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ALDA & Associates International, Inc. Newsletter

January/February 2019

Features & Articles in this issue

Breaking News

Our two articles in this issue are specific while general and touch all of us whether you are in healthcare or business management. You all are potential patients that utilize the health care system and even as investors should be concerned about a company's cash flow. Therefore the subjects in the Newsletter should be of interest to everyone.

��� In the 1950�¯�¿�½s and 1960�¯�¿�½s Pete Seeger wrote and performed a circular folk song entitled �¯�¿�½Where Have All The Flowers Gone?�¯�¿�½.���  In 2010, it was listed by the New Statesman as one of the top 20 political songs. It has as much relevance today as it did then especially if you substitute the word physicians for flowers. The nation is gripped in an epidemic of a physician shortage, especially Primary Care Physicians (PCP�¯�¿�½s). In this article we look at where all the physicians and PCP�¯�¿�½s have gone. This is clearly a dilemma that needs to be solved and there may be no easy answers.

Our second article identifies what we consider to be the 9 rules of cash flow and we also provide some tactics (hints) to avoid what may be embarrassing and costly mistakes. Some of it our readers may have heard before but then again, maybe not. Consider it tantamount to the old newspaper column �¯�¿�½Helpful Hints from Heloise�¯�¿�½.��� 

Book News

���  ��� Essentials of Corporate and Capital Formation
���  ��� by David H. Fater
���  ��� ISBN (13): 978-0-470-49656-5
���  ��� ISBN (10): 0-470-49656-8
���  ��� Cost: $39.95
���  ��� Paperback: 224 pages


��� 

��� Brief Description: A simple and effective guide to the mechanics of finance and corporate structure.

About ALDA:

ALDA & Associates International, Inc. is a business and financial consulting firm committed to assisting companies with:

We help physicians, scientists, entrepreneurs and managements change the world. Our experienced professionals are dedicated to helping clients unlock inherent value��� and create new value. The real-world experience of the ALDA team is leveraged for each client's unique circumstances, challenges, and people.

Among ALDA's hallmark services:

Our experienced professionals can show you all the right steps. For additional information on how we can help, please contact us by email at dfater@alda-associates.com��� or rcohen@alda-associates.com.

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Where have all the Physicians Gone? By David H. Fater

In the 1950�¯�¿�½s and 1960�¯�¿�½s Pete Seeger wrote and performed a circular folk song entitled �¯�¿�½Where Have All The Flowers Gone?�¯�¿�½.���  In 2010, it was listed by the New Statesman as one of the top 20 political songs. It has as much relevance today as it did then especially if you substitute the word physicians for flowers.
��� 
Since the passage of the Affordable Care Act, more and more emphasis has been placed on the role of the Primary Care Physicians. They have been tasked with being the true gatekeeper, even to the granting of incentive bonuses (cleverly disguised as the other side of taking on risk). However, with each passing year, their numbers continue to dwindle. This has to beg the question �¯�¿�½Where have all the PCP�¯�¿�½s gone and why?�¯�¿�½
��� 
Well, let�¯�¿�½s start with the obvious reasons that bubble right to the surface. With half the money and none of the respect, it does not take a genius first-year resident to say no to being a generalist.
��� 
In the world of physicians, there are hundreds of specialties�¯�¿�½neurologists, orthopedic surgeons, dermatologists, radiologists, anesthesiologists�¯�¿�½all the different �¯�¿�½ologists.�¯�¿�½ But physicians generally fall into two camps: the specialists and the generalists (the latter being, for example, your family doctor.) ��� While there has been a longstanding struggle between these two groups, the current consensus is that primary care is losing. The important thing to find out though is why.
��� 
Let�¯�¿�½s start with two medical school graduates one year out of medical school.. They graduated from medical school and are in their residency. Their medical school essays talked extensively about taking care of their patients on a long-term basis which is more or less exclusive to primary care specialties. Interestingly enough, one of these graduates is now in emergency medicine and the other is in radiology. So, why didn�¯�¿�½t they choose primary care?
��� 
In an attempt to understand this anomaly, we consulted with a professor of medicine at the Mayo Clinic in Rochester, Minnesota who is a prominent researcher on the economics of primary care. His findings demonstrate that in the mid to late 1990s about 50 percent of all US medical school graduates were choosing primary care careers. Current estimates are that that is below 20%.

