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PARTICIPATING BOND TRANSACTIONS

Explore the benefits and key features of participating bonds for hospitals, surgeons, physicians, and others. Learn about high returns, low risks, performance targets, and acceptability criteria in this informative summit presentation. Discover practical benefits, low costs, and tax considerations.

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PARTICIPATING BOND TRANSACTIONS

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  1. NATIONAL PAY FOR PERFORMANCE SUMMIT PARTICIPATING BOND TRANSACTIONS presented by ROBERT H. ROSENFIELD Partner McDermott, Will & Emery February 7, 2006

  2. OVERVIEW • A. PARTICIPATING BONDS • BENEFITS

  3. A. PARTICIPATING BONDS • DESCRIPTION • KEY FEATURES • PERFORMANCE TARGETS • 3. ACCEPTABILITY

  4. 1. DESCRIPTION HOSPITAL SURGEONS ASC MSO

  5. 1. DESCRIPTION PHYSICIANS “OTHERS” HOSPITAL

  6. 2. KEY FEATURES • HIGH RATES • “PARTICIPATING” • FIXED YIELD

  7. 2. KEY FEATURES (CONT’D) • d. TERM • e. SECURITY • CALL • COVENANT

  8. 3. PERFORMANCE TARGETS a. FINANCIAL TARGETS b. QUALITY AND PATIENT SATISFACTION c. OTHER d. MODIFICATION

  9. EXAMPLE 20052006200720082009 Margin 3.1% 3.6% 2.7% 3.3% 3.2% % Earned 11% 11% 11% 11% 11% % Paid 11% 11% 0% 23.2% 11% Pre-Tax 18.3% 18.3% 0% 38.7% 18.3%

  10. 4. ACCEPTABILITY a. 20 YEARS OF USE b. IRS c. OIG d. BOND AUTHORITIES e. BOND COUNSEL

  11. B. BENEFITS • HIGH RETURNS • LOW RISKS • PRACTICAL BENEFITS • LOW COSTS AND TAXES

  12. 1. HIGH RETURNS • 10-12% • 20 YEAR TERM • RETIREMENT

  13. 2. LOW RISKS • BUSINESS RISKS • POLITICAL RISKS • REGULATORY RISKS

  14. a. LOW BUSINESS RISKS • COLLABORATION VS. COMPETITION • FIXED YIELD • ACCRUAL FEATURE • 4. CALL FEATURE

  15. b. LOW POLITICAL RISK • REGULATORY CHANGE • CHARITABLE OWNERSHIP • ALL PHYSICIANS CAN BENEFIT • 4. COMMUNITY BENEFIT

  16. c. LOW REGULATORY RISKS 1. INTERNAL REVENUE CODE 2. STARK LAW 3. ANTI-KICKBACK STATUTE 4. SAFE HARBOR COMPLIANCE

  17. 3. PRACTICAL BENEFITS • NO DILUTION • BROAD BASE • NEW INVESTORS • d. CAPITAL ACCESS • e. ALIGNMENT

  18. 4. LOW COSTS / TAXES FINANCING COSTS $2,135,000 SERVICES AND SUPPLIES 600,000 PROPERTY TAXES 1,423,201 (2.7%) SALES TAXES 1,111,687 (8.25% x 49%) INCOME TAXES 1,822,525 TOTAL $7,092,413

  19. QUESTIONS?

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