4,000 patient provider of in-home healthcare services. $46 million annual revenue. $4 million debt.
- Billing errors resulted in significant payback adjustment to cost reports and diminished credibility with State Medicaid
- State’s pending recoupment actions would likely result in shutting down the business.
- Company was presented with alleged claims for billing errors; State’s recoupment procedures were to withhold A/R.
- How to deal with the State’s procedure to unilaterally stop or reduce reimbursements in circumstance of fraud allegations? Medicaid comprised 80% of Company’s billings and therefore it would soon run out of cash.
- Needed to rapidly develop a feasible plan to repay the State and continue to service bank debt.
- For timely repayment, the Plan had to generate cash flow that was >4x the EBITDA run-rate of the previous year’s.
- Performance improvement initiatives were identified, developed, and staged for implementation.
- Pre-sold credibility with extensive due diligence.
- Gained understanding of each parties’ motivations and objectives; solve creditors’ problem for them.
- Developed performance improvement initiatives and timeline/impact to EBITDA and cash flow.
- Process included correcting billing procedures and installing new billing software and new accounting software.
- MorrisAnderson continued manage the Plan’s process until completion.
- State and lenders accepted the restructuring and repayment plan developed by MorrisAnderson.
- Stipulations provided that MorrisAnderson remain involved until state is paid in full.
- Lenders agreed to several concessions:
- Restructured four loan agreements, including amortization
- Waived covenants on line of credit
- Ultimately the initiates to grow the Company resulted in +$10 million increase in revenue –most of which was higher margin.
- The combination of revenue and efficiency initiatives increased EBITDA from $600k to $4.5 million in two years.
- Company is on positive pathway to satisfy its repayment obligations according to plan.