They do, that is, if you
partner with us.
That’s because – although
we are turnaround and
restructuring experts –
we’re business executives
first. We know how to
build consensus, manage
expectations and control
the restructuring to retain
What our clients are afer is
the same thing we’re in
business to deliver: results.
It’s a difference that matters.
Enterprise Improvement • Financial Advisory Services • Information Management Services • Turnaround & Restructuring
The economic downturn, however, created
opportunities for private equity investors
to purchase senior care organizations
for bargain basement prices.
elderly, underinsured payor populations.
In return, CAHs receive cost-based
reimbursement rates from Medicare,
which traditionally have helped keep
operating margins small and steady
in low-utilization environments.
CAHs, however, are particularly
vulnerable to changes in reimbursement
rates. With strong dependency on
the current Medicare reimbursement
scheme based on hospital costs, any
change in this methodology could have
a material impact on such a facility. In
addition, cost-based reimbursement
limits the ability to generate sufficient
free cash flow to upgrade aging
equipment and facilities; retain and
recruit physicians, particularly those
in medical and surgical specialties
such as obstetrics, orthopedics,
and oncology; and to develop the
financial capability to meet ACA
information system requirements.
Furthermore, a recent report by the U.S.
Department of Health & Human Service’s
Office of Inspector General indicates
that as many as one-third of existing
CAHs would not qualify today if they
had to reapply for this special status.
Given that CAHs aren’t typically located
in areas with significant voter leverage,
they could be easy targets for a reduction
in numbers, as their ranks have swelled
to more than 1,000 hospitals since the
enactment of this regulatory windfall.
More common distressed M&A is
occurring in the traditional community
acute care provider market. Tertiary
hospitals with fewer than 200 beds have
been hardest hit by reimbursement
cuts, declining profits, an inability to
flex employee/staffing ratios and still
remain in regulatory compliance,
poor revenue cycle execution, high
IT conversion costs, and a dearth of
capital reimbursement. Physician
shortages, employee retention
difficulties, and, in certain cases, costly
collective bargaining agreements have
all contributed to increased strategic
planning, mergers, and asset sales.
When liabilities continue to outgrow
assets, a strategy of selling to stay alive
becomes imperative. Bankruptcies
are becoming more common.
Expectations are high that these are
no longer anecdotal incidents but are
becoming a trend, and the ability to
get all stakeholders (secured creditors,
vendors, collective bargaining
units, local community leaders, and
politicians) on board early on in a
distressed situation is imperative
to reach a successful outcome.
Even some large providers worry
that they can no longer compete in a
post-ACA world. The “safe zone” once
represented by $1 billion+ in net patient
revenue is now $5 billion or more.
While there are exceptions, ambulatory/
outpatient strategies have replaced large
tower renovations in most markets
around the U.S. Managing populations
and risk is replacing the quest for
utilization, volume enhancement, and
CMI (case mix index) management.
Long-Term Care Facilities
LTC providers, particularly skilled
nursing facilities (SNFs), represent
another area that is expected to
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