Over the past year, I’ve worked with several attorneys and lab operators regarding management and marketing arrangements. The primary question that comes up is “what is the FMV of the services”. As many of you know EKRA disallows charging a per-test fee or percentage of collections. Most lab operators and their attorney’s understand that the fair market value fee for lab marketing/management services can only be expressed as a percentage of cost or a “cost-plus” basis. There is, of course, no market data/transactions to rely upon and a commission or percent of collection is out of the question. So, appraisers have no choice but to express their FMV opinion as a certain percentage mark-up on the costs incurred to provide certain marketing & management services. This is where the issue of commercial reasonableness comes into play. There is a “reasonable” amount of services that a management/marketing company can provide to a lab. In my opinion, this is a larger element of risk than fair market value. A commercial reasonableness assessment for lab management/marketing services should accompany each fair market value opinion.
The information provided herein is of a general nature and cannot be substituted for an actual fair market valuation opinion, in which specialized knowledge is applied to a particular circumstance. Therefore, nothing in this paper should be construed to offer or render a valuation or legal advice and neither Chris David or HealthValue Group can take any responsibility for an attempt to use or adopt the information or disinformation presented herein.