Worse yet is that the pipeline of future primary care physicians has really slowed down even further. As a result, today only roughly 30 percent of physicians practice primary care, compared to 70 percent 50 years ago.
��� 
It is pretty much acknowledged that most researchers believe that with our expanding and aging population, we are going to have a shortage of primary doctors on the order of 52,000 within a decade. If you consider that an average primary care physician cares for about 2,000 patients, that adds up to a lot of people who will not be able to get a doctor�¯�¿�½s appointment and we are seeing that today with the advent of ObamaCare. ��� 
��� 
Unfortunately, even with this increasing demand, only about 6 percent of graduating medical students plan a career in family medicine, and only 2 percent plan a career in general or primary care internal medicine. And every year, primary care residency slots go unfilled. But why not just visit specialists as needed?
��� 
The answer is that primary care is really the front line of medicine. It is really taking care of the entire patient. And that is important because, without primary care, there is no one really tying it all together. It is like a great team with no quarterback. Without a primary provider, no one is coordinating, no one is seeing the whole picture. Even the Center for Medicare and Medicaid Services (CMS) recognized this by creating a fee for PCP�¯�¿�½s (and a way for doctors to get paid) for the coordination of care for Medicare patients with two or more chronic conditions. Even with this fee, it is being billed by less than 30% of the physicians that qualify for it.
��� 
Primary care requires a holistic understanding of the patient. It sees a problem in the context of the patient�¯�¿�½s other medical problems, their personality, their family, their environment. This requires a knowledge base that goes way beyond textbook medicine.
��� 
Subspecialty-driven care without primary care coordination is more expensive. People intrinsically understand America doesn�¯�¿�½t have enough primary care doctors because patients are having trouble finding one; but as a health system America fails and Americans fail to realize that America is paying a huge financial penalty for not having enough primary care doctors
��� 
Most healthcare researchers agree that good primary care is the bedrock of a healthy society.

Countries that value primary care spend less money and have better health outcomes. It is important work, and it sounds like a great setup for a career right? So why is it that most of American medical school graduates are not signing up for the program?
��� 
Many medical students are hearing �¯�¿�½Do not do primary care, whatever you do!�¯�¿�½ Go do dermatology, go do cardiology, be a radiologist. Do something where you have a good lifestyle, make money, and you�¯�¿�½re paid to work with your hands, because that�¯�¿�½s how the American system pays physicians. It pays physicians to do things to people not for people. Primary care, however, is doing things for people.�¯�¿�½
��� 
There are other huge forces at work, pushing impressionable medical students away from primary care. The first has to do with a lack of respect. They are often told �¯�¿�½Oh well, why would you do that? You�¯�¿�½re too smart for that.�¯�¿�½. �¯�¿�½You should specialize, smart people specialize, only those who can�¯�¿�½t specialize end up in primary care.�¯�¿�½
��� 
��� Perhaps we are suffering a societal direction. �¯�¿�½We as a society have drifted off track, we don�¯�¿�½t prioritize population health, public health, and the things that primary care infrastructure is so important for. We�¯�¿�½re really enamored of the latest greatest technology, the fanciest interventions, the miracle cures. And that�¯�¿�½s the subspecialty domain. Obviously, CMS is pushing physicians to take risk and be rewarded for doing well and recognizing the PCP�¯�¿�½s are the ones that need to receive the reward for achieving success as measured by both quality metrics and lower spending.
��� 
Until now, primary care�¯�¿�½at least within our medical culture�¯�¿�½may have been seen as the domain for underachievers. It even feels like the bias is inherent in the terminology. Think about the word �¯�¿�½specialist.�¯�¿�½ Who doesn�¯�¿�½t want to be special? Who wants to go up to their mom and be like, �¯�¿�½Ma, I�¯�¿�½ve decided my passion, it�¯�¿�½s being�¯�¿�½general.�¯�¿�½
��� 
We could, of course, call specialists �¯�¿�½specifists,�¯�¿�½. ��� After all that would be more accurate. Or we could call the generalists �¯�¿�½globalists,�¯�¿�½ which definitely sounds cooler. But the names have stuck.

Another huge problem is the insane amount of paperwork that primary care physicians have to complete. CMS wants the performance metrics documented and the PCP could easily spend his/her whole day charting, filling out endless nonsensical forms, and using fax machines. It is an inefficient use of a physician, and it takes away from face time with patients. More time is spent staring at the computer than at the patient.

