You are on page 1of 26

Hospital Bond and Financial

Advisory Services Market

Market Segment Brief

Q4, 2008
DISCLAIMER

Information Advantage Group (IAG) prepared this report as a general guide and basis for further
discussions and diligence on the select area of healthcare—Financial Advisory and Acquisition Services.

This report includes qualitative and quantitative statements that reflect plans, estimates, data, consensus
views and beliefs of vendors, industry experts and commentaries provided by public sources and IAG
analysts. Best efforts have been made in assessing the reliability of these statements. IAG disclaims all
warranties, express or implied, as to the accuracy, completeness or adequacy of such information and
fitness of this research to a particular purpose. IAG shall have no liability for errors, omissions or
inadequacies in the information contained herein or for interpretations thereof. IAG advises that any
discussion or listing of a company or product of any kind in this report should not be deemed to be an
endorsement of said company or product. The opinions expressed herein are subject to change without
notice.

This report is intended to be one of the many information sources including other published information
and analysis of these sources by the reader. The reader assumes the sole responsibility for the selection
of these materials to achieve its intended results. The reader is urged to exercise the utmost discretion
making the information enclosed in this report available to others that may need to analyze such material
in the course of their evaluations.

Each resource cited in this report is the property of the originating author or publisher and will not be
individually reproduced or distributed by the reader. VHA may contact organizations directly for copies or
reprint authorization.

Copyright 2011 by: IAG LLC, 3757 Webster Street, Ste. 306, San Francisco, CA 94123. All rights
reserved. Duplication or distribution of this document as presented without express written permission
from IAG LLC is prohibited.

Page 2 of 26

© 2011 IAG LLC Inc. Non-disclosure: IAG LLC retains all rights to the use and distribution of this document. This
confidential and proprietary information must be held in strict confidence and not disclosed to any other parties
without the express written permission of IAG LLC, San Francisco, CA 415-346-3860.
Table of Contents

Quick navigation -Hover over blue page and ctrl-click

EXECUTIVE SUMMARY ............................................................................................................4


PROLOGUE ...............................................................................................................................6
OVERALL DESCRIPTION .........................................................................................................7
Implementation – Strategy & Posture .........................................................................................8
External Factors - Largely Beyond the Enterprise’s Control........................................................8
Internal Factors - Conditions Effecting the Enterprise’s Overall Performance.............................8
COSTS .......................................................................................................................................9
BUYERS, USERS ......................................................................................................................9
BENEFITS RETURNS .............................................................................................................10
HEALTHCARE MARKET..........................................................................................................10
Market Size and Growth:...........................................................................................................10
Consensus: It’s A Complicated Time for Healthcare But It Will Continue To Do OK.................12
Hospital Performance – Plateaus for the Strong; Declines for the Weak...................................12
Hospital Bond Rating Volatility Tracks Financial Performance..................................................13
Mergers & Acquisitions .............................................................................................................13
General – Steep Decline in Activity...........................................................................................14
Healthcare – Strategic Buyer’s Market......................................................................................14
FUTURE TRENDS ...................................................................................................................15
HEALTHCARE .........................................................................................................................15
Top Six Healthcare Challenges Will Intensify............................................................................15
Recession Will Have A Mild Effect On Healthcare.....................................................................16
Healthcare Financial Managers Remain Calm..........................................................................17
Hospital Affiliations Up..............................................................................................................17
VENDORS ...............................................................................................................................17
OVERSIGHT & INFLUENCE ....................................................................................................19
Regulatory ................................................................................................................................19
Associations..............................................................................................................................20
Appendix A................................................................................................................................21
A Primer--Tax-Exempt & Non-Traditional Debt Instruments......................................................21
Bibliography..............................................................................................................................23

Page 3 of 26

© 2011 IAG LLC Inc. Non-disclosure: IAG LLC retains all rights to the use and distribution of this document. This
confidential and proprietary information must be held in strict confidence and not disclosed to any other parties
without the express written permission of IAG LLC, San Francisco, CA 415-346-3860.
EXECUTIVE SUMMARY
Historically low interest rates, narrow Total Acute Care Bond Up/Downgrades
credit spreads, and a flat yield curve (Fitch 2008 Report)
that began peaking in 2006 fueled
the hospital bond market’s estimated
$50 billion performance in 2007. 40
Thus far, in 2008 available
information suggests bond market 30
contraction with approximately 100
20
overall healthcare provider deals
having been underwritten, averaging
10
$138 million in size and totaling $14
billion. Despite this plunge from
0
record-setting days to the current
financial turmoil, healthcare remains 2002 2003 2004 2005 2006 2007 2008
clear-headed and is anticipating its Total Healthcare M&A Deals Trending
usual challenges intensifying; the
800
effects of the recession on it being
mild; low confidence in the bond
markets persisting; and increasing 600
opportunities for strategic
410 523 534 489
acquisitions by the strong being a 400
popular strategy. 423

Those holding the financial reins at 200


hospitals are dealing with many
trans-departmental issues leaving 0
little bandwidth to handle the details of transforming
2003 2004 their 2005capital 2006 2007 2008
positions or handling merger and acquisition activities—enter the
financial advisory firm. Working with the board and financial leadership,
these advisory firms provide the expertise and finesse to evaluate a
hospital’s dynamics and then plan and execute a strategy that gives the
funding sources, bond rating services
and underwriters a favorable view of Market Share - Capital Advisory Services
a hospital’s credit worthiness. For [1985-2007 Total Deals Value (Billions $)]
the median hospital, these firms
produce a value of $1.6 million for
each 100 basis points in average
borrowing costs avoided.
Ponder & Co
Three of the top five healthcare 48%
financial advisory firms are part of Killarney
larger national firms with the Group Kaufman Hall
remaining two being growing stand- 3% 24%
Public
alone, privately held firms. The Shattuck Financial
leading firm claims twice the number Morgan Mgmt.
of deals as the next two closest Keegan 20%
competitors—the fourth and fifth place firms halve5% this amount again.
Page 4 of 26

© 2011 IAG LLC Inc. Non-disclosure: IAG LLC retains all rights to the use and distribution of this document. This
confidential and proprietary information must be held in strict confidence and not disclosed to any other parties
without the express written permission of IAG LLC, San Francisco, CA 415-346-3860.
These firms account for an estimated 10% of the total bond underwriting
for healthcare provider organizations; tend to be involved in deals that
average smaller in size ($54 million verses $138 million for all of
healthcare): and have created a twenty-two year collective average of
$5.54 billion/yr.

