Mid-Sized Company Turnaround



Mid-Size Company Turnaround - Coordinated Health
Chris Creger, CohnReznick LLP
Cynthia Romano, CohnReznick LLP
Thomas Marchozzi, Lehigh Valley Health Network
Mark Minuti, Saul Ewing Arnstein & Lehr LLP
Jeffrey Hampton, Saul Ewing Arnstein & Lehr LLP
Victoria Vaskov Sheridan, Epstein, Becker & Green, P.C.
Patricia Wagner, Epstein, Becker & Green, P.C.
Andrew Kaplan, Epstein, Becker & Green, P.C. 

About the Turnaround:
Coordinated Health (CH), a for-profit health network headquartered in the Lehigh Valley, Pennsylvania, grew from a small sports medicine practice to a profitable $235 million health network over more than 30 years. CH comprised healthcare operations (OpCo) of 80 legal entities, 105 physicians, and 1,400 employees responsible for 12,000 patient visits per week, operating from 22 owned properties and three leased facilities (PropCo) across Pennsylvania and New Jersey, including medical office buildings, ambulatory surgical centers, physical therapy and imaging clinics, and micro hospitals. CH was founded by Dr. Emil DiIorio, and more than 20 key physicians bought into the enterprise. DiIorio later bought CH back when regulatory policies restricted doctor ownership of hospitals (the last buyout payment wasn’t yet paid, and these physicians became a pivotal creditor class).

CH built a stellar reputation with low rates and high doctor/patient satisfaction scores via a delivery process that prioritized doctor efficiency and patient coordination. By late 2017, CH struggled to compete with not-for-profit networks, so CH sought partnerships with two of these networks to drive expansion for all. CH doubled administrative staff and started construction on two hospitals as the deals were being finalized. In late 2018, the deals fell apart when an ongoing five-year U.S. Department of Justice (DOJ) investigation into CH billing expanded via the False Claims Act, increased a whistleblower action from $300,000 to more than $100 million, and settled for eight figures plus a corporate integrity agreement.

Worsening competitive and creditor pressures made a transaction the best option for all stakeholders, and improved performance made a transaction feasible. Between May and August, 96 institutions were contacted; creditors stood still without court protection; the CRO team took over as lead negotiator; and six term sheets were received. Lehigh Valley Health Network (LVHN), a $2.7 billion, A-rated not-for-profit health network in the same footprint as CH was chosen for the transaction. The HSR notification and report form was filed using the failing firm defense to combat anticompetitive concerns. Cash reserves and creditor patience dwindled to zero while the government spent eight weeks looking for a different option, including forcing a reopening of the bid process. Finally satisfied, the FTC and PAAG closed their investigations, and the sale to LVHN closed five weeks later, on December 19. 

The outcome was outstanding. LVHN provides stability and a well-funded future for CH. At close, LVHN committed to retaining all non-owner/non-family staff, and nearly all physicians accepted new contracts. LVHN purchased all OpCo assets and four of 22 PropCo assets. All lenders holding purchased collateral were paid in full or brought current, with LVHN assuming the debt. LVHN leased the remaining 18 properties. All PropCo lenders holding leased collateral were brought current and now have an A-rated tenant as credit enhancement. The DOJ and physicians were paid in full. Unsecured creditors of OpCo were paid in the range

ConferenceAgenda

Agenda subject to change - all times in CDT
 

Tuesday, September 29, 2020  
8:00 a.m. - 11:30 a.m. 

Morning Coffee Shop Chat Rooms

Sponsored by MACCO Restructuring Group, LLC

8:45 a.m. - 9:00 a.m. Daily Announcements 
9:00 a.m. - 9:30 a.m.

Guided Meditation Class

Sponsored by Ritchie Bros

9:00 a.m. - 10:00 a.m.

Opening Session: Mega Trends 3.0               

Sponsored by Saul Ewing Arnstein & Lehr LLP

10:00 a.m. - 10:20 a.m.  VIP Access with Mega Trends 3.0 Panelists
10:30 a.m. - 11:30 a.m. 

TMA NOW Event 

Sponsored by AlixPartners, LLP

12:30 p.m. - 1:30 p.m.

General Session: Options! Options! Options! Alternatives to Bankruptcy       

Sponsored by Sherwood Partners, Inc.

12:30 p.m. - 3:30 p.m. 

Re-Energized Afternoon Coffee Shop Chat Rooms

Sponsored by MACCO Restructuring Group, LLC

1:30 p.m. - 1:50 p.m.  VIP Access with Options! Options! Options! Alternatives to Bankruptcy panelists 
2:00 p.m. - 3:00 p.m.

Education Session: Contested Issues in DIP Financing in the Uncertain World of Our New Normal

Sponsored by Riemer & Braunstein LLP

2:00 p.m. - 3:00 p.m.

Education Session: Managing Chaos in the Era of Loan Defaults: What Lenders and Borrowers Need to Know

Sponsored by McCarter & English, LLP

4:00 p.m. - 7:00 p.m. 

