Healthcare Banking 101. Donald Kohlhafer Senior Client Manager Bank of America Merrill Lynch December 4, 2014

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1 Healthcare Banking 101 Donald Kohlhafer Senior Client Manager Bank of America Merrill Lynch December 4, 2014

2 Treasury Management Revenue Cycle Management Liquidity Management and Funds Investment Disbursement Management Fraud Prevention Credit and Finance Outline Working Capital Financing Capital Structure Financing Bridge/ interim financing1 Medium Term Capital and Equipment Finance Investment Banking Debt and Equity Capital Merger and acquisition advisory services Financial Risk Management Individual and Institutional Investment Management Individual wealth management, retirement plans and employee banking solutions ATM services Philanthropic management 1

3 Objectives Provide an overview of the broad array of issues that a healthcare finance professional may face in the areas of revenue cycle management, capital finance and other interactions with commercial bankers and investment advisors. 2

4 Treasury Management Revenue Cycle Management Liquidity Management and Funds Investment Disbursement Management Fraud Prevention 3

5 Treasury Management Revenue Cycle Management Collections Use of lockbox services to speed collections/ reduce mail float Image technology to speed posting of items to accounting system Payments Received from Third Party Payers Payments Received from Patients Information Reporting for Recognition and Reconcilement of electronic funds transfers (EFT s) and electronic remittance advices (ERA s) Merchant Processing to enable easy payment at point of service. Even more important as deductibles and co-pays increase. 4

6 Treasury Management Liquidity Management and Funds Investment Online access for information reporting Demand Deposit Account (DDA) balance information and daily activity Investment balance information Loan account information, ACH returns, wire activity, etc. Online tools for transaction processing Wire transfers ACH file initiation Stop payments Internal account transfers Funds Investment Overnight Investment sweeps Short Term Investing Earnings Credits 5

7 Treasury Management Disbursement Management Accounts Payable Check disbursements are declining Use of electronic means to streamline process and generate other benefits Credit Cards for accounts payable and travel and entertainment (T&E) Closed loop automated clearing house (ACH) process where Bank maintains the vendor bank account data Use of Account Reconcilement Process (ARP) services Payroll Maximizing direct deposit of pay Payroll Cards 6

8 Treasury Management Fraud Prevention Positive Pay Teller Positive Pay Payee Positive Pay ACH Positive Pay 7

9 Credit and Finance Working Capital Financing Capital Structure Financing Bridge/ interim financing Equipment Finance 8

10 Credit and Finance Working Capital Financing Working Capital Line of Credit Revolving Lines of Credit - principal amount may be loaned and reloaned during revolving loan period. Principal balance is then termed out over a defined repayment period. 9

11 Credit and Finance Capital Structure Financing Term Loan Direct Pay Letter of credit enhancement on variable rate indebtedness Direct Placement of Debt Taxable versus Tax exempt credit facilities 10

12 Credit and Finance Bridge/ interim financing Short Term Bridge Loan to bridge financing for a future tax exempt financing. Acquisition financing 11

13 Credit and Finance Medium Term Capital and Equipment Finance Medical equipment and other capital financing Financing for Electronic Health Records (EHR) projects Obsolescence protection financing for medical equipment Capital budget financing for items depreciated over approximately 5 to 7 years Project financing for upgrading physical plant (renovations) depending on amortization requirements Energy efficiency project financing (longer terms available) Financing for Joint Venture entities 12

14 Investment Banking Debt and Equity Capital Merger and acquisition advisory services Financial Risk Management 13

15 Individual and Institutional Investment Management Individual wealth management, retirement plans and employee banking solutions ATM services Philanthropic management (Endowments) 14

16 Donald G. Kohlhafer, SVP & Senior Client Manager Responsible for coordinating the delivery of products and services offered by Bank of America Merrill Lynch to existing healthcare clients and new prospects in Maryland, Washington, D.C., Virginia, West Virginia and Delaware. Fellow in the Healthcare Financial Management Association (HFMA) and has served on the Board of Directors for the Maryland Chapter. Mr. Kohlhafer s volunteer interests are numerous, including participation on the United Way of Central Maryland Board of Directors. Graduate of the University of Rhode Island and received his MBA with a concentration in Finance from Loyola College (now Loyola University of Maryland) and has been with the bank since Donald.kohlhafer@baml.com;