Page 5 of 26

© 2011 IAG LLC Inc. Non-disclosure: IAG LLC retains all rights to the use and distribution of this document. This
confidential and proprietary information must be held in strict confidence and not disclosed to any other parties
without the express written permission of IAG LLC, San Francisco, CA 415-346-3860.
PROLOGUE
Since the early 1990s, a hospital’s access to traditional sources of capital--bonds, bank loans,
philanthropy and equipment leases--was relatively easy. These debt instruments fueled
strategies for healthcare systems to scale up aggressively by buying physician practices,
increasing corporate girth through merger and acquisition, cutting deals to grow their integrated
delivery networks and investing in the latest revenue producing technology. However,
healthcare has been experiencing a tightening on these common funding sources over the last
decade that has illuminated a widening gap between hospitals in strong financial health and
those who are not. The effects of this trend include:

• The total amount and mix of capital accessed from traditional sources has dropped—bank
loans have decreased and leasing has become more popular.
Capital-Intensive
• The percentage of hospitals defined as having broad
Challenges
access to capital has declined.
• Conversely, the percentage of hospitals with limited Changing Competitive
access to capital rose more sharply. Landscape
• Rising Costs of
• Operating margins for both hospital types has also
Delivery
declined—more so for limited-capital-access hospitals.
• Aging Facilities
Much of this movement between these two groupings is • Hospital M&A
attributed to a host of capital-intensive challenges that • Alternate Site
keep healthcare’s financial landscape in flux. Coupling a Competitors
mixture of these challenges with the current rocky • Referring Physician
economy makes it hard to find an acute care enterprise of Relations
any substance that has not seen its equity holdings and • Declining
access to capital suffer. For example, the University of Philanthropy
Pittsburgh Medical Center generates approximately $7
billion/yr with a revenue growth of 12% CAGR in revenue IT Requirements
during 2003-07.1 Yet despite this track record, it was not • Major Legacy
able to stop a 99% drop in its investment income during Upgrades
the second half of 2007. 2 This type of drop has not only • EMR & Clinical
raised the common concerns about budget, but, more to Systems
the point, liquidity issues that add to the challenge of • Siloed Systems
accessing debt instruments to survive and grow the Integration
business.
• Compliance (SOX,
HIPAA)
Today, most hospitals are surviving, in part, by trafficking
in a plethora of debt instruments (See Appendix A). To
Employee Issues
remain debt worthy, consensus states that hospitals need
to return to the basics by focusing on what matters most to • High Turnover Rates
the capital markets—robust cash flow, a strong balance • Limited Skilled
sheet and strong returns from capital, quality and safety Talent Pool
initiatives. It is also thought that with the future earnings
potential of hospitals always being challenged and choices Reimbursement
Pressures
• Uninsured

Page 6 of 26

© 2011 IAG LLC Inc. Non-disclosure: IAG LLC retains all rights to the use and distribution of this document. This
confidential and proprietary information must be held in strict confidence and not disclosed to any other parties
without the express written permission of IAG LLC, San Francisco, CA 415-346-3860.
for accessing capital becoming more sophisticated, the need for guidance to negotiate a
tortuous list of options will exist.

This report will focus on financial advisory services that help acute care enterprises prepare for
and manage access capital funding sources.

OVERALL DESCRIPTION
Financial advisory firms and practices that are focused on helping health systems access
capital typically provide expertise and services that include:

Planning for Capital Access:


• Define financing goals and needs
• Analysis of current credit and debt capacity
• Risk analysis and articulation
• Staging for market conditions
• Develop a clear understanding of the financial strategy with the board

Transaction Implementation:
• Provide detailed knowledge of financial products to be used
• Negotiate fees and interest rates to pay underwriters
• Complete appropriate legal and credit documentation and filings

Continuing Surveillance:
• Monitor for developments in financial products markets; e.g. security provisions, interest
rates and regulatory requirements
• Monitor for opportunities to reduce interest costs or turn a profit like terminating a swap

Derivative Services:
• Advise and negotiate structure, terms and financing on exchanging one type of debt
instruments (e.g. fixed interest payments) for another type (e.g. floating interest payments)
• FAS 133 Reporting: the standard for financial reporting of derivatives and hedging
transactions since 2001

Investment Management Services:


• Act as an independent investment advisor to manage funds that include:
• Project or construction funds
• Reserved funds for debt service
• General corporate funds
• Board-designated funds

Merger & Acquisition Services:


• Provide oversight and management for all steps of the acquisition and divestiture process
• Value healthcare assets
• Negotiate the terms and conditions of buying or selling of business assets

Page 7 of 26

© 2011 IAG LLC Inc. Non-disclosure: IAG LLC retains all rights to the use and distribution of this document. This
confidential and proprietary information must be held in strict confidence and not disclosed to any other parties
without the express written permission of IAG LLC, San Francisco, CA 415-346-3860.
Implementation – Strategy & Posture
Overall, the funding sources, bond rating services and underwriters want
to see that hospital management and the board have a clear strategy.
The advisory firm must assure that in planning a strategy numerous
external and internal dynamics are evaluated including: 3
External Factors - Largely Beyond the Enterprise’s Control
Reimbursement for Services:
• Tightening reimbursement continuing for the foreseeable future
• Quality-based pay-for-performance requirements negatively impacting payment

“Graying of America”:
• Demographics of Americans ages 65 and older will increase by 19 million between 2000 and
2020—how will the hospital handle the volume?

Regulation:
• Increased scrutiny of tax-exempt status and community benefit
• Increased transparency through stricter reporting requirements

Consumerism:
• Health care consumers want access to high-quality care at reasonable costs
• Hospitals will need to invest in meeting the market’s needs or loose share

Internal Factors - Conditions Effecting the Enterprise’s Overall


Performance
Operating Performance:
• Costs, margins, bad debt, accounts receivable, financial ratios, plant condition and other
incomes are among the metrics used to assess financial strength, performance and liquidity
of the enterprise.

Competitive Posture:
• Market share, competing hospital services, patient volume, community perception and
breadth of services are used to assess an enterprise’s attractiveness to a patient population
and ability to capture share.
• The demographic fit with offered services and strength of the local economy assesses
growth potential over the long term.
.
Governance & Leadership
• Pivotal to organizational performance is planning for executive succession; board
composition and involvement; and oversight and accountability of leadership coupled with
long-term strategic, financial and capital planning.

Reimbursement Mix:
• The percentage of patients covered by state, federal and commercial insurers and the
breakout for managed care, co-pay, self-pay and uninsured care offers insight to revenue
source and planning for leaner future reimbursement.

Page 8 of 26

© 2011 IAG LLC Inc. Non-disclosure: IAG LLC retains all rights to the use and distribution of this document. This
confidential and proprietary information must be held in strict confidence and not disclosed to any other parties
without the express written permission of IAG LLC, San Francisco, CA 415-346-3860.
Physician alignment
• Number of physicians, their specialties, certifications, general satisfaction and aging
indicates the strength of the hospital-physician relationship.
• Hospital must have planning to balance physician needs with the communities to offset
contraction in reimbursement and expansion of physician ventures that preempt hospital
revenues.

The end result of this planning is the creation of a “We want to make
favorable credit worthiness profile for the funding sources sure that management
that includes leading bond rating services (Fitch, Moody’s, and the board have a
Standard & Poor’s). These ratings rank the likelihood of clear strategy that
hospitals to default on a bond issue; provides guidance on runs out for five to 10
the level of risk associated with investing in the hospital; or years.”
facilitates the ability of hospitals to access the debt market Jeff Schaub
—the higher the rating the lower the cost of capital.

COSTS
Total costs are dependent on duration and extend of services or a percent of total bond
transactions. A basic costing may look like:4

Financial Advisor (based on bond size):


$2- $4 Million $20,000
$4- $7 Million $36,000
$7- $10 Million $50,000

Issuer:
Fee On All Bonds: 0.25%

BUYERS, USERS
The ultimate buyer of Financial Advisory Services is the
Board Member Experience C riteria
Board of Directors for the acute care enterprise. The
board is typical composed of relevant stakeholders, such Financial & Business 63%

as the medical staff and those from the community, and Strategic Planning 49%
represents different skill sets critical to the hospital’s Public Relations 33%
success. This general composition of the board means
Academic Training 31%
that there will be varying competencies about accessing
capital through a variety of debt instruments. To Quality Mgmt. 26%

compensate for this, the formation of a Financing Other Boards 26%


Committee is typical and includes board members with Safety & Quality. 19%
knowledge of capital financing and key hospital personnel Fund Raising 15%
that includes the CFO and CEO.
Clinical Practice 13%

The overall composition of the board is of utmost importance due to bond-rating


Conflict Mgmt. agencies
11%

(Fitch, Moody’s) increasing their examination of the board’s composition more closely. A board
that has the correct balance of knowledge and experience to achieve the financing mission
garners a more favorable evaluation and thus, positively effects bond ratings.

