This document discusses evaluating the brand value of healthcare entities. It begins with an overview of healthcare affiliations between large brand name healthcare systems and local entities. It then discusses what comprises a healthcare brand in terms of reputation, quality, and benefits to the healthcare system. The document outlines reasons to value healthcare brands, such as for resource allocation, negotiating affiliations, and strategic decision making. It explores various brand valuation methodologies including the relief from royalty method, corroborative methods, and issues that can arise. Finally, it briefly discusses evaluating the strength of a healthcare brand.

1. Page 0December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Evaluating the Brand Value of
Healthcare Entities
December 13, 2014
W. James Lloyd, CPA/ABV, ASA, CFE
Principal, Pershing Yoakley &
Associates, P.C.
Annapoorani Bhat, MBA, ASA
Sr. Manager, Pershing Yoakley &
Associates, P.C.

2. Page 1December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Agenda
• Healthcare Affiliations
• What’s in a Brand Name Anyway?
• Why Value Brands of Healthcare Entities?
• Brand Valuation Methodologies
• Evaluating Brand Strength
• Capitalizing on the Brand’s Value

3. Page 2December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Speaker Biography - Jim Lloyd
• W. James (Jim) Lloyd is a Principal in the valuation and dispute services practice
of Pershing Yoakley & Associates (PYA), an accounting and consulting firm
specializing in the healthcare industry.
• Senior financial executive experienced in valuation, mergers and acquisitions,
litigation, tax, and accounting matters.
• Substantial experience with valuing a wide range of privately-held companies,
complex business arrangements, and intangible assets.
• Litigation and expert testimony experience related to diminution of value, fraud,
intellectual property, lost profits, post and failed acquisition transactions, antirust,
and shareholder disputes.
• Professional credentials include: Certified Public Accountant (CPA), Accredited
Senior Appraiser (ASA), Accredited in Business Valuation (ABV), and Certified
Fraud Examiner (CFE).

4. Page 3December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Speaker Biography – Anna Bhat
• Annapoorani Bhat is a Senior Manager in the Valuation and Litigation Support
practice of Pershing Yoakley & Associates, P. C. specializing in valuation and
related consulting services for companies in the health sciences sector including
providers, pharmaceutical companies, managed care entities, and allied service
providers.
• Over 20 years of work experience with 11 years in providing valuation-related
consulting services. Primary area of expertise is in the valuation of businesses
and assets for regulatory compliance, financial reporting, and tax purposes for
healthcare and non-healthcare entities. Extensive experience in performing
valuations related to fee-for-service agreements for pharmaceutical companies
and fair market value analysis of physician compensation.
• Accredited Senior Appraiser (ASA) and Moderator at the Women’s Leadership
Counsel of the American Health Lawyers Association.

5. Page 4December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Healthcare Affiliations

6. Page 5December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Do you
know
these
names?
Giants in Health Care

7. Page 6December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Affiliations Everywhere
Cleveland Clinic
• Advisory Services - Branded Affiliation
• Heart & Vascular
• Orthopedic & Spine
• Alliances, affiliations, network
Duke Medicine
• Duke LifePoint – 11 facilities in NC, VA & PA
• Cancer programs affiliations
• Heart program affiliations
• Hospital patient safety and quality affiliations
MD Anderson
• Partner members: NJ & AZ
• Certified members: 13 health systems, 11
states
• Affiliates: International
Mayo Clinic
• Announced first affiliation in September
2011
• Since then approximately 30 health
systems have joined the network all over
the U.S.