And now we come to the Money
��� 
And if all that wasn�¯�¿�½t enough to drive a generation of physicians away, primary care disciplines tend to be at the low end of the compensation scale for physicians. The average PCP makes $195,000�¯�¿�½which from some perspectives, is a lot. But the average orthopedic surgeon makes $595,000.
��� 
So if you think about going through four years of college, then four grueling years of medical school, then three to six years of soul-crushing residency, and coming out well into adulthood with a mountain of debt, while all your friends have retirement accounts, and you are looking at a salary that�¯�¿�½s potentially only a third of what someone who goes into a subspecialty can expect to make? Well, that would make anyone think twice about being a PCP.
��� 
If you look at Great Britain and some other countries, primary care is the apex. The Primary Care Physician is at the top of the food chain. America is one of the only countries that has more specialists than primary care physicians. And the result is that we spend more than any country on healthcare, but we�¯�¿�½re dead last among industrialized countries in every measurable health outcome.
��� 
This is, in part, because we don�¯�¿�½t do a good job of keeping people well, keeping them out of hospitals, and managing their diseases in outpatient settings �¯�¿�½ all of which are tasks of primary care physicians.
��� 
Okay, so this situation is terrible�¯�¿�½certainly for primary care physicians, but even more so for us as patients. However, there are forces at work to effect change that will be beneficial.
��� 
Decisions as to who becomes a doctor in certain parts of the country stack the deck in favor of primary care. In addition to looking at applicants differently, different incentives are being created. If a student agrees to practice in one of the fields in shortage in a geographic area of need for 5 years, medical school is free (Who needs Bernie Sanders?). Public medical schools leave graduates in the hole for $200,000 on average�¯�¿�½a steal compared to $280,000 at the private schools so this is meaningful.
��� 
��� There will again be a day when it is sexy and cool and awesome to be a primary care physician, where they are not going to worry about crushing debt and getting out of it because their salary is so small. That is all going to change. We may be at a sea change in medicine, a tipping point. It has the potential to be revolutionary. It has to be otherwise-America is just not going to have the healthcare system it needs.
��� 
And, remember that song-Where have all the flowers gone?-they will come back again as will Primary Care Physicians.

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To explore ways in which we can provide assistance in analyzing issues and strategies relating to health care and its impact on your company, please contact David H. Fater at��� dfater@alda-associates.com��� or Richard M. Cohen at��� rcohen@alda-associates.com

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9 Rules of Cash Flow and Other Tactics to Avoid Embarrassing and Costly Situations by David H. Fater


In the last two editions of the newsletter we explored concepts of cash and working capital management. This is a critical element of any business and can involve multiple departments, multiple disciplines and just plain hard work. In this month�¯�¿�½s edition, and with the start of a new calendar year, it seems appropriate to come at the topic from a different direction and dumb it down to a few simple rules and selected hints.

There is an old saying that is timeless in its application and simple in its philosophy: �¯�¿�½When you�¯�¿�½re out of cash, you�¯�¿�½re out of business.�¯�¿�½

However, cash flow can be one of the most difficult challenges when running a business. Knowing some basic rules of cash flow can help to free you from money worries. While having unlimited funds at your disposal is the best way to not have money worries, these nine basic rules will help you take control of your cash flow so you can maximize the probability of your business succeeding.

