The Bottom Line:
A medical center was at risk of losing its contract with the Independent Practice Association (IPA) of Physicians contracted to provide primary care services to the medical center’s employees due to the IPA’s high fixed costs. Stapleton Group creatively restructured debt owed by the IPA to the medical center, meeting both parties’ needs.
The Business Issue:
The IPA, which had been funded with a loan from the medical center, faced severe cash flow problems. It had failed to attract sufficient members, beyond the medical center’s employees, to support its high fixed costs. Displeased with the economics, physicians were threatening to leave the IPA which would have put the hospital in jeopardy.
Genesis of Stapleton’s Engagement:
Desirous to keep the IPA in business to serve the primary care needs of its employees, the medical center retained Stapleton Group to conduct a financial analysis of the IPA and provide restructuring solutions.
Stapleton’s Actions & Solutions:
- Analyzed the IPA’s cash flow projections and financial condition, including its debt service obligations to the medical center.
- Researched regulations specific to the medical center’s loan to the IPA.
- Prepared financial models demonstrating the feasibility of debt restructuring options pursuant to the IPA’s cash flow and regulations.
- Provided a comfort letter outlining a creative, commercially-reasonable debt restructuring option that met the needs of the IPA and the medical center.