Spiked Coffee Shop Chat Rooms

Sponsored by MACCO Restructuring Group, LLC

4:00 p.m. - 5:00 p.m.  TMA 101: First-Timers and New Members Event 
5:00 p.m. - 6:00 p.m. 

Education Session: The Dark Days and Nights for the Sports Industry

Sponsored by FTI Consulting, Inc.

5:00 p.m. - 6:00 p.m.

Education Session: Beyond the Transaction: Stories of Post-Merger Integrations

Sponsored by CohnReznick LLP

6:00 p.m. - 7:00 p.m. 

TMA Variety Show 

Sponsored by Ritchie Bros

Wednesday, September 30, 2020  
8:00 a.m. - 8:30 a.m. 

Turnaround Yoga Class 

Sponsored by Ritchie Bros

8:00 a.m. - 11:30 a.m. 

Morning Coffee Shop Chat Rooms 

Sponsored by Newpoint Advisors Corporation

8:45 a.m. - 9:00 a.m. Daily Announcements 
9:00 a.m. - 10:00 a.m.

General Session: They Might Be Giants: The Titans of Today and Their Lessons from Along the Way

Sponsored by Hilco Global

10:00 a.m. - 10:20 a.m.  VIP Access with They Might Be Giants: The Titans of Today and Their Lessons from Along the Way panelists 
10:30 a.m. - 11:30 a.m. 

TMA NextGen Event 

Sponsored by Arch + Beam

12:30 p.m. - 1:10 p.m.

Keynote: Mariana Mazzucato: Never Waste a Crisis: Rethinking Capitalism During COVID-19

Sponsored by Gordon Brothers

12:30 p.m. - 3:00 p.m.

Re-Energized Afternoon Coffee Shop Chat Rooms

Sponsored by Newpoint Advisors Corporation

1:10 p.m. - 1:30 p.m.  VIP Access with Keynote Speaker 
2:00 p.m. - 3:00 p.m.

Education Session: Figuring Out Retail: What Was Already Bad Just Got a Lot Worse

Sponsored by Hilco Global

2:00 p.m. - 3:00 p.m.

Education Session: The Impact of COVID-19 on Higher Education: A Schism of Debt, Endowments, and Educational Challenges, Too

Sponsored by Alvarez & Marsal

4:00 p.m. - 5:00 p.m. 

TMA Awards Celebration: "Better Together Roundtable"

Sponsored by Ritchie Bros

4:00 p.m. - 7:00 p.m. 

Spiked Coffee Shop Chat Rooms

Sponsored by Newpoint Advisors Corporation

5:00 p.m. - 6:00 p.m. 

The Business IMPACT of Diversity and Inclusion: Strategic Conversation Workshop

Sponsored by Burford Capital

6:00 p.m. - 6:20 p.m. VIP Access with Diversity and Inclusion Workshop panelists 
6:00 p.m. - 7:00 p.m.  TMA Family Feud
Thursday, October 1, 2020  
8:00 a.m. - 11:30 a.m. 

Morning Coffee Shop Chat Rooms 

Sponsored by Gulf Coast Business Credit

8:45 a.m. - 9:00 a.m. Daily Announcements 
9:00 a.m. - 9:30 a.m. 

Impact Fitness Class 

Sponsored by Ritchie Bros

9:00 a.m. - 10:00 a.m.

Keynote: Duncan Wardle, Innovation & Creativity in a Virtual World

Sponsored by Burr & Forman, LLP

10:00 a.m. - 10:20 a.m.  VIP Access with Keynote Speaker Duncan Wardle 
10:30 a.m. - 11:30 a.m. 

TMA Talks: International 

Sponsored by Deloitte

12:30 p.m. - 1:30 p.m.

General Session: Will the Patient Survive? The Healthcare Industry in a COVID-19 World

Sponsored by Carl Marks Advisors

12:30 p.m. - 3:00 p.m. 

Re-Energized Afternoon Coffee Shop Chat Rooms

Sponsored by Gulf Coast Business Credit

1:30 p.m. - 1:50 p.m. VIP Access with Will the Patient Survive? The Healthcare Industry in a COVID-19 World panelists 
2:00 p.m. - 3:00 p.m.

Education Session: Intentions in Retention: Ethical Considerations When Being Retained in Bankruptcy Cases     

Sponsored by SM Financial Services Corporation

2:00 p.m. - 3:00 p.m. 

Education Session: Market Liquidity and Impact

Sponsored by Deloitte

3:30 p.m. - 4:00 p.m.  VIP Access 
4:00 p.m. - 7:00 p.m. 

Spiked Coffee Shop Chat Rooms

Sponsored by Gulf Coast Business Credit

4:00 p.m. - 5:30 p.m. 

Virtual Capital Connection + Networking Event

Sponsored by Duff & Phelps, LLC and Getzler Henrich & Associates LLC

5:30 p.m. - 6:30 p.m. 

TMA 'Big Tent' Celebration

Sponsored by Ritchie Bros