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Physician offices' vital signs seem strong
Raleigh, N.C., November 19, 2013—With enrollment related to the Affordable Care Act opening Oct. 1, all eyes are on the health care sector. Despite the uncertainty and debate surrounding this issue, it can be helpful from both a business development and business advisory perspective to keep tabs on the financial strength of health-care related industries, such as doctors’ offices.
Sageworks recently provided some data on this topic to Accounting Today based on a financial statement analysis of privately held physician offices. Looking at average ratios for statements ended in the past 12 months, the vital signs for physician offices appear to be very strong. Offices of Physicians (NAICS 6211) have been growing revenue at a steady pace of 5 percent. They also have a very healthy 13 percent net profit margin. (Net profit margin has been adjusted to exclude taxes and include owner compensation in excess of their market-rate salaries. These adjustments are commonly made to private company financials in order to provide a more accurate picture of the companies’ operational performance.)
Financial statement analysis of privately held physicians
As for historical revenue growth and profitability, results for this trailing 12 month period seem to be fairly consistent with past performance: doctor’s offices typically grow revenues at a steady rate, and they’re always among the most profitable industries in the Sageworks Private Company Database. Recent liquidity and cash flow looks to be strong as well.
Accountants can use these metrics to show your business clients within this industry how their financial performance compares with peers’ overall fairly clean bill of health. From a business development perspective, offices of physicians have some attractive demographics. These companies do not show a lot of volatility on their financial statements, and their consistently healthy profit margins and strong liquidity may suggest that they have some extra cash to spend or to cushion against uncertainty.
More broadly, the health care sector may be a good place to look for business development opportunities. The Bureau of Labor Statistics estimates that more than 5.6 million new health care and social assistance jobs will be created between 2010 and 2020. For other new-business development ideas, check out the health care sector analysis included in the latest Private Company Report by Sageworks. The analysis identifies some of the most and least profitable sub- industries related to health care and social assistance.
This data looks at financial statements ended in the 12 month time period August 2012-August 2013.
About the Data
Sageworks possesses a proprietary database of privately held company financial statements aggregated by industry. Each day, approximately 1,000 of these financial statements are collected by Sageworks from accounting firms, banks and credit unions through a cooperative data model with Sageworks’ clients. The data is segmented and can be queried by 1,400 industry codes, 70 financial metrics, company size and geographic location.
About Sageworks
Raleigh, N.C.,-based Sageworks is a financial information company that provides financial analysis and industry benchmarking solutions to accounting firms. Sageworks’ data and applications are used by thousands of banks and accounting firms across North America. Sageworks provides industry data on private companies to U.S. accounting firms at no cost. The company has been named to the Inc. 500 list of the fastest growing privately held companies in the U.S. and to the Deloitte Technology Fast 500.
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