8. Page 7December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Cleveland Clinic - Affiliations

9. Page 8December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Mayo Clinic - Affiliations

10. Page 9December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Healthcare Affiliations
“You can tell a lot about a
place by the company it keeps.
Through affiliations with thought
leaders in the medical world like
Cleveland Clinic for heart care
and medical oncology and Ann &
Robert H. Lurie Children’s
Hospital of Chicago for pediatric
specialty care, Cadence Health
connects you with access to
expertise and top-ranked
healthcare, right in your own
backyard.” Cadence Health Website
Trusted experts in the field

11. Page 10December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Healthcare Affiliations
“… our exclusive local affiliation
with MD Anderson Cancer
Network® strengthens the Saint
Francis Cancer Institute’s
commitment to providing
exceptional local cancer
care. Experts at MD Anderson have
developed disease-specific
guidelines for cancer treatment,
cancer prevention, early detection
and follow-up care that allow MD
Anderson Cancer Network-
certified physicians to bring new
hope and knowledge to local
cancer patients.” MD Anderson Website
Hospital in Dublin, Ireland

12. Page 11December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Healthcare Affiliations
• Motivating factors for the local
entity:
 Associate with high quality
services providers
 Gain access to knowledge
and resources
 Learn and develop protocols,
skills
 Build own reputation for
quality
• Motivating factors for the
“brand name” entity:
 Capitalize on the investments
made in developing brand and
reputation in the market
 Expand reach outside of
immediate geographic area
 Promote further brand
awareness

13. Page 12December 13, 2014
Evaluating the Brand Value of Healthcare Entities
What’s in a Brand Name
Anyway?

14. Page 13December 13, 2014
Evaluating the Brand Value of Healthcare Entities
What’s in a Brand Name Anyway?
“…This is not just a new logo, signage, or new ads. This is
about who we are, how we are able to reduce costs while
continuously improve quality and where we are going as an
organization…”
John Fox, CEO of Emory Healthcare, September 2013

15. Page 14December 13, 2014
Evaluating the Brand Value of Healthcare Entities
What’s in a Brand Name Anyway?
Reputation &
Quality
Reputation of the Health System
Reputation of Physicians
Perception around Safety
Reliability of Outcomes
Perception around Quality

16. Page 15December 13, 2014
Evaluating the Brand Value of Healthcare Entities
What’s in a Brand Name Anyway?
Benefits to
Health System
Attracting Top Quality Clinicians
More Philanthropic Gifts
Better Rates with Health Plans
Retaining Clinicians/Staff
Attracting Patients

17. Page 16December 13, 2014
Evaluating the Brand Value of Healthcare Entities
What’s in a Brand Name Anyway?
Brand
Strength
Affected by
Patient Satisfaction
Marketing
Physician Referral
Networks
National Rankings
Preference and Awareness
with Patients and
Providers
Reputation in the Market &
Competition for Services

18. Page 17December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Why Value Healthcare Brands?

19. Page 18December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Why Value Healthcare Brands?
“If a measurement matters at all, it is because it must
have some conceivable effect on decisions and behavior.
If we can't identify a decision that could be affected by a
proposed measurement and how it could change those
decisions, then the measurement simply has no value”
Douglas W. Hubbard, How to Measure Anything:
Finding the Value of "Intangibles" in Business

20. Page 19December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Why Value Healthcare Brands?
What is my brand
worth?
How much should I
invest in
developing my
brand name?
How much should
I pay for an
affiliation?
Am I allocating my
resources
appropriately?

21. Page 20December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Why Value Healthcare Brands?
• Resource allocation:
 Marketing spend – is it effective and having a positive
impact on brand strength?
 Campaigns to improve brand awareness – Pre- and
post-campaign assessment.
 Building & maintaining brand equity – Help focus on
developing brand awareness on a sustained basis.

22. Page 21December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Why Value Healthcare Brands?
• Provides guidance for negotiating affiliation terms:
 Should a fee be paid?
 If so, how much?
 What does the fee cover (just the name, or clinical
protocols, administrative support, etc.)?
 What form should the payment take? For example:
royalty fee, upfront lump sum payment, equity interest,
etc.

23. Page 22December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Why Value Healthcare Brands?
What did I get?
What did I give?

24. Page 23December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Why Value Healthcare Brands?
What did I get?
What did I give?

