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The end of 4Q 2024 marks the start of a new year. In the Valuation Group, the end of the calendar year brings us to one of our busiest times of year: “ESOP season.” During the first few months of the year, we perform annual valuations for 30+ ESOP clients.

Meanwhile, other members of the valuation team have been focusing on assisting business owners with exit planning through our value acceleration service. The value acceleration exit planning framework is designed to help business owners identify and address value constraints and transferability limitations, but like turning a ship, it takes time. We recommend that business owners understand their strengths, limitations, and value at least five years before planning to exit. This proactive approach allows for a smoother transition and maximizes the business’ value.

Often, business owners like to wait until year-end results come out to make decisions. That way, they can compare performance year-over-year to aid in decision-making. Now that 2024 has concluded, we can assist business owners with decision-making by determining the value of the business based on year-end results. The end of the year is a busy time, with fiscal years wrapping up and holidays in full swing. As we move into 2025, it's an opportune moment to make strategic decisions for the future.

Speaking of busy, M&A activity often peaks in the fourth quarter. In 2024, this trend was again observable. After a strong year in 2024, our transaction advisory team is looking to help more clients sell or buy companies in 2025.

Another exciting opportunity for BerryDunn’s valuations team is the merger of BerryDunn and Burzenski & Company on December 1, 2024. Burzenski is well known for its work with veterinary practices and the construction industry. The merger will enable BerryDunn to expand into the veterinary practice market and add to its existing construction practice.

We track trends in several databases of private company transactions, among them GF Data, Capital IQ, DealStats, and BIZCOMPS. As presented below, we saw a slight downturn in multiples in the third quarter of 2024. We also saw the number of transactions increase in the fourth quarter compared to the third quarter of 2024 and in line with the first and second quarter.

Don’t get too fixated on the multiples in this chart as an indicator of value for your company. Look at the trends. Multiples vary dramatically from industry to industry and business to business. If you are interested in exploring value drivers for your company, read this recent article.  

The value of privately held companies often isn’t as volatile as share prices for public companies. However, activity in the stock market provides general guidance that is often much more timely than data available for private companies.

There are a few indexes we keep an eye on. The S&P 500 is generally considered the go-to benchmark for stock market performance, although it is dominated by a handful of large tech stocks. The Russell Midcap Index cuts out the largest 200 companies in the Russell 1000 Index, keeping 800 US companies with market capitalizations between $2 billion and $10 billion. The Dow Jones Industrial Average is comprised of 30 “blue chip” US stocks that may be similar to many private companies.

Stock prices have followed a generally upward trend throughout 2024 but have started to trend downward toward the end of Q4.

Many drivers of business value can be influenced or controlled by the decisions of the business’s management team, including product diversification, brand recognition, and employee retention. Other drivers are outside of management’s control, such as inflation and unemployment rates. As summarized below, key drivers of the US economy generally remained near similar levels in 4Q as in 3Q.¹

¹ Source: Federal Reserve Economic Data, available at https://fred.stlouisfed.org/.

² Indicates the likely effect on business value for most businesses. Depending on the business model, certain businesses may demonstrate an inverse relationship to economic variables compared to the market as a whole.

As many of our clients are located in New England, we’ve included a summary below of some of the key economic drivers that affect businesses in the Northeast³. If your business is headquartered outside of New England, reach out to us for an economic analysis specific to your market area. 

Economic activity  

Economic activity increased slightly overall. Prices and employment levels were roughly unchanged, and wages rose at a modest pace. Air travel was a relative bright spot, as domestic air passenger traffic through Boston finally surpassed 2019 levels, and passenger traffic through the Worcester airport increased substantially in the past year. Tourism activity overall increased only modestly, however, and restaurants in some areas reported softer-than-expected sales. Retail revenues rose slightly, and consumers remained highly price-conscious. Manufacturing sales were mixed, while software and IT services firms experienced stable and healthy demand. Residential real estate sales increased modestly, helped by improved inventories in some areas, while commercial real estate activity was flat. The outlook was modestly optimistic on balance, although some contacts had concerns for 2025 related to how national economic policies might change and where long-term interest rates would land.