Page 9 of 26

© 2011 IAG LLC Inc. Non-disclosure: IAG LLC retains all rights to the use and distribution of this document. This
confidential and proprietary information must be held in strict confidence and not disclosed to any other parties
without the express written permission of IAG LLC, San Francisco, CA 415-346-3860.
Finally, the size of the healthcare organization matters. With payer and case mixes being
similar, those organizations with more than $2 billion in revenue typically perform better than
smaller organizations. This stronger profile makes it easier for them to secure funding and
typically indicates a more aggressive growth path that would require advisory services. 5

BENEFITS RETURNS
The role of those holding the financial reins of a hospital have changed. As exampled, the CFO
used to be focused on balancing the books and achieving some type of revenue. Today, the
stakes are much higher. Price transparency, pay for performance, regulatory compliance and
quality are blurring operational lines and health systems need a much more diverse person
interacting with all departments including those who are actually providing the patient care.

As their reach is extended by these conditions, financial leaders have to expand their
knowledge base and resources as well. It is the addition of a financial advisory services that
provides the periodically needed bandwidth, transactional expertise and surveillance that
speeds access to capital at the lowest cost--failure to do so can become expensive

With today’s higher borrowing costs and complexity of transactions, timing a hospital's
borrowing needs and the types of debt it has previously utilized weighed against what’s wise for
the hospital now is the basis of all benefits. The simplest of examples tell us for each increase
of 100 basis points in average borrowing costs the annual interest expense for the median
hospital would increase by $1.6 million.6
HEALTHCARE MARKET
Market Size and Growth:
(NOTE: Due to most firms being privately held and the Total Acute Care Bond Up/Downgrades
(Fitch 2008 Report)
highly niche nature of this service, publicly available
market data on the capital access advisory services 40
market is insufficient to construct estimates that are
anything more that rough at best.) 30

20
Market Size:
• The leading top five capital access advisory 10

firms are involved in an estimated 10% of 0


the total bond underwriting for healthcare 2002 2003 2004 2005 2006 2007 2008
provider organizations.
• The twenty-two year collective average of bond deals completed by
these five firms is $5.54 billion/yr.

• The top five firms tend to be involved in deals that average smaller in
size ($54 million verses $138 million) than those handled by the large
financial bankers.
• The average deal size was roughly the same among the top five
vendors.
• The leading firm claims twice the number of deals as the next closest
competitor—the third and fourth place firms halve this amount again.

Page 10 of 26

© 2011 IAG LLC Inc. Non-disclosure: IAG LLC retains all rights to the use and distribution of this document. This
confidential and proprietary information must be held in strict confidence and not disclosed to any other parties
without the express written permission of IAG LLC, San Francisco, CA 415-346-3860.
Market Growth:
• Bond rating agency’s empirical growth projections indicate that,
despite healthcare’s general lag in responding to gyrations of the
economy, this market will continue to see slowing growth from the
highs of early 2007.
• “Flight to Quality”: The strongest financial performers with the
highest bond ratings will lead the list of those organizations seeking
additional funding to grow and modernize their system while those of
lesser strength will find funding difficult to attract.

2007 saw a continuation of hospital finance directors taking advantage of historically low
interest rates, narrow credit spreads, and a flat yield curve that began peaking in 2006.

• The $27.1 billion produced overall by healthcare in the "Hospitals that have
first half of 2007 showed a 40.1% increase over the been issuers over a
same period a year earlier most of this growth was in long period of time
the first quarter.7 have generally seen
• Combined issues, which include refundings and new that over a 20-year
money, rose 125.2% to $10 billion from 2006's first period, the lowest cost
half.8 of capital has been in
• Straight new-money issues fell by 3.6% from the variable-rate debt."
2006 period.9 Ken Kaufman
• Refundings increased 70.4% to $6.3 billion
compared with the same period in 2006.10
• Hospitals issued more than $15 billion of fixed-rate debt verses $11 billion of variable-
rate.11
• Variable-rate long bonds increased 2,267% from $125 million in 2006 to nearly $3
billion in the first half of 2007.12

Hospital Funding:
• Up through September 2008, available information
October, 2008
suggests that around 100 overall healthcare bond deals
... because of the lack
have been underwritten.13
of liquidity in the
• These provider bond deals total $14 billion,
market ...hospitals
averaging $138 million.14
have been postponing
• Banner Health, the largest non-profit system in the
plans to sell new bonds
US, closed the largest deal thus far at $917 million.15
to fund capital
• Although data is incomplete, the market could slow to improvements such as
half its previous growth spike and size until more renovations and new
favorable liquidity returns. building....
Lisa Martin SVP
Leading Hospital Financial Advisory Services: Moody’s HC
• During the 1985 to January 1, 2008, there were 2,270 transactions (103/yr) accounting for
$122 billion ($5.54 billion/yr) in funding among the top five identified leading capital access
advisory vendors.
• The average transaction was for $53.7 million.16
• VHA’s current vendor Ponder & Co claims the lion’s share with an average forty-six deals
per year through 2007.

Page 11 of 26

© 2011 IAG LLC Inc. Non-disclosure: IAG LLC retains all rights to the use and distribution of this document. This
confidential and proprietary information must be held in strict confidence and not disclosed to any other parties
without the express written permission of IAG LLC, San Francisco, CA 415-346-3860.
It is anticipated that the severe dislocation in the bond market will presumably ease as
government interventions take hold and market confidence returns. However, prudence
dictates that, even in the event of effective government intervention, future credit and liquidity
facilities from banks to support new issues will be more difficult and more costly to obtain for the
near future.

Consensus: It’s A Complicated Time for Healthcare But It Will


Continue To Do OK
The agreement over a litany of anticipated negatives precipitating a
slowing in healthcare’s bond market activity is matched by a sense of
calm about the low impact they will have on the sector.

Most of the last decade found hospitals enjoying a market with high liquidity that easily
facilitated borrowing at affordable costs. However, the current financial crisis is producing an
emerging consensus about what hospitals can do and expect over the short term:

• Many are delaying plans to sell new bonds to fund capital improvements.17

• Bad debt will grow due to the weakening economy forcing companies to shift costs in the
form of higher deductibles and co-pays or eliminating employee coverage all together.18

• The tighter economy and anticipated tax hikes will cause higher-income patients and
community supporters to be less inclined to make charitable donations to their local
hospital.19
• Hospitals that implemented a strategic plan requiring back-end borrowing may be stuck with
very large investments that they financed on lines of credit--expecting to refinance these
lines is not going to be as easy as before.

Still, top bond-rating agencies see hospitals financial performance in 2008 continuing to
stabilize or moderately decline from 2007, despite a weaker economy and negative effects on
patient volumes and revenues.20

Hospital Performance – Plateaus for the Strong; Declines for the


Weak
Hospitals with high bond ratings are seeing a leveling of financial
performance while those with rating of “BBB” or lower are scaling back.