  1. Cash Is King.��� It�¯�¿�½s important to recognize that cash is what keeps your business alive. Manage it with great care, because it is the lifeblood of your business. Many businesses focus on profitability and forget that profits can be manufactured but cash cannot.
  2. Never Run Out of Cash.��� Make a commitment to do what it takes to maintain cash flow.��� ��� If you don�¯�¿�½t, you�¯�¿�½re out of business. (See Number 1).
  3. Know Your Cash Balance.��� Do you know what your cash balance is right now? You should. It�¯�¿�½s absolutely critical that you always know your exact cash balance. Failure is inevitable if you are making business decisions based on incomplete or inaccurate information which many entrepreneurs do.
  4. Daily on a Daily Basis.��� In other words, do today�¯�¿�½s work today. The key to knowing your cash balance is to have up-to-date information in your accounting system. Having the numbers you need, when you need them is critical.
  5. Invoice Immediately.��� You can�¯�¿�½t have cash in the bank until you collect it. If there is a delay in sending out your invoices, there will be an equal delay in receiving cash. Invoice daily if you can and do not treat your accounts receivable like a fine wine-they are not supposed to age!
  6. Never Manage From Your Bank Account Balance.��� Your bank balance is never a true measure of your cash. The cash in your bank account and your real cash balance are two different things. Don�¯�¿�½t make the mistake of confusing them. Attempting to mange cash flow from your bank account is a prescription for failure and being in an embarrassing and costly overdraft situation.
  7. Forecast Your Cash Flow.��� What is your cash balance going to be like in six months? Knowing this can tell you if you are managing your business or if your business is managing you. Predicting your cash balance into the future will give you critical information you need to successfully manage your cash flow today. Be proactive in your approach to cash management and regard all surprises as unwelcome.
  8. Cash Flow Issues Don�¯�¿�½t Just Happen.��� It is amazing how many businesses fail because management didn�¯�¿�½t recognize that they had a cash flow problem in time to do something about it. Just like any other problem, there are always signs well before cash flow issues appear. Reviewing your cash flow forecast on a regular basis will help you to prepare well in advance of having a real cash problem. (See Number 7).
  9. Get Expert Advice.��� Not all managers are comfortable with calculating projections or conducting a trend analysis. Many times they just don�¯�¿�½t have the time. Bookkeepers, although capable, may not provide the insightful knowledge that a seasoned professional may. Wrong information can lead to wrong decisions. Have an expert review your accounts to help you make the best decisions you can make for your business. It is well worth the investment.
With these rules in mind, let�¯�¿�½s consider the pleasant problem of having surplus cash and what to do with it. This is an excellent time to consider this with the windfall many companies received as a result of the tax overhaul and a very healthy business climate in which revenues, profits and cash ballooned.

One of the obvious uses of surplus cash would be the prepayment of debt, especially if interest rates on that indebtedness is high.���  We have enjoyed an extended period of low interest rates so it may be unlikely that prepayment of debt would be advantageous unless it related to a revolving credit line with a low fixed interest rate.���  A prudent use of that cash would be to reload that revolver so maximum availability exists should it be needed in the future. Remember that banks always like to make loans when companies don�¯�¿�½t need the money not when they actually need it.

Another use of surplus cash is that growth acquisition that the company has been looking at but afraid to pull the trigger because of the cash requirements. With surplus cash available, it may be the right time to go on the right shopping spree with an accretive acquisition that will increase the company�¯�¿�½s value (and, if public, the stock price).

And then we come to my personal least favorite use of surplus cash which is, for public companies, the stock buyback. Stock repurchases are perceived to be beneficial because: (a) they reduce the number of shares outstanding which increases earnings per share [Please note that the increase in earnings per share was contrived not real], (b) Increased earnings per share will result in an increase in the share price and (c) a buyback provides a return to the shareholders [However, that is only true if the existing shareholders are the ones selling their shares and if that is the case they must not have much confidence in the future prospects for the company or they would be holding on to their shares]. My philosophy is that stock repurchases should really be a termination offense because there are so many other uses that can generate increased value.

In case there are those that believe I am in the minority, let�¯�¿�½s look at how three well-known companies fared in 2018 with their stock repurchases. Apple spent $62.9 billion (that is correct �¯�¿�½ billion) on share repurchases.���  Before last week�¯�¿�½s skid, they had already lost $9.1 billion on their own stock. Wells Fargo spent $13.3 billion in repurchasing their shares which are now worth $10.6 billion or a loss of $2.7 billion on their own shares. Lastly, Citigroup spent $9.9 billion on share repurchases that are worth $7.1 billion for a loss of $2.8 billion on their own shares.���  Management was paid to run an established business-not be day traders in their own company�¯�¿�½s stock.
��� 
Let�¯�¿�½s sum up. Taking a focused and pragmatic approach to managing cash should allow management to ultimately focus on what is most important�¯�¿�½growing the business profitably.
��� 
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To explore ways in which we can provide assistance in analyzing your cash and working capital issues and strategies to improve your liquidity, please contact David H. Fater at��� dfater@alda-associates.com��� or Richard M. Cohen at��� rcohen@alda-associates.com