Labor markets  

Employment was roughly steady, and wages increased modestly on average. Contacts in the retail, tourism, and software and IT services sectors all reported stable headcounts. Among manufacturing contacts, headcounts increased slightly at selected firms, decreased modestly at one in response to slower sales, and were reportedly unchanged otherwise. Labor supply to retail and tourism jobs improved modestly, with contacts noting greater ease of hiring and reduced attrition. Wages increased modestly on average, and contacts reported no elevated wage pressures. However, one manufacturing contact experienced a significant increase in health insurance costs that they partly passed on to employees, while offering a slight wage increase as an incomplete offset. No contacts mentioned plans for major changes in hiring or wages in 2025. Cape Cod contacts, whose businesses rely heavily on seasonal worker visas, expressed concerns that potential changes to visa programs could restrict their labor supply in 2025 or beyond.

Prices 

Prices were about flat on balance. An online retailer reported only modest pricing pressures and remained keenly aware of consumers’ heightened price sensitivity. The same contact was cautiously optimistic that any tariffs would not have a major impact on their prices, owing to changes made to their supply chain in recent years. Hotel room rates in the Greater Boston area decreased modestly on a year-over-year basis, but contacts pointed out that the change was in relation to the record-high room prices of November 2023. Manufacturers held output prices steady, even though most experienced slight to modest increases in input prices. Software and IT services firms posted modest price increases on average. Contacts did not foresee major changes in pricing pressures for their businesses moving forward.

Retail and tourism 

First District⁴ retail contacts reported slight increases in revenues in recent months, while tourism activity experienced modest growth on average. An online retailer described fourth-quarter revenues as stable overall but said that promotions had been critical to those results and that demand for lower-end goods remained weak. On Cape Cod in the fourth quarter, hotel occupancy rates and retail sales met expectations and were roughly on par with the fourth quarter of 2023, but restaurants experienced weaker-than-expected sales. Airline passenger traffic through Boston increased moderately in the fourth quarter from one year earlier, with domestic travel finally surpassing 2019 levels. Worcester air passenger counts grew 18 percent from the previous year. Like the change in hotel room prices, hotel occupancy rates in greater Boston were down slightly in November from one year earlier, when occupancy rates had been at all-time highs. Contacts expected robust tourism and convention activity for Boston for 2025. The outlook for retail and restaurant activity was more cautious, as contacts in those businesses expected roughly flat activity going forward.

Manufacturing and related services 

Manufacturing sales were flat on average since the last report. Most firms reported no change in revenues in the fourth quarter from the third, but sales were unexpectedly soft for one manufacturer and unexpectedly strong for another. The strong sales pertained to a frozen fish producer who speculated that retailers were accumulating inventories in anticipation of tariffs. A semiconductor maker with flat sales said that demand for their products was softening and that they would adjust employment downward moving forward. Capital expenditures largely stayed within forecast ranges. The outlook for 2025 was modestly positive on balance, as most firms expected sales to increase at least slightly in the new year, but one semiconductor manufacturer expected moderate declines in sales relative to 2024.

IT and software services 

First District IT and software services contacts described demand as stable at healthy levels, and one firm’s total revenues for 2024 exceeded expectations. Capital spending was constant, and physical investments were described as minimal given firms’ reliance on cloud computing services. Contacts expected revenues to increase strongly in the first quarter of 2025, based on a combination of organic growth in demand and, in one case, the recent acquisition of another company. Considering the longer-term outlook, most contacts expressed confidence that demand for their products would continue to rise, even in an environment of heightened political and macroeconomic uncertainty. Nonetheless, one firm said that increased competition from China affecting its clients could either boost its business, as client firms invested in new technologies to keep up, or hurt demand if clients were pushed out of the market altogether by such competition.