A Sept. 25, 2008 special report by a leading bond rating % Community Hospitals With Negative
agency and based on audited financial data from 270 Total Margins
hospitals and systems for fiscal 2007, excluding specialty 35
and those with significant municipal support, found:21
30

• After several years of stable and improving financial 25


performance, acute care hospitals are experiencing a
20
plateau.22
15

Page 12 of 26 10

5 distribution of this document. This


© 2011 IAG LLC Inc. Non-disclosure: IAG LLC retains all rights to the use and
confidential and proprietary information must be held in strict confidence and not disclosed to any other parties
0
without the express written permission of IAG LLC, San Francisco, CA 415-346-3860.
1998 1999 2000 2001 2002 2003 2004 2005 2006
• Those with bond rating of “A” or higher are showing the strongest performance, even
though there is a slight decline in profitability during 2006-07.23

• Most notably is a downward financial performance trend in the lower end of the investment
grade bond scale (“BBB” and lower). 24
• These enterprises tend to be more volatile due to their smaller size and thus are limited
during contracting negotiations due to limited economies of scale. 25
• They are also experiencing eroding profitability that is resulting in reduced capital
investments.26
Hospital Bond Rating Volatility Tracks Financial Performance
The number of upgrades and downgrades are at parity, but look for
upgrading—especially for “BBB+” or above rated bonds-- over the next
two years.

During the period from 2003 and thus far in 2008, bond Acute Care Bond Upgrade Trend
volatility (ratings upgrades or downgrades) has shown: 27 (Fitch 2008 Report)

30
• “A” rated bonds and higher remained the least volatile
showing little tendency to migrate.
• “A-” & “BBB+” exhibit a propensity for mildly moving up. 20

• “BBB” & “BBB-” are the most active and trend negative,
if they don’t remain neutral. 10

As to the up and down grading trends nine months into 0


2008, the pendulum has swung back from 2006 when 2002 2003 2004 2005 2006 2007 2008
upgrades spiked and exceeded downgrades for the first Acute Care Bond Downgrade Trend
(Fitch 2008 Report)
time.
30
• The number of upgrades and downgrades are currently
at parity. 28 20
• Upgrades tend to be for large higher rated
enterprises with improved financial profiles.29
10
• Downgrades are for smaller, lower rated enterprises
with eroding profitability and volume losses--
increased debt had a small effect.30 0

• Upgrades will likely match or slightly lag downgrades through2002 2003 2004 2005 2006 2007
the next 12 – 24 months.31 2008
• Stronger hospitals should fare better by virtue of the characteristics that got them to high
‘A’ or ‘AA’.32
• Expect more downgrades than upgrades at lower end of the investment grade rating
scale.33

Mergers & Acquisitions


The slowing of M&A activity in 2007 resulted in a restructuring that
eliminated underperforming and marginally strategic assets to create
stronger regional networks.

Page 13 of 26

© 2011 IAG LLC Inc. Non-disclosure: IAG LLC retains all rights to the use and distribution of this document. This
confidential and proprietary information must be held in strict confidence and not disclosed to any other parties
without the express written permission of IAG LLC, San Francisco, CA 415-346-3860.
General – Steep Decline in Activity
• The $1.6 trillion in worldwide M&A activity thus far in the
first half of 2008 shows a 36% decline from the record “It has taken a long
set during the same period a year ago.34 time for the pendulum
to swing...the market
• Activity in transactions under $500 million showed
conditions clearly
best performance with only an 18% decline and
favor the buyer...”
totaling $369 billion.35 Jim Beecher
• As of late July, 2008 only 36% had hope for an Publisher
improved outlook in the second half of 2008; up from
24% in December 2007.36
Healthcare – Strategic Buyer’s Market
The implosion of the credit market in midsummer 2008 has prompted a reduction in healthcare
M&A activity--especially in those transactions with considerable real estate components. This
contraction is seen as producing two key effects:37

• Financial buyers have retreated from the market.


• These buyers seek opportunities to buy organizations and then sell equity assets like real
estate.
• Strategic buyers, who did not care to compete with
financial buyers and have always accounted for the Total Healthcare M&A Deals Trending
largest share of acquirers, will take advantage of the 800
current pricing deflation.
• Hospital pricing in 2007 showed an average price- 600

to-revenue multiples of 0.74x, down slightly from 410 523 534 489
400
the 0.75x of 2006, yet above the 2004 423
measurement of 0.61x.38 200
• Expect some opportunistic activity from the stronger
systems while the weaker unload non-strategic 0
assets. 2003 2004 2005 2006 2007 2008

Healthcare’s service sectors M&A advisors enjoyed a bull


market from 2003 into 2007. Since then, overall M&A 2007 Healthcare Services M&A Deals
activity declined 8% in 2007 from the record year of Long Term Care 127
2006.39 Still, the $57 billion spent in 2007 eclipsed all
other years with the exception of the $90 billion in 2006.40 Hospitals 58

Labs, MRI, Dialysis 54


More to the point, the 2007 hospital acquisition activity
paralleled the activity in the overall M&A market: Home Health Care 48

Physician Groups 41
• 58 transactions totaled $8.8 billion and involved 149
hospitals accounting for 22,440 beds; a decrease from Managed Care 28
the $35 billion in involving 57 transactions involving
Rehab 15
249 hospitals and accounting for 54,550 beds in
2006. 41
Behavorial Health 13
• 2006 included the largest transaction ever--$33
billion privatization of HCA by a consortium of private equityOther
firms.
Services
42 105

Page 14 of 26

© 2011 IAG LLC Inc. Non-disclosure: IAG LLC retains all rights to the use and distribution of this document. This
confidential and proprietary information must be held in strict confidence and not disclosed to any other parties
without the express written permission of IAG LLC, San Francisco, CA 415-346-3860.
FUTURE TRENDS

As of September 2008, industry observers have noted no evidence of lack of capital available,
but have seen the sources of funding shift toward strength and quality--the money is going after
deals with big-name companies. The general trends include:43

• Lending continues to large, financially sound companies like Siemens or Chevron.

• Smaller companies with higher risk are paying higher rates due to their weaker credit status.
• The large companies with excellent banking relationships and reservoirs of credit are
borrowing and then extending credit to their channels and trading partners.

• Municipal bondholders have responded to the crisis with a huge flight to quality—high-grade
short-term issues are highly coveted right now.44
• Although the yields are up in the long end of the market, 30 years, demand is down and
that is why people are buying short term.

• The generation of money through the use collateralized debt obligation by leasing
companies has found the current market unreceptive.

HEALTHCARE
Top Six Healthcare Challenges Will Intensify
One of the more important steps for hospitals to do is establish a formal investor relations
programs that include consistent, open and honest communications with Wall Street. These
efforts will keep the capital expenditure pipeline open and full as hospitals reconfigure to meet a
variety of needs.45 A centerpiece of this program is to answer how hospitals are addressing:

Expenditure Control: For Medicare/Medicaid payors, budgetary pressures will hinder rate
increases and may lead to restructured payment programs to control costs over the long term.

• Healthcare costs for workers and employers will increase by an estimated 5.7% in 2009, the
same rate as 2008.46

Decline In Cost Shifting: The commercial payer sector is seeing its ability to shift costs to the
insured impeded by flattening prices.

• 59% of U.S. businesses plan to increase employees’ deductibles, copays or out-of-pocket


spending limits.47
• Nearly half are encouraging enrollment in high deductible/lower premium health plans.48
• 19% want to offer a consumer-directed health plan.49

Rising Costs For New Projects: Profitability will be negatively impacted by increasing capital
costs from new projects and the rising cost of borrowing.

The Business Physician: As physicians continue to compete with hospitals, alignment


strategies with them will ascend to being a top priority.

