Sector Profiles
Healthcare Clinics
ACA will consider insurance for the not-for-profit healthcare clinic marketplace. ACA's basic credit approach would be consistent with its evaluation of other healthcare related entities we insure; however, ACA would be quite selective in its approach to this unique segment of the healthcare provider marketplace. The transactions we would consider insuring would be for well-established clinics with significant operating, utilization and a positive financial history of continued funding, absence of significant competitive pressures from other clinics or outposts of larger established providers, and strong community support.
Key Credit Factors
ACA's general approach to determining insurance eligibility would be to review the healthcare clinic or group of clinics (a "system") which would start with a review of the following, among others:
- Service Levels and Essentiality: What range of services are provided and what are patients alternative healthcare options in that community? How long has the clinic been in operation in operation and how essential is this facility to the community?
- Payor Relationships: The clinic must have a history of successful negotiations with third party payors including managed care companies.
- Physician Providers: Loyalty: How long has the current staff been in place and what has been its experience in medical staff turnover? What recruitment and retention policies are in place? This area would focus on turn-over issues, contractual relationships with physicians. ACA will consider clinics with at least 20 physicians on staff.
- Clinic Management and Oversight: How long has the management been in place and how active is the Board? ACA would look at Accreditation, State oversight and control, financial and operational management capabilities, and reporting systems with audit history.
- Other Factors: ACA will review the Clinic affiliation with other medical service providers, the history and basis of clinic referrals, operating margins, insurance coverage, and other utilization/demographic statistics.
Key Legal and Covenant Provisions
There are no 'standard' legal approaches or security provisions that ACA has developed as each transaction opportunity is measured on a case by case basis. However, ACA anticipates that the following would be required:
- Pledge of Gross Revenues
- First Mortgage on the Facility
- Fully Funded DSRF
- Minimum Negotiated Rate Covenant
- Restrictions on Additional Borrowing
- Minimum Negotiated Cash Days on Hand Test
- Minimum Physician/Practice Size; Minimum 5-year Positive Operating History
Essential Documentation
The following information is essential for an ACA review of a healthcare clinic transaction including:
- Preliminary Official Statement with project description including sources and uses
- Financing Documents
- Description of Clinic: history, services, organizational structure, size of practice, waiting time
- Five years of audited financials
- Funding Sources, Payor Mix, Utilization data history, revenue by Source and Program;
- Physician Contracts; Relationships with Managed care and State/Federal Reimbursement Programs
- Economic/Demographic statistics of the service area
- Accreditation Information
- Board Involvement and Board Credentials