Commercial real estate 

Commercial real estate activity was mostly flat in the First District. Contacts reported uniformly that elevated long-term interest rates continued to limit transactions. One contact said that borrowers, hoping that long-term rates would decline, continued to favor extensions for maturing loans. However, several contacts downgraded the chances of significant rate declines in 2025. Office leasing activity remained slow, but prime Boston properties continued to experience relatively healthy activity. Contacts described industrial and retail leasing activity as stable. Rents and occupancy rates were unchanged across all asset classes. One contact said that a recent Massachusetts law intended to promote multifamily construction was yielding tangible results in some areas of the state. Around half of contacts were cautiously optimistic that the first quarter of 2025 would bring more robust commercial real estate activity, while others expected current activity levels to persist or, more pessimistically, that interest rates would stay higher for longer than previously expected and exert negative impacts on the market.

Residential real estate 

Home sales in the First District rose modestly on a year-over-year basis in November 2024, the most recent month for which data was available. Supporting the increase in sales, home inventories were up moderately from a year ago overall, with very large increases in Maine and Vermont, although inventories declined moderately in Massachusetts from a year earlier. However, the typical number of days homes spent on the market increased, as multiple contacts mentioned that some buyers were waiting until after the presidential election to make purchasing decisions. Considering changes since November 2023, prices of single-family homes increased at a brisk pace, while condo prices increased moderately on average in Massachusetts and Rhode Island but decreased modestly in the northern New England states. Multiple contacts expressed optimism that more sellers would put their homes on the market in early 2025 and that this would lead to increased sales activity.

³ Quoted from the Beige Book – January 2025 from the Board of Governors of the Federal Reserve System.

⁴ The Federal Reserve System’s First District includes Connecticut (excluding Fairfield County), Massachusetts, Maine, New Hampshire, Rhode Island, and Vermont.

• To learn more about ESOPs, here is a brief overview of ESOPs we put together. 
• Interested in learning more about business valuations? Read more here or pick up a copy of our book, A Field Guide to Business Valuation.
• MaineBiz recently featured an article about exit planning for business owners.

Where to find us

Casey Karlsen and Seth Webber are leading a four-part workshop series for business owners about increasing business value and liquidity. We previously summarized this content in a couple of blog posts (Session 1, Session 2, Session 3). Take a look if you missed us! 

Interested in meeting the team? Please reach out to us. We would love to connect. 

For manufacturers in New England, the global trade environment has always played a significant role in shaping supply chain strategies and cost structures. With the current tariff landscape marked by rapid changes and adjustments due to ongoing trade negotiations and economic strategies, businesses must be ready to quickly reevaluate their pricing models and material cost standards to maintain profitability. 

Tariffs and the rising cost of materials for manufacturers 

Tariffs on imported raw materials—especially steel, aluminum, and electronic components—have significantly impacted manufacturing costs for many New England manufacturers. Impacts include:  

• Higher material costs: Price increases in metals and components force businesses to either absorb higher costs or pass them along to customers, potentially affecting competitiveness. 
• Supply chain disruptions: Many businesses that previously relied on international suppliers must reconsider domestic sourcing, which may not be as cost-effective. 
• Increased production costs: With raw materials costing more, the overall cost of goods sold increases, tightening profit margins. 

What manufacturers can do now to be ready for tariffs 

For CFOs, controllers, cost accountants, and business owners, it is imperative to assess how these tariffs affect cost margins and whether existing standard costs remain valid. Key considerations include: 

• Reassessing bill of materials pricing: Companies should review and update material costs in their enterprise resource planning (ERP) systems to reflect current market prices. 
• Revising standard costs: Many manufacturers set cost standards based on historical pricing. With tariffs inflating costs, businesses should update these figures to avoid inaccurate pricing models and profitability projections. 
• Scenario planning for future tariffs: The tariff landscape remains uncertain. Running cost simulations under different tariff conditions can help businesses prepare for potential future changes. 
• Vendor and supply chain analysis: Evaluating domestic versus international sourcing and considering supplier renegotiations could mitigate tariff impacts. 