Page 15 of 26

© 2011 IAG LLC Inc. Non-disclosure: IAG LLC retains all rights to the use and distribution of this document. This
confidential and proprietary information must be held in strict confidence and not disclosed to any other parties
without the express written permission of IAG LLC, San Francisco, CA 415-346-3860.
Consumerism Rises: Community and patient Reimbursement Gap: Actual Cost v.s.
empowerment will bring demands for investments that Medi/Medi Under Payment (billions)
$30
foster improved transparency, quality, safety and
community benefit. $25

Uncompensated Care: the current economic slowdown $20


and resulting unemployment is escalating the movement
by employers to reduce benefits costs and thus driving up $15

co-pays and deductibles. $10

• The percentage of individuals with employment-based $5


health benefits decreased from 68% in 2000 to 62% in
$0
2006.50 2000 2001 2002 2003 2004 2005 2006

• As of September 2008, the nation’s short-term acute care hospitals (STACHs) have reported
almost $124 billon in uncompensated care costs over the last five years.51
• More than 20% of uncompensated care Medicare cost reports have not complied fully
with reporting requirements.52
• Not-for-profit hospitals have 4.8% of uncompensated care costs.53

Recession Will Have A Mild Effect On Healthcare


With the exception of credit being tight, a recession lasting through 2009 is anticipated to
produce a mild effect on the healthcare sector. The most visible change will be a spike in the
health spending/GDP ratio primarily due to a shrinking economy and the costs of providing
healthcare growing at 9.6% in 2009; down from 9.9% in 2008.54 A retrospective analysis of the
past six recessions to see how a slowing economy might affect healthcare showed:55

• The health industry is not as closely linked with the rise and fall of business cycles—it takes
at least a one or more years for the effect to show up, if at all.

• A medical price [inflation adjusted Medical Consumer Price Index (MCPI)] tends to rise
where the general CPI declines usually during or towards the end of a recession.

• National Health Expenditures (NHE) and the Net Cost of Private Health Insurance (PHI)
do not always fall during a recession.
• NHE increased during the 1970, 1974, 1980, 2002 recessions and tended to decline
about one or two years after.
• PHI increased during 1970, 1974, and 2002 but declined during 1980, 1982 and 1990
recessions.

• The number of uninsured does not track well with the ebb and flow of a recession—rising
with some recessions and sinking with others.56

Page 16 of 26

© 2011 IAG LLC Inc. Non-disclosure: IAG LLC retains all rights to the use and distribution of this document. This
confidential and proprietary information must be held in strict confidence and not disclosed to any other parties
without the express written permission of IAG LLC, San Francisco, CA 415-346-3860.
Healthcare Financial Managers Remain Calm
The sub-prime crisis has lead to a near complete disintegration of two bond instruments
accessed extensively in the past by hospitals--Auction-Rate Securities (ARS) and the Variable-
Rate Demand Bond (VRDB) market. The impact on hospitals has been significant.

• Auction-Rate Securities (ARS), no longer a favorite of hospitals, saw a nearly complete


destruction thus far in 2008.57
• 33% to 50% of all hospitals are in the auction rate market and everyone with this type of
debt has had problems--these rates could not possibly be supported for long. 58
• Healthcare enterprises with these types of instruments started the process of
restructuring to move their debt out of this troubled market to VRDBs, fixed-rate bonds,
and other forms of debt in March and April 2008.
• Some have structured this debt with built in protections; for others, fast rate increases
as high as 17% have been levied. 59
• The ARS breakdown spread into the Variable-Rate Demand Bond (VRDB) market in
some specific situations.

Even with this much violent churning in the market, a late September 2008, analysis of
healthcare financial manager’s attitude highlighted that they were concerned, but confidently
waiting for the waters to calm. Observations included:60

• Despite Lehman and Merrill's problems, variable rate bonds trading, popular among
hospitals, had barely been affected.
• Managers were worried about the interest rates on their bonds, particularly auction-rate debt
that have moved up to double-digits.
• One of the primary concerns centered on the paper they currently held and the resultant
challenge to determine what mix of debt they should carry.
• The more financially fit health systems and hospitals trying to acquire smaller ones were not
struggling to find financing to do so.
• Activity within the private equity investors market continued to be brisk.

Hospital Affiliations Up
Competitive pressures, tightening reimbursement and the long-term demand for capital has
motivated independent community hospitals to affiliate with health systems.
• In 2007, 56% of hospitals were part of health systems—a 10% rise since 2001.61

VENDORS 2007 Long Term Municipal New Issues


There any number of financial advisory services that Leading Firms Ranking [(#transactions)/billions]
Source: The Bond Buyer/ Security Data Company

range from large financial bankers to small boutique


firms specializing in just one of the services PFM (625) $43.4
described in this report or a specific industry or
niche. However, there are only a handful of full First Southwest (630) $29.3

service financial advisory firms strictly focused on RBC Capital Markets (244) $11.3
capital access for healthcare; most are privately held;
many have a strong regional presence. Three of Kaufman Hall (75) $8.6

these are on this report’s vendor short list. Lamont Financial (42) $5.9

Page 17 of 26 Morgan Keegan (71) $5.7

© 2011 IAG LLC Inc. Non-disclosure: IAG LLC retains all rights to the use and distribution
Ponder & Co (50) of this document. This
$5.6
confidential and proprietary information must be held in strict confidence and not disclosed to any other parties
without the express written permission of IAG LLC, San Francisco,
RaymondCA 415-346-3860.
J ames (5) $5.5

Kelling Northcross (77) $4.9


Market leaders short list, as ranked by total value of healthcare deals completed for the 1985-
2007 periods are:

1. Ponder & Co.


2. Kaufman Hall
Market Share - Capital Advisory Services
3. Public Financial Management [1985-2007 Total Deals Value (Billions $)]
4. Morgan & Keegan (Shattuck)
5. Killarney Group

• If the total number of deals was the criteria, Public Ponder & Co
48%
Finance Management and Kaufman Hall would switch Killarney
rankings. Group Kaufman Hall
3% 24%
Public
Notables: Shattuck Financial
• The American Hospital Association (AHA) has Morgan Mgmt.
Keegan 20%
endorsed Kaufman Hall. 62
5%
• Morgan Keegan(acquired Shattuck Hammond Partners in 2007 for their healthcare focus)
been recognized as the top municipal bond underwriter in the South Central United States
(Arkansas, Kentucky, Tennessee, Mississippi, Alabama and Louisiana) for fifteen years.63

Market Distribution of Vendors


Based on Annual Revenue When Available 1
Structure and Revenues
Vendor as available [in millions]

Ponder & Co Privately held, employee


30 years in business owned
• Ranked first in U.S. healthcare finance by dollar volume
and number of bond issues over the last 20 years, and
have helped raise more than $58 billion of debt capital
in 1,021 financing transactions.
• Prepared more than 500 capital access plans, debt
capacity and asset/liability analyses
• Advised on the terms, conditions and price of interest
rate swaps for $17 billion in the last two years
• 100 completed M&A engagements ranging from $4
million to $1.5 billion.
• Actively manage a $2 billion portfolio in fixed income
investments for clients.

