Our Services

Monitoring Exams - monitoring examinations are typically performed on behalf of lenders to determine if the borrower is in compliance with loan covenants and if collateral value /enterprise value / fixed charge coverage is sufficient to service the loan. Watermark Healthcare Audit performs both ABL and Non-Borrowing Base monitoring exams. The scope of each exam is determined in advance at the direction of the client but typically includes in addition to other procedures:

• Borrowing Base verification
• AR Reconciliation and Trend Analysis
• Bad Debt and Contractual Adjustment Reserve analysis
• Liquidity/Dilution Testing
• Lockbox analysis
• Fixed Charge and Loan Interest Coverage testing
• AP, Payroll Taxes and Withholding, and other liability/impairment analysis
• Third Party Reimbursement Settlement analysis
• Regulatory Compliance

Underwriting Exams - underwriting due diligence examinations are generally performed either on behalf of lenders in contemplation of granting a loan or on behalf of an investor group in anticipation of purchasing a business. In addition to performing the procedures typically performed for monitoring exams, underwriting exams typically include:

• A review of change of ownership issues and any affect they may have regulatory requirements or expected revenue levels
• AR Reconciliation and Trend Analysis
• More detailed Census/Volume analysis
• Analysis of synergy/ramp-up affects on cash flow and revenue
• More extensive Fixed Charge Coverage analysis
• Fixed Charge and Loan Interest Coverage testing
• May include more extensive search for unrecorded liabilities depending upon whether the transaction is a simple asset sale or more complex full scope acquisition
• May include background check procedures

Revenue and Expense Validation - Revenue and expense validations are often performed for companies that do not have reliable, audited statements or for subsidiaries whose results are so intermingled within a larger corporate reporting entity that audited statements do not provide a reliable gauge for the target entity. A revenue and expense validation can provide verification of historic results more quickly and less expensively than a full scope audit, and under certain circumstances can provide more meaningful information.

• Revenue and expense validations reconcile both reported revenue and reported expense to bank statement validation of deposits and disbursements.
• Revenue and expense validations are particularly useful in determining value for real estate/mortgage transactions.

Quality of Earnings Reports - Quality of Earnings reports are frequently prepared during the due diligence phase of acquisition analysis. Quality of Earnings reports are prepared by an unbiased third party and are an analysis of the components or earnings (and expenses) as well as the sustainability of historic results and the achievability of projections. Quality of Earnings analysis includes:

• Breakdown of revenue by appropriate stratification
• Analysis of historic revenue trend, potential mean-reversion, and issues concerning sustainability
• Determination if there are any billing or regulatory concerns due to change of ownership
• Determination of one time expenses v. recurring expenses
• Analysis of effect on both revenue and expenses due to management/personnel changes
• Synergy analysis
• Analysis of cash flow projections during implementation
• Review of executive compensation, incentive compensation programs, third party transactions, effect of existing litigation

SNF Survey Analysis - Skilled Nursing Facilities are licensed by the appropriate State Department of Labor and are subject to periodic surveys with regard to care. CMS/Medicare has developed the fire star analysis for health inspections, staffing, quality measures and fire safety. Watermark Healthcare Audit offers reviews of these ratings, the underlying 2567 reported surveys, plans of correction, acceptance of plans of correction and status of actual and potential CMPs for deficiencies. Performance of SNF Survey analysis is appropriate for both compliance monitoring in conjunction with existing loans and as an integral part of due diligence analysis for any new SNF loan being considered or as part of the acquisition analysis for investor groups.

Inventory Valuation - Watermark Healthcare Audit prepares Inventory Valuations for use in establishing Borrowing Base parameters and for acquisition valuation purposes. Each valuation summarizes or addresses the following:

• Inventory Class and Location
• Age and Condition
• Market characteristics affecting supply, purchase, and return
• Valuation by historic cost and market replacement validated by price testing
• Valuation by orderly liquidation and forced liquidation
• Description of valuation and sampling methodologies