How BerryDunn can help 

Navigating the complexities of tariff-induced cost increases requires a strategic approach. At BerryDunn, we assist manufacturers with: 

• Costing analysis and standard updates: We help businesses reassess standard costs and implement updated costing models to maintain accuracy in financial reporting. 
• Profit margin impact assessments: Our team can analyze the direct and indirect effects of tariffs on your bottom line, identifying opportunities for cost recovery. 
• Supply chain cost modeling: We provide financial modeling to compare sourcing alternatives and develop cost-efficient strategies. 
• Budgeting and forecasting support: Our expertise in financial planning ensures your business remains resilient despite tariff fluctuations. 

The tariff landscape continues to evolve, and manufacturers must remain proactive. By reassessing costs and adapting pricing strategies, businesses can sustain profitability and competitive positioning. If you need assistance understanding how tariffs impact your financials, BerryDunn is here to help. Reach out to our team today to help your business stay ahead of the curve. 

From the complexities of the regulatory environment, to staffing shortages and skill deficits, to the rising costs of technology, healthcare organizations today face greater challenges than ever before. Among the key trends threatening a provider's financial stability is the surging rate of claim denials, resulting in delayed payments, increased operational costs, and potential revenue loss. For many providers, the financial strain of managing these denials has become unsustainable.

So, what can your organization do to thrive in the face of today’s revenue cycle reality? Consider shifting from managing denials after they occur to preventing them before they happen. By proactively tackling denials at the source, your organization can both lower collection costs and also enhance your financial stability through improved cash flow.

Why focus on denials prevention?

Denied claims can mean denied revenue. Denials happen along the entire revenue cycle, preventing your organization from being paid for services in a timely way––or at all. Your options have been to rework the claim or write it off, and both will cost you:

• Rework is expensive. On average, rework costs $25 per claim and adds at least 14 days to pay. Success rates vary between 55% and 98%.
• Write-offs are a net loss. The industry only appeals 35% of denied claims, absorbing write-off losses that range from 1% to 5% of net patient revenue.

A better alternative is to prevent denials from occurring in the first place. Below are five strategies to help your organization avoid claim denials and collect what’s due.

Proactive denials prevention: A glide path

Creating a system for preventing denials requires an assessment of where you are today, a committee of stakeholders, the setting of sustaining goals, and continued monitoring. 

1. Baseline analysis: Where are you today?

You can’t prevent denials without understanding their root cause. Begin with a holistic baseline assessment of the underlying causes by payer and denial categories. This analysis will help identify and correct potential issues related to clinical denials, underpayments, billing and administrative processes, and coding and compliance issues.

The Healthcare Financial Management Association’s MAP Keys provide a foundation for monitoring and reporting denials. These industry-standard metrics or KPIs are a way to track your organization’s revenue cycle performance using objective, consistent calculations.

Key metrics include your organization’s:

• Initial denial rate – zero pay
• Initial denial rate – partial pay
• Denials overturned by appeal
• Denial write-offs as a percent of new revenue

Note: Appeals are the most expensive and longest way to get paid. But you lose 100% of the denials you don’t fight!

Track trends and details by:

• Payor
• Department
• Reason
• Codes (CDM/CPT)
• Dollars and Volume
• Control charts

2. Accountability: Establish a Denials Prevention Committee

Before you begin shifting from denials management to denials prevention, set your organization up for success by creating a Denials Prevention Committee and securing the solid support of senior leadership. Your team should include stakeholders across the organization, including:

• Revenue integrity
• Managed care
• Care coordination
• Billing
• Coding
• Patient access
• IT
• Department leaders
• Special guests, such as payor representatives and clinical leaders