Kaufman Hall Privately held


• Founded 1985
• Also offers software suite for planning, in addition to its
consulting services
• Endorsed by American Hospital Association

1
Source: Publicly available records
Page 18 of 26

© 2011 IAG LLC Inc. Non-disclosure: IAG LLC retains all rights to the use and distribution of this document. This
confidential and proprietary information must be held in strict confidence and not disclosed to any other parties
without the express written permission of IAG LLC, San Francisco, CA 415-346-3860.
Market Distribution of Vendors
Based on Annual Revenue When Available
Structure and Revenues
Vendor
as available [in millions]

Public Financial Management Privately held


• Founded 1975
• A division of the PFM Group (“PFM”), that includes the
PFM Asset Management LLC
• Has advised on more than $30 billion of completed
health care transactions since 1990
• Claims to have been consistently ranked the nation's
number one financial advisor
• Very large firm; national presence

Morgan Keegan (Shattuch Hammond) Privately held


• Shattuch Hammond acquired by Morgan & Keegan in
2007
• Founded1993
• 160+ M&A transactions totaling $10.8 billion in
transaction value
• Completed $12.9 billion as underwriter, placement
agent, financial advisor on equity and debt financings
• Served as competitive bid agent on interest rate swaps
and reinvestment contracts totaling $3.4 billion
• Remarketing agent for variable rate issues of
approximately $500 million

Killarney Group Privately held


• Founded 1995
• Small shop

OVERSIGHT & INFLUENCE

Regulatory
U.S. Securities and Exchange Commission (SEC)’s mission is to protect investors, maintain
fair, orderly, and efficient markets, and facilitate capital formation. The laws and rules that the
SEC enforces governs the securities industry in the US and are based on the concept that all
investors, whether large institutions or private individuals, should have access to certain basic
facts about an investment prior to buying it, and so long as they hold it.

Page 19 of 26

© 2011 IAG LLC Inc. Non-disclosure: IAG LLC retains all rights to the use and distribution of this document. This
confidential and proprietary information must be held in strict confidence and not disclosed to any other parties
without the express written permission of IAG LLC, San Francisco, CA 415-346-3860.
The SEC oversees the key participants in the securities world, including securities exchanges,
securities brokers and dealers, investment advisors, and mutual funds. Here the SEC is
concerned primarily with promoting the disclosure of important market-related information,
maintaining fair dealing and protecting against fraud.

The most recent and notable SEC laws are the Sarbanes-Oxley Act of 2002. This legislation
mandated reforms that enhanced corporate responsibility, improved financial disclosures and
combated corporate and accounting fraud, and created the "Public Company Accounting
Oversight Board," also known as the PCAOB, to oversee the activities of the auditing
profession. Direct impact on hospitals and capital access includes hospitals posturing for bond
rating agencies by forming audit committees, in addition to finance committees in preparation
for to questions like: 64
• Does the board have a separate audit committee; what’s its role?
• Has the hospital or health system adopted a code of conduct or code of ethics or whistle-
blower policy that allows for anonymous submission of complaints regarding accounting,
internal controls and financial matters?
• Does the hospital’s auditor routinely recommend audit adjustments? Are they reviewed by
the board?
• Which officers certify the financial statements?

Associations
The Securities Industry and Financial Markets Association (SIFMA) and its Investing in Bonds
provides a regulatory voice and information services to its 650 member firms.

National Council of Health Facilities Finance Authority focuses on issues that raise the
availability of tax-exempt financing for healthcare facilities. This Council represents the
member authorities that are the tax-exempt bond issuers and does not represent specific
hospitals or healthcare systems. Since 1990, NCHFFA members have issued over $50 billion
of healthcare bonds.

Page 20 of 26

© 2011 IAG LLC Inc. Non-disclosure: IAG LLC retains all rights to the use and distribution of this document. This
confidential and proprietary information must be held in strict confidence and not disclosed to any other parties
without the express written permission of IAG LLC, San Francisco, CA 415-346-3860.
Appendix A

A Primer--Tax-Exempt & Non-Traditional Debt Instruments

Of these methods access to capital in the form of tax-


exempt bond offerings and non-traditional vehicles are the Four Key Ways Not-for-
most common and include: profit (NFP) Access
Capital
• Bond Offerings: Most common are publicly offered tax-
• Self -Generation:
exempt bonds with fixed or variable rates are sold on the
Operational cash
open market by an underwriter.
reserves and flow are
• Fixed Rate Bonds: Typically a 30-year term to
raised by a net increase
maturity with the rate based on the credit rating of the
in revenues while
borrower or credit enhancements like bond insurance.
dropping costs.
• Variable Rate Bonds: Unless a crediting rating of
• Disposal of Assets:
AA/Aa or higher and a highly liquid financial posture
Divestiture of
can be demonstrated, a letter of credit or bond
insurance from a bank is usually required of the nonproductive assets or
borrower. Term to maturity is shorter; can vary from non-core assets—like
daily to multi-year; and can be structured more real estate—can yield
commonly as: capital and improve
financial performance.
• Auction Rate Securities: These debt instruments
are typically corporate or municipal bonds that use • Philanthropy: More
a Dutch auction (seller and buyer demand is used mainstream than in
to set the interest rate) to reset the interest on a past periods, donations
regular basis. Preferred stock that uses this same of “time, talent or
process to set the dividend also falls into this treasure” is part of
category. every healthcare
• Tax-exempt hospital and health system financial profile.
issuers make up approximately 25% of the • External Capital
auction-rate market.65
• Demand Bonds: The borrowed funds are payable upon demand by the lender;
charged interest is typically based on prevailing money market rates, like the prime
rate.
• Put Bonds: Also known as a multi-maturity bond, option tender bond or variable rate
demand obligation give the bondholder the option of requiring the bond issuer to
repurchase this security at specified dates before maturity. This may happen either
once during the lifetime of the bond (known as a one-time put bond), or on a number of
different dates. Of course, the special advantages of put bonds mean that some yield
must be sacrificed.
• Commercial Paper: An unsecured short-term debt instrument that is typically issued
by a corporation to finance accounts receivable, inventories or other short-term
liabilities. The debt is usually issued at discounted prevailing market interest rates;
only corporations with high-quality debt ratings will find buyers easily without having to
offer a substantial discount. It does not need to be registered with the Securities and
Exchange Commission (SEC) if matures before nine months—a major inducement to

Page 21 of 26

© 2011 IAG LLC Inc. Non-disclosure: IAG LLC retains all rights to the use and distribution of this document. This
confidential and proprietary information must be held in strict confidence and not disclosed to any other parties
without the express written permission of IAG LLC, San Francisco, CA 415-346-3860.
use.

• FHA Financing: Gaining some popularity recently, this is essentially a form of public
offering by the U.S. Department of Housing and Urban Development (HUD).
• FHA Section 242 loans are insured and offered to acute care hospitals to finance
constructions, remodeling, expansions or refinancing.
• It is usually a fixed rate for a term of up to 25 years from the end of construction with
variable rate swap structures often being a consideration.

• Private Placement: Raising capital via private placement is the product of selling
securities to a small number of investors such as pension or mutual funds, banks or
insurance companies.
• It can take the form of leases, loans, notes, or bonds; be taxable or tax-exempt; and
have fixed or variable interest rates.
• Because of the limited number of investors, public disclosure of detailed financials, the
need for a prospectus and registration with the Securities and Exchange Commission
(SEC) is waved.

• Nontraditional Offerings: These offerings are post 1990s when not-for-profit tax-exempt
financing was the rule of the day. Today, non-traditionals most frequently come in the form
of:

• Off-Balance-Sheet (OBS) Options: By using a method of reclassifying financing, large


capital expenditures are kept off of a company's balance sheet.
• Joint ventures, partnerships focused on research and development, and operating
leases (one of the most common forms for capital equipment).

