By on January 8, 2013 in News

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In the past 12 months, the conditions of the financial markets have created a significant slowdown in the M&A marketplace. The primary reasons behind this have been the lack of financing available from investment banks and other institutions to complete these deals, lower stock prices across the board, and reluctance on the part of banks to extend or renew credit facilities for companies seeking to acquire businesses. That said, M&A activity has begun to rebound in the past 30 days as ‘money on the sidelines’ begins to go to work. But, it still has a long way to go before it returns to the levels seen the second and third quarter of 2008.
The small to midsize deal market has not seen the slowdown that the large deal market is suffering. Healthcare business owners continue to enjoy profitability and cash flow similar to last year based on their relative immunity to the effects of the recession. This is allowing aggressive small healthcare-business owners to acquire and expand into new markets using their own cash to finance deals. But, bank or other financing at the small and midsize deal level is difficult to find. And, traditional sources of small business expansion – home equity lines, signature loans, and other secured and unsecured credit facilities – are not an option in most markets.
To summarize the general outlook for Healthcare M&A activity, cash is king. Deals today are happening only when the buyer has the ability to self-finance a significant portion of the transaction. As stock prices increase, publicly-traded companies will try to use their stock as currency to close deals. At the small and midsize market, look for activity to come from existing healthcare business to use their cash to expand through acquisition.

Trends in the industry
We are seeing moves in the healthcare M&A space in anticipation of many proposed and possible healthcare reform scenarios that may change reimbursement models from a fee-for-service model towards a ‘packaged’ or ‘bundled’ payment system based on diagnosis or condition, and outcomes. In a bundled environment, a primary provider – the hospital, clinic, or other care coordinator – would receive a bundled payment for the services that a given patient requires across the continuum of care. For example, a hospital could be paid a lump-sum for a stroke patient that covers the hospitalization, specialists, and the post acute care. This model would effectively mean that many providers that are downstream of the primary provider would actually receive payment for their services from the hospital or clinic instead of Medicare, Medicaid, or private insurance. To position themselves for this eventuality, many large providers like hospitals or clinics have begun acquiring primary care and specialty practices, pharmacies, and other ancillary providers to better control the care delivery process while maximizing profits. And, if the new models do not go into effect, these organizations will still have a stronger referral and admission pipeline that further justifies the acquisition.

Home Health Care
M&A activity in the Home Health Care space continues to be very active in spite of many proposed cuts in reimbursement, caps on outliers and other potential revenue cuts. Buyers continue to believe that Congress and CMS will recognize the cost-effective nature of the services provided. That said, the threat of significant cuts in reimbursement have many worried and, as such, deal prices have fallen somewhat from their highs in late 2008 and early 2009. We foresee continued brisk M&A activity in the Home Health Care market through the end of 2009. Activity in 2010 will depend largely on the outcome of healthcare reform legislation and the related reimbursement adjustments that should be defined by November, 2009.

Durable Medical Equipment
DME/HME M&A activity has been stagnant for the past 18 months. The Competitive Bid process and its subsequent rescission by CMS halted activity in 2008 while potential acquirers stood on the sidelines waiting to see who won. And, the 36-month oxygen cap is remains in effect with no real end in sight. Now, the market is suffering from a similar stagnation caused by two events that are on the horizon: the pending healthcare reform legislation and its potential effect on the 36 month cap, and the 2010 Competitive Bid process.

Ben A. Sardiñas is a Managing Executive at the Healthcare Acquisitions Group, an M&A Advisory and Business Brokerage firm specializing in exclusively in the Healthcare Industry. Article published in the ACHC HH & Hospice Educator Newsletter Winter Edition.


By on January 8, 2013 in News

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In the wake of the moratorium imposed after the passage of the most recent amendment to the statute governing home health agencies in Florida, it appears that the ability to sell your home health agency located in Miami-Dade or Broward County has been terminated by the Florida legislature. Consequently, the business that you may have worked for years to create, manage and grow is suddenly worthless to anyone other than yourself. Using a common sense analogy, “How much is can your house really be worth, if you are not allowed to sell it?”