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Representative Engagements

  • Organized a start-up Drug Development Company focused on drugs to���  restore and protect damaged brain tissue originating from an Acute Ischemic Stroke or Traumatic Brain Injury. Developed the infrastructure and hiring of key scientists and physicians to rapidly transform the company from a pre-clinical stage to a clinical stage��� ��� company.
  • Initiated and developed a de novo Accountable Care Organization to participate in the Medicare Shared Savings Program which grew to over 250 physicians over three years which successfully��� generated savings.
  • Financial advisor to large physician practice in connection with a potential acquisition transaction where engagement includes determination of strategic and fair value and assisting in negotiations for closing the acquisition and in post acquisition integration.
  • Review and in-depth analysis of new Medicare Reimbursement rules for subsidiary of Fortune 50 insurance company and assistance in developing a business model enabling the��� capture of a new revenue stream for both physician practices��� and affiliated providers.
  • Acquisition due diligence and integration assistance for a public healthcare staffing company involved in numerous acquisitions. Retained by parent company to manage acquired company for 22 weeks through ALDA developed integration plan.
  • Turnaround assistance for a near bankrupt client company, including tax and financial restructuring, and ultimate sale at a significant cash price.
  • Working with development stage drug company fas its Chief Financial Officer and Director focused on cannabis-based compounds for the treatment and prevention of HIV ��� 
  • Leadership of development of client company's strategic plan for the next decade and assistance in repositioning the company.
  • Determination of strategic value of a client company, packaging for sale and assisting in negotiations.
  • Providing the entire management team for several life science and healthcare companies from early stage through obtaining additional patent protection, guiding clinical development plans, navigating the pathway through the FDA, establishing the manufacturing processes, initiating commercial sales and eventually transforming the Company into a publicly traded Company.
  • Determination of strategic implications of a line of business with weak performance; development of strategies to maximize profitability contribution.
  • Turnaround assistance for a troubled venture-backed company,��� including raising additional debt and equity capital.
  • Acquisition and financing assistance for a public, international railroad in connection with a $300 million cross-border acquisition and refinancing.

Our experienced professionals are dedicated to helping clients unlock inherent value and create new value.

The ALDA Team includes, among others:

David H. Fater - Chief Executive Officer

Strategy, capital markets, restructuring, and mergers and acquisitions experience with��� public healthcare companies focused on physician management, rural healthcare, nursing homes, HMO's, diagnostic imaging and medical devices.��� Deeply involved in the implementation of the Affordable Care Act with Accountable Care Organizations, Independent Practice Associations and Management Services Organizations.��� 

Richard M. Cohen - Senior Operations and Business Development Executive

Healthcare operations and worldwide sourcing experience. Skilled in healthcare (physician management, clinical trials, medical and patient process flow, diagnostic imaging and life science) operations as well as in issues dealing with importing, exporting and manufacturing operations in South America, Far East and Europe.��� 

Thomas J. Bohannon -��� Senior Financial Executive

Accomplished, creative CPA, outstanding analytical and technical abilities. Has experience for over 40 years in public accounting and private industry including nursing homes, medical device companies,���  hospitals, not-for-profits, retail, manufacturing, import/export and natural resources.

A. Ronald Turner -��� Senior Healthcare Executive

Senior healthcare industry executive with strong entrepreneurial focus including CEO and COO positions with start-up hospital companies and a publicly-traded hospital company. Extensive and successful operations experience for more than 50 hospitals and 9 nursing homes, and senior reimbursement experience for a major publicly-traded hospital company and a national accounting firm. Experienced in mergers and acquisitions, led operational turnarounds and debt restructurings that created significant value.

Mark W. Caton �¯�¿�½��� Senior Healthcare Executive

Senior hospital executive with over 30 years experience in operating not-for-profit and investor-owned rural/community hospitals as CEO or COO, and Regional COO with several national hospital companies. ��� Skilled in strategic planning and business development, operations management, revenue cycle management, medical staff development, and quality/resource management.

Daniel N. Weiss, M.D., F.A.C.C. - Chief Medical Officer

Medical devices and healthcare practice experience, engaged in a private medical electrophysiology practice where he performs numerous invasive cardiac procedures and has served as a consultant for several Fortune 500 Medical Device Companies including Philips, Boston Scientific/Guidant, St. Jude and Medtronic, as well as for several medical device and drug start-up companies.��� 

Santiago Guzman - International Executive

Experienced in new project development for companies in a variety of industries from start-up to Fortune 500. Client relations management, fluent in English and Spanish. Skilled facilitator for introductions with influential leaders in South America including those in the health care industry.��� 

With offices in:

  • Delray Beach/Boca Raton, FL
  • Atlanta
  • New York
  • Quito, Ecuador

For additional information, please contact:
David H. Fater, Chief Executive Officer
ALDA & Associates International, Inc.
751 Park of Commerce Drive; Suite 128
Boca Raton, FL 33487
(877) 845-4657
dfater@alda-associates.com

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