Whether your hospital needs to sell an asset, raise money for new capital projects or simply refinance its debt, you're probably going to need some outside assistance with things like appropriately valuing assets and creating competition among bidders. Hospitals should consider several factors before hiring a financial adviser, says James S. Vaughan, managing director at Cain Brothers & Co. LLC, a New York-based investment banking firm that provides advisory services to healthcare providers. 1. Does the adviser know today's market values backward and forward?
For example, if you're buying or selling a hospital, other health facilities or ancillary real estate, your adviser needs to know the likely bidders and their transaction tendencies. Does he know which for-profit or nonprofit hospital companies are currently acquisitive, including what geographies they are interested in? If your hospital is trying to raise debt capital, your adviser needs to know the appropriate tax-exempt mutual funds to approach and their preferences. This competency will help create a competitive market for your debt. Does he know the principal dealers if he's trying to do a derivative transaction?2. Is the adviser nimble and flexible, or does he only know how to do one thing well?
You might want a jack-of-all-trades, or you might want a specialist depending on the number of financial initiatives your hospital has on its plate in the near-to-intermediate term. Can the potential adviser demonstrate a track record in the area of advice the hospital is looking for, and can the adviser staff the engagement with appropriate, experienced personnel? 3. What will the adviser charge? Is he willing to be at risk?
For example, in an asset sale, some advisers may be willing to work on contingency-earning little or nothing if the sale is unsuccessful. How will the success of the transaction be measured?Vetting these questions with potential financial advisers before signing a contract will save big headaches down the road, Vaughan says. -Philip Betbeze