The recent amendment attempts to restrict sales of home health agencies, as written, §.408.803 (5), Florida Statutes, defines a change of ownership as:“’Change of Ownership” means an event in which the licensee sells or otherwise transfers its ownership to a different individual or entity as evidenced by a change in federal employer identification number or taxpayer identification number or an event in which 51 percent or more of the ownership, shares, membership, or controlling interest of a licensee is in any manner transferred or otherwise assigned. This paragraph does not apply to a licensee that is publicly traded on a recognized stock exchange. A change solely in the management company or board of directors is not a change ownership.

Does this mean that you cannot sell your business? Not necessarily. Initially, we note a change of ownership, or CHOW, is not deemed to have occurred unless there is a change of more than fifty-one percent of the shares of the company. If you are buying out your partner or selling your percentage to your partner, as long as the percentages transferred are fifty-one or less, a change of ownership is not deemed to have occurred. While all proper notifications to AHCA, CMS and your accrediting body need to be made, it will not trigger the CHOW provisions and moratoriums discussed above. These steps need to be followed to assure a smooth transition phase, legal representation is recommended to ensure all the governing bodies are notified in a prompt manner that does not put the agency’s license, provider number or accreditation status at risk.

More interesting though is the language the legislature chose to use when drafting the recent amendment. An “event” as used in the statute is not defined and can have a multitude of legal definitions. The legislature has left open for interpretation what constitutes an “event”. The Agency for Health Care Administration (“AHCA”) has indicated that “there may be circumstances where the transfer or other assignment of 51% or more of the ownership of a licensee may not amount to a change of ownership for purposes of 408.803(5), Florida Statutes.” It would appear this statement from AHCA creates more questions than answers. Any attempt to transfer stock above the fifty-one percent mark will now require analysis by ACHA as to the intent of the parties to the transaction. If AHCA determines the multiple events in a transfer were created solely to circumvent the statute, then it would likely be considered a change of ownership currently prohibited by statute.

The question now remains if you have a home health agency in Miami-Dade or Broward county can you sell more than 51% of your agency? Based on recent AHCA communications the answer appears to be a definitive MAYBE. There will be circumstances where the parties have structured the transactions in such a way that multiple transfers can be made for a number of reasons other than to circumvent the statue. However, in order to effectuate these transactions, careful attention must be paid at every step to ensure compliance with the statute. The parties must ensure that their legal documents are drafted in a manner which will allow AHCA and their general counsel to discern the intent of the parties at each “event” of the transaction. It is now more important than ever for both sides of the transaction to have adequate legal representation by attorneys familiar with the home health industry.

It is important to note the home health industry in South Florida is a lucrative and highly marketable business. Your main concern should be to continue to cultivate the value of your business, service your patients and to determine your exit strategy if you choose to leave the industry or take on partners. The wording of the statute has opened possible avenues within which to do so legally and without risking the license of the agency. If you are interested in either buying or selling an agency in Miami-Dade or Broward, there may still be many legal options for you.

Dagmar Llaudy, Esq., is a trial lawyer with a practice concentrating the areas of Health Law, Corporate transactions, Bankruptcy and General Litigation. Currently, she focuses on representing Home Health Agencies, Health Care Clinics, Assisted Living Facilities, CORFs, Pharmacies, Durable Medical Equipment companies, Community Mental Health Centers and general medical practices with all aspects of managing their medical businesses, including licensing, mergers and acquisitions, Agency for Health Care Administration (AHCA) issues, Medicare and Medicaid overpayments and reviews. Dagmar is a licensed member of the Florida Bar and admitted to practice in the Southern and Middle Districts of Florida Federal Bar.

