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Overview
Decosimo was engaged to sell Woods Memorial Hospital, a governmental hospital and nursing home that had struggled financially with debt guaranteed by McMinn County.
About Woods Memorial Hospital
Located in Etowah, Tennessee, the hospital was one of two hospitals in the county. It lost much of its surgical business when a new ambulatory surgery center opened. The county had guaranteed debt for the hospital on the condition that it find a buyer. The hospital experienced regular turnover in management positions and had just completed five years of monitoring under a corporate integrity agreement.
Client Objectives
The board's vision for the hospital was to continue serving the eastern part of the county and repay the debt on the facility.
Maximizing Value
After reviewing the historical and current financial statements, we began a dialogue with the independent auditors on our findings in the financial statements of the hospital. The result was a restatement of and corrections to the most recent year's financial statements prior to issuance, as well as adjustments to the current period's internal financial statements. This initial assessment paved the way for a cleaner due diligence process. The work included the simple reconciliation of accounts and resolution of almost one million dollars of credit balances. More than half of the credit balances were improperly posted contractual adjustments which had resulted in an understatement of the hospital's income.
Our review of the hospital's operations identified value in their home health operations and a renal dialysis center which could be monetized separately. Ultimately, the hospital was sold in its entirety but our analysis caused the buyer to focus on unique value components.
Disciplined Process
The Decosimo process was developed to accumulate, analyze and report information in a timely manner. The process includes active communication to management, board members, medical staff and in this case the county executive and county commission. We prepared a request for proposals outlining the demographics of the Hospital's service area as well as operational and financial information. We contacted twenty potential buyers, eight prospects toured the hospital and four made offers. Following a board review, the highest and best offer was selected and a letter of intent (LOI) executed. After negotiation of the purchase and buyer due diligence, the transaction was submitted to the State of Tennessee’s Attorney General for approval, which was granted. The proceeds were used to extinguish the Hospital's debt and acquire tail coverage, with the balance being place with the county for use in funding health related activities.
Proven Results
Working with the hospital board, medical staff and county commission, we were able to successfully sell the hospital, preserving access for the community.
By Ken Conner
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