3. Set your goals: What is possible?

The Denials Prevention Committee is accountable for identifying the patterns and trends that are leading to denials and recommending preventative measures. With insight from your baseline analysis, the committee will identify the top denial issues, their root causes, and potential actionable measures to avoid future denials. Prevention measures could include:

• Educating and training staff on common denial causes and best practices for accurate coding and claim submission to prevent errors
• Identifying opportunities to build in system automation to prevent denials
• Creating a better understanding of the specific billing rules and requirements of each payor to tailor claims accordingly

4. Results: Active denials prevention and monitoring

The committee is charged with implementing denial avoidance measures, monitoring, and reporting on the results. The process includes regular reporting on initial denial, appeal, and win rates to determine over time if the measures are working, and if the results are sustainable.

Tracking and trend analysis can help identify:

• New opportunities for denial prevention
• Areas that should be prioritized
• Emerging issues that should be addressed
• Payor behavior trends

5. Follow-up process: Who should work denials?

Even the most effective prevention measures won’t eliminate all claim denials. Working claims is part of the AR follow-up process––but it’s important to allocate the right resources at the right time. Consider creating a decision matrix to help determine who works your denials, with criteria based on both denial complexity and dollar value. For example, assign your:

• Dedicated AR follow-up staff to work straightforward, low-dollar denials and claim corrections related to eligibility, COB, credentialing, referrals, and authorizations
• Denials specialist to focus on high-dollar claims that may require specific payor forms, cover letters, rebilling, etc.
• Clinical Appeals RN to work high-dollar complex and clinical denials requiring a formal appeal letter with evidence from the medical record to support the claim

Setting up a dollar threshold can help guide resource allocation. For example:

• AR follow-up staff: $200 - $4,999
• Denials specialist: $5,000 - $34,999
• Clinical Appeals RN: $35,000+

Once your denial efforts have been exhausted, consider outsourcing write-offs to a third-party agency for one final attempt. Weigh the potential for more revenue against the balance remaining on the books for a longer period.

Ultimately, shifting to denials prevention and effectively allocating your follow-up resources will help reduce your administrative costs, improve your cash flow, and enhance patient satisfaction. Don’t let due dollars go unpaid!

With experts along the entire continuum of care, BerryDunn's approach to revenue cycle optimization focuses on cash acceleration, revenue integrity, and helping to ensure that every dollar owed is collected. Based on best practices, we help bolster performance and improve the efficiency and effectiveness of your revenue cycle. Learn more about our team and services. 

In a closely held business, ownership always means far more than business value. Valuing your business will put a dollar figure on your business (and with any luck, it might even be accurate!). However, ownership of a business is about much more than the “number.” To many of our clients, ownership is about identity, personal fulfillment, developing a legacy, funding their lifestyle, and much more. What does business ownership mean to you? In our final article in this series, we are going to look at questions around what ownership means to different people, explore how to increase business value and liquidity, and discuss the decision of whether to grow your business or exit—and which liquidity options are available for each path. 

While it may seem counterintuitive, we find that it is best to delay the decision to grow or exit until the very end of the value acceleration process. After identifying and implementing business improvement and de-risking projects in the Discover stage and the Prepare stage (see below), people may find themselves more open to the idea of keeping their business and using that business to build liquidity while they explore other options. 

Once people have completed the Discover and Prepare stages and are ready to decide whether to exit or grow their business, we frame the conversation around personal and business readiness. Many personal readiness factors relate to what ownership means to each client. In this process, clients ask themselves the following questions:

• Am I ready to not be in charge?
• Am I ready to not be identified as the business?
• Do I have a plan for what comes next?
• Do I have the resources to fund what’s next? 
• Have I communicated my plan?

On the business end, readiness topics include the following:

• Is the team in place to carry on without me?
• Do all employees know their role?
• Does the team know the strategic plan?
• Have we minimized risk? 
• Have I communicated my plan?

Whether you choose to grow your business or exit it, you have various liquidity options to choose from. Liquidity options if you keep your business include 401(k) profit sharing, distributions, bonuses, and dividend recapitalization. Alternatively, liquidity options if you choose to exit your business include selling to strategic buyers, ESOPs, private equity firms, management, or family. 

