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on the valuation of home health care agencies and has frequently
appeared as an expert witness.
Hahn started by noting that because of the predominance of
Medicare in the payor mix of most home health agencies, a
conventional cashflow or earnings approach to valuation would
produce “a very different result from other, more appropriate
approaches.” This is so because home health agencies, with a
preponderance of Medicare-eligible patients, earn little if any
profit.7
Hahn instead relied principally upon an “Adjusted Balance
Sheet” methodology, a form of the cost approach. That
methodology restates a company’s accounting balance sheet to its
fair market value equivalent. Hahn explained that this approach
involves the identification and valuation of tangible and
intangible assets and liabilities, whether or not they appear on
the subject company’s accounting balance sheet.
Hahn started with the unaudited balance sheets prepared by
petitioners’ accounting firm in 1995. He concluded that several
of the Sta-Home tax-exempt entities’ asset accounts required
revaluation. He noted that there were several “unrecorded
7 The evidence includes an article written by Hahn wherein
he reports that his firm’s database reflects that “more than 75
percent of home health agency acquisitions involved agencies that
recorded losses.” Hahn, “Payment Reform Will Shift Home Health
Agency Valuation Parameters”, Healthcare Financial Management
(Dec. 1998).
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