The BVR/AHLA Guide to Healthcare Industry Finance and Valuation explains that the valuation objective includes the subject ownership interest, the legal rights attached to that interest, the standard and premise of value, the applicable level of value, and the valuation date. Mark O. Dietrich ed., BVR/AHLA Guide to Healthcare Industry Finance and Valuation 706 (4th ed. 2016). What Does The Physician Actually Own? A physician may tell others, “I own my practice.” Yet that statement may describe several different things. For example, the physician may own the entirety of a solo medical corporation, an ownership interest in a professional limited liability company, or shares in a larger physician group. Each ownership interest should be identified and valued separately. Otherwise, an appraiser may omit a valuable related entity or count the same income and assets more than once. Thus, the ownership documents should establish what the physician actually owns. Relevant documents may include shareholder or operating agreements, buy-sell agreements, articles of incorporation or organization, partnership agreements, stock certificates or membership records, and other related materials. The practice’s assets are not automatically identical to the physician’s ownership interest in the entity. A medical practice may own cash, equipment, supplies, […]