When it comes to liquidity, there are several other topics clients are curious about. One of these topics is the use of earn-outs in the sale of a business. In an earn-out, a portion of the price of the business is suspended, contingent on business performance. The “short and sweet” on this topic is that we typically find them to be most effective over a two- to three-year time period. When selecting a metric to base the earn-out on (such as revenue, profit, or customer retention), consider what is in your control. Will the new owner change the capital structure or cost structure in a way that reduces income? Further, if the planned liquidity event involves merging your company into another company, specify how costs will be allocated for earn-out purposes. 

Rollover equity (receiving equity in the acquiring company as part of the deal structure) and the use of warrants/synthetic equity (incentives tied to increases in stock price) is another area in which we receive many questions from clients. Some key considerations:

• Make sure you know how you will turn your rollover equity into cash.
• Understand potential dilution of your rollover equity if the acquiring company continues to acquire other targets. 
• Make sure the percentage of equity relative to total deal consideration is reasonable.
• Seller financing typically has lower interest rates and favorable terms, so warrants are often attached to compensate the seller. 
• Warrants are subject to capital gains tax while synthetic equity is typically ordinary income. As a result, warrants often have lower tax consequences.
• Synthetic equity may work well for long-term incentive plans and for management buyouts. 

We have found that through the value acceleration process, clients are able to increase business value and liquidity, giving them control over how they spend their time and resources.

If you are interested in learning more about value acceleration, please contact the business valuation services team. We would be happy to meet with you, answer any questions you may have, and provide you with information on upcoming value acceleration presentations. 

The 2025 Home Health Value-Based Purchasing (HHVBP) payment adjustments have been finalized. Designed to reward those organizations that demonstrated better outcomes in patient satisfaction, quality of care, and hospitalizations/emergency department use, the result was a payment adjustment. This varied from -5% to 5% for participating home health agencies based on their 2023 performance data.

2025 payment adjustments

While each home health agency Centers for Medicare & Medicaid Services Certification Number (CCN) was given their payment adjustment for 2025, many agencies were left to ask: how did everyone else fare?

Within the large cohort*, 3,465 (53%) of agencies received an increase in payment and 3,018 (47%) received a decrease in payment. For the small cohort*, 327 agencies received an increase and 348 received a decrease. Nearly half (4809 or 40%) of home health agency CCNs were omitted from the HHVBP calculations due to Medicare size/insufficient data or recent Medicare certification date (new agency).

Total Performance Scores (TPS)

For the large cohort, agencies that were smaller in size (less than $3M) saw larger Total Performance Scores (TPS) overall than medium and larger agencies (over $3M in revenue). Of those agencies that received an increase in payment, 55% had less than $3M in annual Medicare revenue. Small agencies also outperformed medium and larger-sized agencies with OASIS and Claims Based measures. However, medium and larger agencies outperformed smaller agencies on the CAHPS-based outcomes.



As we unravel the 4,809 agency CCNs being exempt from this model, we must also question true market saturation rates and access to care for seniors, as these are based on CCN counts and not active patient counts.

We're here to guide you

BerryDunn has solutions to support all agency HHVBP needs, including our CAHPS Improvement Bundle, hospitalization analysis, outsourced OASIS solutions, and OASIS training and education. We also offer clients access to our HHVBP reporting using the national database to help clients better understand their performance compared to agencies across the country. For more information on our HHVBP services or becoming a client, contact Lindsay Doak.

*Cohorts: Determined prospectively, based on each HHA's unique beneficiary count in the prior calendar year (CY) as defined below: Smaller-volume cohort: the group of competing HHAs that had fewer than sixty (60) unique beneficiaries in the calendar year prior to the performance year; Larger-volume cohort: the group of competing HHAs that had sixty (60) or more unique beneficiaries in the calendar year prior to the performance year.