When valuing trained and assembled workforce (“TAWF”) in healthcare provider entities, such as physician practices, imaging centers, hospitals, ASCs, and the like, many appraisers get it wrong. Experts Tim Smith and Angie Smith discuss the most common reason including a misunderstanding the correct application of the cost approach as currently formulated in the professional literature or the nature of training for healthcare provider employees, especially for physicians. Often appraisers have not correctly analyzed functional obsolescence for training or they fail to account for economic obsolescence due to lack of understanding of the theory behind the cost approach. In addition to these missteps hear an in-depth overview of four cases purported to show TAWF has value under liquidation, and a critique of the theory that bankruptcy case law supports the idea of value for TAWF under liquidation. Learning to value trained and assembled workforces correctly is key in understanding the debate about how physician practices are valued.

1.    Valuing intangible assets under the cost approach:  the current state of the body of knowledge

a.     Generally accepted cost approach method:  replacement cost new less depreciation
b.    Techniques for estimating economic obsolescence
c.     How tangible asset valuation follows the generally accepted cost approach method

2.    Valuing trained and assembled workforce in healthcare provider entities

a.     Job types and job training
b.    Assembly cost
c.     Application of the cost approach

i.     Estimating replacement cost new
ii.    Estimating functional obsolescence
iii.   Estimating economic obsolescence

d.    Liabilities accompanying workforce
e.    Valuing workforce under an income approach: the forgotten method for valuing physician workforce
f.     Due diligence and data gathering considerations

3.    Valuing trained and assembled workforce under a liquidation premise of value

a.     Review of premise of value options
b.    Critique the bankruptcy case law thesis:  workforce in exchanges liquidates

i.    The Sullivan bankruptcy case
ii.    The 3DFX bankruptcy case
iii.   The Atchison corporate successor liability case
iv.   The Orthotec corporate successor liability case

c.     Examining the attributes and conveyance of workforce
d.    Valuing workforce under a liquidation or in-exchange premise of value

4.    Examining the implications of correct valuation of TAWF for the debate about valuing physician practices

• Understand and apply the generally accepted cost approach method for valuing TAWF
• Analyze and estimate the value of TAWF appropriately for healthcare provider entities
  
• Understand how to avoid inappropriate assumptions and estimates of value for TAWF under a liquidation premise of value