How one agency thwarted downsizing, acquisition
Don’t fight the owner; become one
Miss a day’s news, and you’re likely to miss word of a major acquisition or merger of health care organizations. Like it or not, such changes in the industry affect you, whether indirectly through additional or stronger competition, or directly as a result of downsizing. But you don’t have to let the current trend of consolidation force you out of a job, as the staff at a local home infusion agency in the Southeast can attest.
For the Gadsden, AL, branch of NMC Homecare, it appeared the staff had just one option start the job search when the German corporation Fersenius purchased NMC last August. There were a number of smaller branches, Gadsden being just one, that the new owner didn’t want to keep and planned to close.
For the four full-time staff of the Gadsden branch Joey Kleinklaus, RPh, pharmacist; Dudley Parker, marketing director; Tracy Pettitt, pharmacy technician; and Sherry Silvey, RN, nurse there was a second option. The staff made the unusual move of buying the branch from NMC, and almost overnight, became the owner/operators of Modern Medical Concepts.
"When we heard NMC was going to sell or close some of the smaller branches, we called the regional manager and expressed to him the desire to purchase the branch," recalls Parker.
Once the regional manager gave his support, the process took just 45 days and was much simpler than the staff expected.
The first step was to establish an asking price for the branch. The building was leased, so there would be no site to purchase. However, the building still became a problem.
"The original lease was with an international company [NMC], and the gentleman who owns the building felt uncomfortable switching the lease from a large company," says Parker. The staff included in the contract with NMC that the lease would have to be signed over to Modern Medical Concepts. The building’s owner eventually agreed but not without some legwork.
"These people who own property are hard to hunt down, so we probably should have started that process earlier," notes Parker.
Fortunate for the soon-to-be-owners, costs such as future anticipated revenue from existing patients were not included in the asking price.
"Because the company had made up its mind to close the location and was planning on sending the patients elsewhere, it wasn’t asking for any goodwill," says Parker.
The NMC corporate office sent an assessor to Gadsden to tally the branch’s assets, such as equipment, pumps, poles, and furniture. NMC had a printout of the branch’s assets and came up with an estimated depreciated value of their worth. The assessor also appraised tangible property that was not on the list, such as furniture, coffee pots, and other items.
Staff determine cost
Then, on the day of closing (Sept. 14, 1996), NMC took an inventory of the remaining supplies, such as remaining drugs and solutions that would also be bought by Modern Medical. The total of the assets became the sale price of the branch.
Once the assessor’s initial work was done, it was easy for the staff to determine what they would have to pay to acquire the office.
"There was a predetermined price for the assets, and we knew what supplies would be left," says Parker. The staff were allowed to ship to another NMC branch any inventory they didn’t want.
When it came time to finance the purchase, the staff had several options. They chose to establish a line of credit using the agency’s assets as collateral.
"It can take a lot of time to acquire a small business loan, as much as two to 21¼2 months," says Parker. "We chose not to go that route strictly because of the time frame."
All things considered, the transition went along smoothly but not without some last-minute worries. Sept. 11, NMC told the Gadsden staff it had three days to finalize the deal. While most of the formalities were out of the way, it left a lot of last-minute work.
"The biggest thing was making sure we had everything up to date on the patient charts because they took all the charts," says Silvey. "We had to re-intake them again."
Another Joint Commission survey required
Because NMC was responsible for the patients’ care up until the change of ownership, it kept all patient files. This left the new owners just three days to transcribe all the charts. While that issue was resolved with a lot of extra work, some issues are still outstanding.
For example, as an NMC branch, the agency was accredited with the Joint Commission on Accreditation of Healthcare Organizations. While the agency did not lose its status following the change in ownership, it will have to subject itself to another survey.
"We were JCAHO accredited with commendation in October of 1995," says Parker. "We will have to be surveyed again because we changed ownership, however we will not lose our accreditation in the meantime."
The change in ownership also requires the agency to reapply to several agencies for a new Medicare number, new pharmacy number, and new state, city, and county business licenses. Payer sources also had to be notified, which was less of a hassle than one would think.
"Our patients are a combination of managed care and Medicare," says Silvey. "We sent a letter to them and told them of the change. Only one person called back and just asked why the ownership changed."
Insurers were informed that nothing would change other than billing, and even then the main difference would be that bills would look different and would originate in the Gadsden office rather than NMC headquarters. The contract stipulated that Modern Medical could not use NMC’s forms, so Silvey is in the process of drafting new documents.
"Because I worked with them for several years and they were good forms, I’m patterning mine after NMC’s as close as I can remember," she says.
The success of the agency relies heavily on open lines of communication between the four owners. Daily meetings help accomplish that.
"We meet every morning to discuss what needs to be done that day," says Silvey, adding that problems or areas of concern also are addressed. Four owners appear to be an optimum number for Modern Medical.
"With seven or eight you would have too many different opinions and too many different directions people want the company to go in," says Parker. "And one I don’t think one is enough. One person can’t know everything there is to know about the business and do everything there is to do."
The agency, which provides "anything having to do with infusion," has five part-time staff who are on call 24-hours a day to assist with patient visits, particularly unscheduled visits or emergencies.
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