4 Key Considerations When Buying A Facility
1. Retrieve Loss Data
2. Study the Venue and Location
Check the litigious nature of the county youre looking to buy in. For example, Cook County in Illinois is at the top of the list in number of lawsuits pertaining to alleged nursing home negligence, which has returned considerable jury verdicts in the plaintiffs favor. Inherently, there is nothing specific you can do regarding the location of the nursing home. However, there are sub-areas that have more of a penchant for claims against ownership than others.
3. Understand Insurance Costs
You must be extra diligent when dissecting the insurance costs presented by the seller. Insist that the seller identifies different levels of the self-insured retentions and limits for their current liability insurance program, as well as retro dates and/or tail coverage that may or may not be in place. These are major components in determining cost allocation and can allow all of us to better determine a realistic number for your pro forma.
Basing that line item by simply using the sellers numbers can potentially give you an inaccurate cost analysis. In addition, a seller's requirements from their lender might be inconsistent with what your lender is requiring. This applies not only for limits of coverage, but retentions, and even the strength of the insurance carrier itself.
4. Thoroughly Review Their Workers Compensation Program
The seller may have a master policy or loss sensitive program that would make their premium expense seem lower than it truly will be factoring in their loss experience of course. It could also be the other way around, where your program has specific parameters that need to be taken into consideration when determining prospective costs.
These are just some of the items you need to take into account when purchasing a facility. If you do your due diligence, ask the right questions and demand certain information up front, it will save time, energy, resources and more importantly give you a better picture of the asset youre about to purchase.
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