Juvan's Health Law & Private Equity Report

A Digression for Struggling Lawyers - Embrace the Challenge, Eradicate the Negativity and Get Active, NOW!

Jayne E. Juvan — Sun, 04 Oct 2009 23:07:56 -0500

The legal profession lost 2,000 jobs in September.

The American Lawyer (Seasonally Adjusted Data)

I’m extremely concerned about the employment prospects for many law students.

Several Friends

There’s a waiting list for pro bono projects.

How do I gain experience if I can’t even volunteer?

Anonymous

My division’s numbers have declined dramatically. I’m ready to fold.

Anonymous

I could write about the noteworthy absence of the “L” in “LBO” or my health care reform predictions, but those stories have received plenty of coverage recently. I’ll return to private equity and health care reform soon, but, for now, indulge me as I digress at the request of a colleague.

As a practicing lawyer, it is almost impossible to escape the stories of the staggering job losses facing the legal profession. My telephone lights up almost daily with unemployed lawyers or struggling division heads. As my assistant would attest if asked, I take each of the calls. The stories I’m told are mostly the same.

I’m fortunate that I have remained fully employed through the course of the recession. Nevertheless, my path as a lawyer has not been easy. Being a lawyer is, in a sense, a daily exercise in crisis management. I’ve also navigated my share of personal challenges. Ethics rules limit my ability to expound on lessons derived from my clients, but I can share my personal crisis with you and offer a few suggestions based upon my experience.

As a newly minted graduate, my mother was diagnosed with an aggressive form of breast cancer. Neither skills learned in law school – effective drafting techniques, the fine art of persuasion or negotiation tactics – nor law school credentials – Law Review Editor-in-Chief, salutatorian, top 1% on the bar exam – mattered to my mother’s cancer. Quite simply, it didn’t care. But I managed to continue my climb up the ladder in one of Cleveland’s largest law firms and, at the same time, care for her through chemotherapy and recovery. I dashed from negotiations to the hospital, read court opinions and transaction documents by day and the New England Journal of Medicine by night, all the while getting only about four hours of sleep on some evenings. I even traveled. We managed. Several years later, she is in good health, and my career has taken off. I have not, and I will not, make career decisions based upon her cancer. I’ve stayed true to my goals. Somehow, in a strange way, helping her overcome her cancer has only seemed to enhance my performance. When you watch someone overcome a disease, everything else looks easier.

Perhaps my personal experience has caused many to turn to me. When asked for my advice, I can’t help but to reference Bill George’s 7 Lessons for Leading in Crisis. Crises, George writes, are leaders’ defining moments. In the words once penned by Abigail Adams to her son John Quincy, “It is not in the still calm of life or the repose of a pacific station that great characters are formed. The habits of a vigorous mind are formed in contending with difficulty. Great necessities call out great virtues.” Maybe it’s for these reasons that I’ve avoided asking “why me” when I reflected upon my struggle as a young lawyer and watched so many others climb without such obstacles. Instead, I have attempted to grow personally and professionally from the experience and, in turn, help others overcome their challenges.

Indeed, I do believe our crises can define us as leaders if we let them. When we write of Anne Mulcahy, we talk about how she saved Xerox from the brink of disaster. And where would Apple be without the resilience of Steve Jobs? Jobs, having been tossed from the company he founded, fired back, regained control and launched the iPhone, the iPod, and so many other incredible devices upon which we’ve come to rely. He has even bounced back from a traumatic illness. Such courage.

In my humble opinion, embracing the challenge and being resilient is key. As I tell each and every caller, trust that you will get through these difficult times and emerge much stronger because of them. The crisis can make you and define you, both personally and professionally, if you choose.

For those interested, here’s some additional advice that I’ve been giving to my callers.

Don’t Panic. Stay Calm. Think Rationally. If necessary, draw upon the strength of others. Ask for help. Find a confidant. Avoid making quick, reactionary decisions in the heat of the moment. Sometimes it’s better to walk away, then decide.

Set Goals. Where would you like to be in one, three and five years? Surely, the economy will rebound eventually. Set “BHAGS” or “Big, Hairy, Audacious Goals” (from Built to Last: Successful Habits of Visionary Companies by Jim Collins and Jerry I. Porras) and “SMART” goals, or goals that are specific, measurable, achievable, realistic and timed. Stay on plan – this is only a minor setback. Be accountable. If external factors limit your ability to accomplish your goals, what are your contingency plans?

Develop Your Skills. You want desperately to be a corporate lawyer, but are just out of law school and unemployed. My advice? Pick up a textbook on mergers and acquisitions. Read legal forms such as the ABA’s model transaction documents (asset purchase agreement, stock purchase agreement and merger agreement). Visit Ken Adams' blog on legal drafting. Check out Getting to Yes: Negotiating Agreement Without Giving In by Roger Fisher and William Ury. Fine tune your knowledge of corporate finance and accounting.