• Real Estate Investment Trusts (REITs): These are essentially third party ownership of
the real estate that is formed to monetize the hospitals assets by selling securities on the
major exchanges.
• REITs have increasingly partnered with physician groups and other health care
enterprises to selectively develop and manage medical properties like medical office
buildings, specialty hospitals, outpatient and ambulatory treatment and diagnostic
clinics.

• Accounts Receivable Financing: A form of asset-financing where an enterprise sells or


uses its receivables--money owed by patients—in an amount that is reduced in value
based on the length of time the money has not been paid (“ageing”).

• Subordinated Securities: These are lower-rated classes of securities that bear higher
interest rates. They are sold to other investors or, in the case of securitization deals, held
by the originator.
• In the event of problems, the higher-rated (senior) securities receive payments prior to
the subordinated ones.

Page 22 of 26

© 2011 IAG LLC Inc. Non-disclosure: IAG LLC retains all rights to the use and distribution of this document. This
confidential and proprietary information must be held in strict confidence and not disclosed to any other parties
without the express written permission of IAG LLC, San Francisco, CA 415-346-3860.
Bibliography

Page 23 of 26

© 2011 IAG LLC Inc. Non-disclosure: IAG LLC retains all rights to the use and distribution of this document. This
confidential and proprietary information must be held in strict confidence and not disclosed to any other parties
without the express written permission of IAG LLC, San Francisco, CA 415-346-3860.
1
Ziegler, A. (2008, July 8). Trend: Hospital investment returns still looking shaky. Fiercehealth.com.
Retrieved from: http://www.fiercehealthfinance.com/story/hospital-investment-returns-still-looking-
shaky/2008-07-08
2
Ziegler, A. (2008, July 8). Trend: Hospital investment returns still looking shaky. Fiercehealth.com.
http://www.fiercehealthfinance.com/story/hospital-investment-returns-still-looking-shaky/2008-07-08
3
Presenting your story to capital markets. http://www.hhnmag.com/hhnmag_app/gateFold/pages/JUNE08.jsp
4
http://ida.lacity.org/pdfs/Other/bond_issuance_fees.pdf
5
Clark, R. (2008, May). Size and focus: healthcare provider organizations are beginning to see the benefits of
size. Retrieved 10/9/08 from: http://findarticles.com/p/articles/mi_m3257/is_/ai_n25449479
6
(2008, Fall). The Impact of the Capital Markets Crisis and Economic Slowdown on Hospitals and Health
Systems. Shattuck Hammond. Retrieved 10-28-08 from:
http://www.shattuckhammond.com/Publications/PDFs/CM%20Crisis.pdf
7
Campbell, D. (2007, August 13). As healthcare’s financials peak…. The Bond Buyer Retrieved 10-2908
from: http://www.bondbuyer.com/article.html?id=20070825MHX4RCTA&queryid=1790584574&hitnum=17
8
Campbell, D. (2007, August 13). As healthcare’s financials peak…. The Bond Buyer Retrieved 10-2908
from: http://www.bondbuyer.com/article.html?id=20070825MHX4RCTA&queryid=1790584574&hitnum=17
9
Campbell, D. (2007, August 13). As healthcare’s financials peak…. The Bond Buyer Retrieved 10-2908
from: http://www.bondbuyer.com/article.html?id=20070825MHX4RCTA&queryid=1790584574&hitnum=17
10
Campbell, D. (2007, August 13). As healthcare’s financials peak…. The Bond Buyer Retrieved 10-2908
from: http://www.bondbuyer.com/article.html?id=20070825MHX4RCTA&queryid=1790584574&hitnum=17
11
Campbell, D. (2007, August 13). As healthcare’s financials peak…. The Bond Buyer Retrieved 10-2908
from: http://www.bondbuyer.com/article.html?id=20070825MHX4RCTA&queryid=1790584574&hitnum=17
12
Campbell, D. (2007, August 13). As healthcare’s financials peak…. The Bond Buyer Retrieved 10-2908
from: http://www.bondbuyer.com/article.html?id=20070825MHX4RCTA&queryid=1790584574&hitnum=17
13
Retrieved 10/11/08 from: http://www.ponderco.com/reportsandcommentary/index.php
14
Retrieved 10/11/08 from: http://www.ponderco.com/reportsandcommentary/index.php
15
Retrieved 10/11/08 from: http://www.ponderco.com/reportsandcommentary/index.php
16
Retrieved 10/11/08 from: http://www.ponderco.com/reportsandcommentary/index.php
17
Goldstein, J. (2008, October 1). The Financial Crisis Takes a Toll on Hospitals. Retrieved 10/08 from:
http://blogs.wsj.com/health/2008/10/01/the-financial-crisis-takes-a-toll-on-hospitals/
18
Goldstein, J. (2008, October 1). The Financial Crisis Takes a Toll on Hospitals. Retrieved 10/08 from:
http://blogs.wsj.com/health/2008/10/01/the-financial-crisis-takes-a-toll-on-hospitals/
19
Goldstein, J. (2008, October 1). The Financial Crisis Takes a Toll on Hospitals. Retrieved 10/08 from:
http://blogs.wsj.com/health/2008/10/01/the-financial-crisis-takes-a-toll-on-hospitals/
20
Retrieved 10/08 from: http://www.hfma.org/hfmanews/default,month,2008-09.aspx
21
(2008, September). 2008 Median Ratios for Nonprofit Hospitals and Health Care Systems. Retrieved 10/08
from: http://www.fitchratings.com/web_content/presentations/2008/healthcare/fitch2008_median_ratios.pdf
22
(2008, September). 2008 Median Ratios for Nonprofit Hospitals and Health Care Systems. Retrieved 10/08
from: http://www.fitchratings.com/web_content/presentations/2008/healthcare/fitch2008_median_ratios.pdf
23
(2008, September). 2008 Median Ratios for Nonprofit Hospitals and Health Care Systems. Retrieved 10/08
from: http://www.fitchratings.com/web_content/presentations/2008/healthcare/fitch2008_median_ratios.pdf
24
(2008, September). 2008 Median Ratios for Nonprofit Hospitals and Health Care Systems. Retrieved 10/08
from: http://www.fitchratings.com/web_content/presentations/2008/healthcare/fitch2008_median_ratios.pdf
25
(2008, September). 2008 Median Ratios for Nonprofit Hospitals and Health Care Systems. Retrieved 10/08
from: http://www.fitchratings.com/web_content/presentations/2008/healthcare/fitch2008_median_ratios.pdf
26
(2008, September). 2008 Median Ratios for Nonprofit Hospitals and Health Care Systems. Retrieved 10/08
from: http://www.fitchratings.com/web_content/presentations/2008/healthcare/fitch2008_median_ratios.pdf
27
(2008, September). 2008 Median Ratios for Nonprofit Hospitals and Health Care Systems. Retrieved 10/08
from: http://www.fitchratings.com/web_content/presentations/2008/healthcare/fitch2008_median_ratios.pdf
28
