0 presenters: robert goodman managing partner the mansfield group peter myhre president marcap...
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Presenters:
Robert GoodmanManaging Partner
The Mansfield Group
Peter MyhrePresident
MarCap Corporation
ELA Healthcare Finance Summit
September 13-14, 2005
OutpatientAmbulatory Care
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Outpatient Ambulatory Care Session Agenda
Overview: Outpatient Ambulatory Care MarketRobert Goodman
Financial Health of Market ParticipantsPeter Myhre
How Providers Are Obtaining EquipmentRobert Goodman
Structures That Work BestPeter Myhre
Question and Answer Session
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Overview: Outpatient Ambulatory Care Market
Outpatient Ambulatory care services – 35 years in the making
Trends in ambulatory care services
Growth remains strong
Ownership continues to be varied – physicians, management companies and/or hospitals
Competition — saturated markets
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Overview: Outpatient Ambulatory Care Market
Outpatient ambulatory care market
Diagnostic imaging – MRI, CT, PET/CT as well
as other imaging modalities
Surgery – single specialty and multi-specialty centers
Treatment – radiation therapy, dialysis and physical therapy
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Financial Health of Market Participants
Provider (borrower) profile
Typically single purpose entities established by physicians, management- development companies and hospitals
Usually limited liability companies; often joint ventures between two or three of the parties noted above
Generally stand-alone facilities and most often start-ups
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Financial Health of Market Participants
Provider cash flows
Revenues = patient procedure/scans x related
reimbursement
Expenses – largely fixed; debt service and staffing are the most significant outflows
Profitability – once breakeven revenue is exceeded, majority of incremental revenue drops to the bottom line
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Financial Health of Market Participants
Risk considerations
Commitment - equity and guarantees
Patient referrals – the right physician specialties
Self-referral restrictions – state and federal
Payor risk – contracting and reimbursement
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Financial Health of Market Participants
Manufacturers/vendors profile
Manufacturers and vendors vary significantly in financial strength
Dominant full line manufacturers are Siemens,
GE, Philips and Toshiba
Variety of single line/specialty manufacturers
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Financial Health of Market Participants
Evaluating vendor risk
Strength of business - financial statements,
and installed base
Equipment – reliability and operating costs
Sales force – direct and distribution
Service/repair – quality and capability
Potential fraud – management and
motivations
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How Providers Are Obtaining Equipment
Equipment financing options and project financing options
Business Plan – business case or rationale behind equipment purchase or project
Equipment:– Cash (equity)– Capital leases and loans
– FMV leasing – Per-use
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How Providers Are Obtaining Equipment
Project:– Cash (equity)
– Capital leases and loans
– FMV leasing for major equipment (MRI, PET, linear accelerators, etc.)
– Working capital lines of credit, primary and back-up (surgery centers vs. diagnostic imaging
centers)
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How Providers Are Obtaining Equipment
Debt sources
Leasing companies
Captive finance organizations (e.g., Siemens and GE)
Local and regional banks
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Structures That Work Best
Lease Structures
60 to 84 month terms
Payment deferral until reimbursement ramps-up
Interim funding
Equipment and tenant improvements
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Structures That Work Best
Differentiating products
Working capital
Acquisition funding
Physician equity financing
Differentiating terms
Limited to no personal guarantees
Guarantee burn off
No covenants
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Structures That Work Best
Risk management terms
Blanket lien including A/R
Subordination of payments to owners
Covenants before making distributions
Assignment of tenant’s rights
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Peter MyhreMarCap Corporation200 West Jackson, Suite 2000Chicago, Illinois 60606800.621.1677www.marcapcorp.com
Robert GoodmanThe Mansfield Group6 Oak Tree CourtWestampton, NJ 08060609.267.0990www.mansfield-group.com