25. Page 24December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Valuation Methodologies

26. Page 25December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Valuation Methodologies
Brand Value
How to
value ????
How to
value????

27. Page 26December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Brand Value Continuum
Valuation Methodologies
Business
Name
Brand

28. Page 27December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Build
Credibility
Brand
Valuation Methodologies
Build
Awareness
Create
Emotional
Connection
Create
Loyalty
Business
Name

29. Page 28December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Brand
Value
Income Approach
Based on the
economic benefits
anticipated to be
derived from the asset.
Market Approach
Based on transaction
data involving
similar assets or
services
Cost Approach
Based on the anticipated
cost to recreate,
replace, or replicate
the asset
Valuation Methodologies

30. Page 29December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Brand
Value
Income Approach
Based on the
economic benefits
anticipated to be
derived from the asset.
Market Approach
Based on transaction
data involving
similar assets or
services
Cost Approach
Based on the anticipated
cost to recreate,
replace, or replicate
the asset
Valuation Methodologies
Difficult to determine
Floor Value

31. Page 30December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Brand
Value
Income Approach
Based on the
economic benefits
anticipated to be
derived from the asset.
Market Approach
Based on transaction
data involving
similar assets or
services
Cost Approach
Based on the anticipated
cost to recreate,
replace, or replicate
the asset
Valuation Methodologies
Difficult to determine
Floor Value
Adopt a combination
of both methods

32. Page 31December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Valuation Methodologies
• Commonly used to value intellectual property assets
• Based on the theory that owning the asset avoids the
cost of licensing it
• Value = present value of royalty/licensing costs avoided
by owning the asset
• Key considerations: 1) royalty rate(s), 2) revenue base
and projections, and 3) discount rate
Relief from Royalty Method (RFR)

33. Page 32December 13, 2014
Evaluating the Brand Value of Healthcare Entities
• Search public license/royalty rate
databases
• Review public filing, press releases,
disclosures, tax returns, legal filings to
identify terms of any existing
affiliations
• Review research studies on brand
licensing
Royalty Rate Research
Valuation Methodologies

34. Page 33December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Valuation Methodologies
• Evaluate comparability – industry/operations
• Evaluate profitability – (i.e. evaluate impact on
profitability from utilizing the brand).
• Qualitative comparison of subject entity with other
similar entities.
Thoroughly evaluate royalty rate data

35. Page 34December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Step 1
Step 2
Step 3
Step 4
Valuation Methodologies
Case Study
Selecting Royalty Rate
• Researched more than 40 AMC’s to
identify agreements where brand name is
licensed.
• Researched public data for licensing
agreements involving brand name in
healthcare sector/university names.

36. Page 35December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Step 1
Step 2
Step 3
Step 4
Valuation Methodologies
Case Study
Selecting Royalty Rate
• Evaluated earnings before interest and
taxes (EBIT) margins for 14 AMCs
indicated to be comparable to subject
entity in size and services to determine
royalty rate thresholds (based on 25%
Rule of Thumb methodology).

37. Page 36December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Step 1
Step 2
Step 3
Step 4
Valuation Methodologies
Case Study
Selecting Royalty Rate
• Qualitative evaluation of brand strength
and position
• Evaluate rankings for 14 AMCs and
compare with subject entity
• Interview more than 20 stakeholders to
understand brand position for each service
line.