(2008, September). 2008 Median Ratios for Nonprofit Hospitals and Health Care Systems. Retrieved 10/08
from: http://www.fitchratings.com/web_content/presentations/2008/healthcare/fitch2008_median_ratios.pdf
29
(2008, September). 2008 Median Ratios for Nonprofit Hospitals and Health Care Systems. Retrieved 10/08
from: http://www.fitchratings.com/web_content/presentations/2008/healthcare/fitch2008_median_ratios.pdf
30
(2008, September). 2008 Median Ratios for Nonprofit Hospitals and Health Care Systems. Retrieved 10/08
from: http://www.fitchratings.com/web_content/presentations/2008/healthcare/fitch2008_median_ratios.pdf
31
(2008, September). 2008 Median Ratios for Nonprofit Hospitals and Health Care Systems. Retrieved 10/08
from: http://www.fitchratings.com/web_content/presentations/2008/healthcare/fitch2008_median_ratios.pdf
32
(2008, September). 2008 Median Ratios for Nonprofit Hospitals and Health Care Systems. Retrieved 10/08
from: http://www.fitchratings.com/web_content/presentations/2008/healthcare/fitch2008_median_ratios.pdf
33
(2008, September). 2008 Median Ratios for Nonprofit Hospitals and Health Care Systems. Retrieved 10/08
from: http://www.fitchratings.com/web_content/presentations/2008/healthcare/fitch2008_median_ratios.pdf
34
Barr, G. (2008, July). M&A activity takes hit in first half of 2008. Houston Business Journal. Retrieved
10/08 from: http://houston.bizjournals.com/houston/stories/2008/07/21/daily17.html
35
Barr, G. (2008, July). M&A activity takes hit in first half of 2008. Houston Business Journal. Retrieved
10/08 from: http://houston.bizjournals.com/houston/stories/2008/07/21/daily17.html
36
Barr, G. (2008, July). M&A activity takes hit in first half of 2008. Houston Business Journal. Retrieved
10/08 from: http://houston.bizjournals.com/houston/stories/2008/07/21/daily17.html
37
(2008). The healthcare acquisition report, Levin & Associates. Retrieved 10/08 from:
http://www.levinassociates.com/publications/har/har14abstract.pdf
38
(2008, March 25). Health Care Services M&A Posts Second-Highest Dollar Level in 2007, According to.../
Reuters. Retrieved 10/08 from: http://www.reuters.com/article/pressRelease/idUS173743+25-Mar-
2008+BW20080325
39
(2008, March 25). Health Care Services M&A Posts Second-Highest Dollar Level in 2007, According to.../
Reuters. Retrieved 10/08 from: http://www.reuters.com/article/pressRelease/idUS173743+25-Mar-
2008+BW20080325
40
(2008, March 25). Health Care Services M&A Posts Second-Highest Dollar Level in 2007, According to.../
Reuters. Retrieved 10/08 from: http://www.reuters.com/article/pressRelease/idUS173743+25-Mar-
2008+BW20080325
41
(2008, March 25). Health Care Services M&A Posts Second-Highest Dollar Level in 2007, According to.../
Reuters. Retrieved 10/08 from: http://www.reuters.com/article/pressRelease/idUS173743+25-Mar-
2008+BW20080325
42
(2008, March 25). Health Care Services M&A Posts Second-Highest Dollar Level in 2007, According to.../
Reuters. Retrieved 10/08 from: http://www.reuters.com/article/pressRelease/idUS173743+25-Mar-
2008+BW20080325
43
Davis, J. (2008, September 18). Getting the Credit You Deserve: How Will the Credit Crisis Affect IT
Spending? Channel Insider. Retrieved 10/08 from:
http://blog.channelinsider.com/content001/channel_chatter/post_2.html?kc=EWKNLESP09232008STR2
44
Retrieved 10/08 from: http://www.modernhealthcare.com/apps/pbcs.dll/article?
AID=/20080922/REG/809199948&nocache=1
45
(2008, September). 2008 Median Ratios for Nonprofit Hospitals and Health Care Systems. Retrieved 10/08
from: http://www.fitchratings.com/web_content/presentations/2008/healthcare/fitch2008_median_ratios.pdf
46
Retrieved 10/08 from: http://www.hfma.org/hfmanews/default,month,2008-09.aspx
47
Retrieved 10/08 from: http://www.hfma.org/hfmanews/default,month,2008-09.aspx
48
Retrieved 10/08 from: http://www.hfma.org/hfmanews/default,month,2008-09.aspx
49
Retrieved 10/08 from: http://www.hfma.org/hfmanews/default,month,2008-09.aspx
50
Retrieved 10/08 from: http://www.hfma.org/hfmanews/default,month,2008-09.aspx
51
Retrieved 10/08 from: http://www.hfma.org/hfm/HFM0908_Schuhmann.htm
52
Retrieved 10/08 from: http://www.hfma.org/hfm/HFM0908_Schuhmann.htm
53
Retrieved 10/08 from: http://www.hfma.org/hfm/HFM0908_Schuhmann.htm
54
Retrieved 10/08 from: http://pwchealth.com/cgi-local/hregister.cgi?link=reg/numbers2009.pdf
55
Retrieved 10/08 from: http://pwchealth.com/cgi-local/hregister.cgi?link=reg/numbers2009.pdf
56
Retrieved 10/08 from: http://pwchealth.com/cgi-local/hregister.cgi?link=reg/numbers2009.pdf
57
Retrieved 10/08 from: https://www.kaufmanhall.com/modules/DownloadFile.cfm?DocumentFile=M%3FI
%2A0%40K%3E9AF3%3B%21%5C%2A4C%22%22%2FH%2AV%2EHO%5E%3D4%29JL%29H5%3C4X%5C
%20LI%2A%5DALZSIHL%3DD%5FYWDO%5E%40%0A%26GK%271HJ%5D%5F%0A
58
Blanchfield. (2005, July). Hospital capital financing in the era of Quality and safety: strategies and Priorities
for the future – a survey of Ceos. Robert Wood Foundation. Retrieved 10/08 from:
http://www.hret.org/hret/programs/content/rwjreport905.pdf
59
Blanchfield. (2005, July). Hospital capital financing in the era of Quality and safety: strategies and Priorities
for the future – a survey of Ceos. Robert Wood Foundation. Retrieved 10/08 from:
http://www.hret.org/hret/programs/content/rwjreport905.pdf
60
Retrieved 10/08 from:http://www.modernhealthcare.com/apps/pbcs.dll/article?
AID=/20080922/REG/809199948&nocache=1
61
Retrieved 10/08 from: https://www.kaufmanhall.com/modules/DownloadFile.cfm?DocumentFile=M9H%3A
%28B%3B%5E%2AMPFC5I%3AG%40%232ZCX%22%3DNL%26%401I%2A%3E%24%29%5DF
%21%2CMOQJ2%3BDLNCJHT%5BK%3C%3DBCOJA%0A%25FO%26%2FMJT%20%0A
62
Retrieved 10/08 from: http://www.aha-solutions.org/aha-solutions_app/ControllerServlet?
action=displayComponent&componentID=538714079&platformID=144684615
63
(2008, January 8). Morgan Keegan is Again Top Ranked Municipal Bond Underwriter in Six-State Region...
Reuters. Retrieved 10/08 from: http://www.reuters.com/article/pressRelease/idUS247430+08-Jan-
2008+BW20080108
64
The board’s role in capital financing. H&HN. Retrieved 10/08 from:
http://www.hhnmag.com/hhnmag/gateFold/PDF/06_2007/6.07_hhn_gate.pdf
65
Retrieved 10/08 from: https://www.kaufmanhall.com/modules/DownloadFile.cfm?DocumentFile=M%3FI
%2A0%40K%3E9AF3%3B%21%5C%2A4C%22%22%2FH%2AV%2EHO%5E%3D4%29JL%29H5%3C4X%5C
%20LI%2A%5DALZSIHL%3DD%5FYWDO%5E%40%0A%26GK%271HJ%5D%5F%0A