The Monte Carlo method improves physician practice valuation

James M. Grayson, Phil Rutsohn, Pamela Z. Jackson

Research output: Contribution to journalArticle

Abstract

This article demonstrates the use of the Monte Carlo simulation method in physician practice valuation. The Monte Carlo method allows the valuator to incorporate probability ranges into the discounted cash flow model and obtain an output indicating the probability for specified ranges of practice valuation. Given the high level of uncertainty in projected cash flows associated with physician practices, the value of this kind of information in a practice valuation decision would quite obviously be superior to any single point estimate generated by a traditional discounted cash flow model. It is postulated that virtually all hospitals support an information system that can easily accommodate a Monte Carlo simulation.

Original languageEnglish (US)
Pages (from-to)282-288
Number of pages7
JournalHealth Care Manager
Volume25
Issue number3
DOIs
StatePublished - Jan 1 2006

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Keywords

  • Discounted cash flow
  • Monte Carlo
  • Physician practice valuation
  • Simulation
  • Uncertainty

ASJC Scopus subject areas

  • Leadership and Management
  • Health(social science)
  • Health Policy
  • Care Planning

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