38. Page 37December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Step 1
Step 2
Step 3
Step 4
Valuation Methodologies
Case Study
Selecting Royalty Rate
• Test value conclusions using corroborative
methods

39. Page 38December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Valuation Methodologies
Data Evaluation
Internal Data
• Revenue and
margins of subject
entity
• Strategic plans for
key service lines
• Internal Quality &
Safety Report
• NRC research
results
External Data
• Quality Metrics: US News & World
Report, Leapfrog Group,
Healthgrades
• Financial metrics - Margins for 14
academic medical centers (AMCs)
• Franchise/affiliation agreements –
financial and other data for more
than 45 AMCs and affiliates
• General market data on trade
names
• University/College licensing
agreements for consumer products
Interviews
• Service line and
other executive
leadership
• Marketing team
• Chief quality
officer

40. Page 39December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Valuation Methodologies
Issues with RFR Method
• Finding a needle in a haystack
• Limitations on ability to
appropriately compare entities
• Sensitive data points
• Qualitative factors can be
difficult to assess/estimate
impact
• Corroborative methods and
appraiser judgment is key.

41. Page 40December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Valuation Methodologies
Percent of Purchase
Consideration
Residual Value
Calculation
Proxy Contract
Evaluation –
e.g. Duke-LifePoint JV
Corroborative
Methods

42. Page 41December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Valuation Methodologies
Percent of Purchase Consideration
• Estimate subject entity’s enterprise value.
• Review data on purchase price allocations
for hospitals where trade names are
identified.
• Consider percentage of value allocated to
trade name and evaluate in the context of
the concluded value indication .

43. Page 42December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Valuation Methodologies
Residual Value Calculation
• Estimate enterprise value less tangible
assets to ensure sufficient balance available
for other intangible assets.
• Use fair market value of tangible assets if
available, if not book value. Estimate value
of intangible assets apart from brand name
where possible.
• Estimate residual value attributable to brand
name and goodwill

44. Page 43December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Valuation Methodologies
Proxy Contract Evaluation
• Research public information on terms of
affiliations between health systems and
health care entities
• Evaluate what the terms of the agreements
imply for brand value
• e.g. Duke – LifePoint JV, internal contracts,
etc.

45. Page 44December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Valuation Methodology
Conclusion
of Brand
Value

46. Page 45December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Evaluating Brand Strength

47. Page 46December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Evaluating Brand Strength
Brand strength is generally service line specific:
• In a single hospital system, brand strength may be
substantially different within various service lines.
• Important to evaluate appropriate qualitative factors
that drive preference and perception of value.
• Many joint ventures are service-line specific (e.g.
cancer centers, etc.).

48. Page 47December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Evaluating Brand Strength
Factors considered in evaluating brand strength:
• Rankings, awards, recognitions
– Quality and Safety rankings- e.g. Leapfrog, Healthgrades
– Overall ranking: US News & World Report
– Patient satisfaction: Healthgrades
• Market preference – Internal data
• Competition
• Strategic Initiatives and affiliations

49. Page 48December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Evaluating Brand Strength
Brand
Strength
Affected by
Patient Satisfaction
Marketing
Physician Referral
Networks
National Rankings
Preference and Awareness
with Patients and
Providers
Reputation in the Market &
Competition for Services

50. Page 49December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Applications of Brand
Valuation

51. Page 50December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Application of Brand Valuation
Applications of Brand Valuation
• Structure joint ventures based on value contribution
• Allocation of resources related to improving brand
awareness, etc.

52. Page 51December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Application of Brand Valuation
Examples of joint venture/affiliate contracting terms:
• Royalty rate on revenue/gross margin, etc.
– Ensure selected royalty rate adequately compensates for
all value contributed (brand name, protocols, intellectual
property, etc.)
– Royalty rate should generally be applied to incremental
revenue anticipated to be generated from using the
brand

53. Page 52December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Application of Brand Valuation
Examples of joint venture/affiliate contracting terms:
• Percent of equity
– How would the value of the joint venture be measured at
the onset of the use of the affiliated brand name?
– Consider performing a with-without analysis to
understand the value contribution of the affiliation
– Consider how the business value will change over time
with the use of the brand name and ensure contract
terms do not lock you into unfavorable terms

54. Page 53December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Final Thoughts
A rose by any other name
would not smell as sweet…….

55. Page 54December 13, 2014
Evaluating the Brand Value of Healthcare Entities
Questions