Home Health Agency in Miami-Dade & Broward County

By on November 21, 2012 in Opportunities
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In 2002, the agency opened in Miami-Dade. The agency is Medicare/Medicaid certified and accredited by Community Health Accreditation Programs (CHAPS) since October 2009. Shortly after, they opened a branch office in Weston, FL. The agency is Medicare Certified and is accredited by Community Health Accreditation Program, Inc. (CHAPS. The agency operates with a 10 full-time administrative staff in both locations Miami-Dade and Broward County. The agency shares the Director of Nursing and works with approximately 33 skilled (nurses, therapists, etc.) and 14 non-skilled (home health aides) workers to service their patient’s needs. The agency offers services to Medicare and Medicaid patients. Currently, the agency has approximately 100 active patients (as of 09/01/2010) and about 99% of its patients are Medicare. The types of services provided are skilled visits, skilled nursing and physical therapy.

Facilities: The Miami-Dade office is inside a professional building with approximately 1263 square feet in size and is currently paying approximately $2,210.25 a month in rent.
The Broward branch office is also inside a professional building with approximately 600 square feet in size and is currently paying approximately $700 a month in rent.

Support/Training: Yes. Owner will support a transition period.

Reason Selling: Owner is focus in other businesses.

Year Established: 2002

Employees: 10


By on November 21, 2012 in News

Buying a Medical Practice

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The decision to purchase a medical practice can turn out to be very rewarding or a financial disaster. Part of the process involves understanding what type of practice you want to buy, the payor mix and what provider relationships are best for you. The purchase of the right practice can dramatically increase monthly income and serve as an investment which will provide a handsome return once you are ready to retire. The purchase of the wrong practice can leave you in debt. Letters of intent A Letter of Intent serves as a term sheet by memorializing each party’s obligations. It should set forth purchase price, terms of payment, time frames for due diligence and closing. In most circumstances, the letter of intent should not be a binding document. In some circumstances, a buyer may want to make the letter of intent binding in order to secure a valuable practice while the buyer performs its due diligence. A binding letter of intent should be carefully written to allow the buyer an out if it finds certain inconsistencies in the seller’s financial and other material representations. The Letter of Intent will also serve to flush out any problems which will eventually surface and kill the deal. If the parties cannot agree on the terms to be included in the letter of intent, they will never be able to conclude a transaction. Due Diligence If you employ the services of a broker or discover the listing through a broker, you should take advantage of the services provided by the broker for purposes of due diligence. A good broker will have compiled most of the financial and other material information necessary in advance for you to even consider whether the practice is one that fits your buying parameters. Once you have taken this first step, you should engage the services of an accountant to review the financial documents and have the medical charts reviewed for billing discrepancies and completeness. You should spend a few days at the practice to see how it operates on a daily basis and identify which employees you may want to keep. You need to identify which assets are being purchased and whether these assets are free and clear of any debt. Aside from furniture computers, medical equipment and supplies, you are also buying medical charts and having provider contracts assigned. Review the lease where the practice is located to see whether it can be assigned, and whether you would like to extend the term. Review any equipment leases and billing company agreements. The purchase agreement should specifically identify all assets being purchased. Asset or stock deal This decision is usually made with your attorney. However, barring a very unusual situation, the purchase of a medical practice is in the form of an asset purchase agreement. Because a stock purchase involves buying the entire practice, you are buying the assets and liabilities, whether wanted, unwanted, disclosed or undisclosed. Moreover, the unwanted liabilities may not surface for years. There are also tax considerations in you choice of purchase form which should be consulted with you accountant. There a many representations and warranties that you want the seller to make in the agreement. Seek legal counsel. The Transition The value of a practice is tied for the most part to its patients, whether they are fee for service or capitated. Thus, the transition from buyer to seller is extremely important. The selling physician needs to be employed for a period of time long enough to enable the patients to get acquainted with their new physician. In some cases, buyers withhold part of the purchase price and request an adjustment to the purchase price based upon the number of patients who stay after the transition period. The transition period also helps you get a better evaluation of the employees. Finally, you should have provisions in you agreement which take into consideration that it may take some time to transition the provider contracts and provide for a continuation of cash flow while this takes place. Manny R. Lopez, Esq., is an attorney with over thirteen years of experience in the healthcare industry. His practice concentrates on health law transactions, regulatory compliance and litigation.