Network, Network, Network. Embrace social media. Sign up for Facebook, Twitter and LinkedIn. Start writing a blog that addresses hot legal topics.Read Never Eat Alone by Keith Ferrazzi.With whom are you lunching? You’ve joined your local bar association and have been attending meetings and events, right? If I’m in your workgroup and you run with a project from start to finish, turning it into gold, I’ll be thinking, “I need to hire this girl. Immediately.”

Take Care of Yourself. Continue to pursue your hobbies. Stay in shape – run, swim, play basketball or baseball, etc. It’ll keep you sharp.

Take control of the situation. Bounce back. Rock on!

Twitterview with @22twts and @LanceGodard (22tweets.com)

Jayne E. Juvan — Tue, 01 Sep 2009 19:23:51 -0500

Last week, I participated in an inteview with @22twts, a Twitter page run by @LanceGodard. The full "twitterview" (or so he calls it!) is set forth below. As you'll see, we covered a variety of areas, including recent private equity and health care trends, changes in the legal profession, and advice for unemployed attorneys and law students. Enjoy!

Today we’re tweeting with M&A and private equity lawyer @JayneJuvan, one of Cleveland’s “Top 25 under 35” movers and shakers

@JayneJuvan, thank you for joining us today on Twitter. Tell us: who is @JayneJuvan?
Pleasure’s mine. I’m a tireless advocate, mentor, student of philosophy and economics and martial arts black belt
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Tell us about your law practice.
Deals, deals, deals! A 24/7 corporate lawyer, focusing on M&A, corporate governance and regulatory compliance
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What type of clients do you represent?
Market leaders changing the future of health care and other industries…
Public and private companies, many in health care, and health care focused private equity funds.
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And what is the single most important legal issue affecting those clients?
Reactionary reforms from the economic crisis and potential health care crisis, causing uncertainty and nervousness…
Challenging times we’re in, no doubt.
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No doubt. What do you tell every new client before you start working for them?
I shift the focus to my clients - it’s all about them, not me…
Which means I question & listen. Tell me about your products & service lines, your mission, & what keeps you up at night.
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That’s a very sensible approach. Tell us about one of the more significant client representations you’ve had.
I’m proud to say I recently advised a client on a $300M tender offer. We worked day and night on that deal. ;-)
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Congratulations on that! Why do your clients hire you?
Thanks. If I had to say it in a single word, it comes down to “trust”…
Being a lawyer isn’t enough-I also seize upon the chance to help them grow their businesses and show them new opportunities.
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Am sure that is extremely valuable to them. What’s the most active area of your practice right now? Is that typical?
Not typical, there’s been an uptick in gov’t enforcement actions and I’ve advised on corp compliance & reg investigations.
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What do the proposed Health Care reforms mean to your health care clients?
Many PE funds have adopted a “wait and see” approach-they’ll delay acquisitions until there’s more certainty on HC reform.
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Has the econ crisis affected your clients’ ability to do business? R they changing the way they structure transactions?
Impacts deal flow & timing. We’re spending significant time in due diligence & utilizing creative structuring techniques.
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I imagine the impact is far greater than 140 characters could cover…. How do you market your practice?
You’re not kidding! Most referrals are performance based - ibanker is impressed w/our work & invites us to the next deal.
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What are the strategic objectives driving your Web 2.0 activity? Are you meeting them?
Developing longlasting, authentic relatnshps. Results r better-than-expected - I’ve made many new personal & prof’l friends.
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How is your active Web 2.0 profile perceived by your firm’s leadership? Is it difficult to convince them of its value?
I’d characterize our leadership as avant-garde and innovative, naturally. They’ve welcomed my efforts from the onset.
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That’s great for everyone. Why did you decide to become active on Twitter? Are you achieving those objectives?
These new technologies can advance our practice’s growth. I embrace them & all they have to offer & am meeting my goals!
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How much time do you spend each day developing / enhancing your brand?
We must remember that our reputation as lawyers is built day by day, decision by decision, brick by brick…
Which means that all day, everyday is spent on brand development - every decision, every judgment call matters.
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Absolutely. What is the most significant issue currently facing the legal profession?
IMHO, this ? is at the core - how do we train & mentor the next generation of lawyers & at same time remain fee sensitive?
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What will the legal landscape look like in 10 years?
I’m hopeful that firms will recognize that our future is dependent upon training the next generation of lawyers…
I believe strongly this is our duty, ought to be one of our highest priorities, and ultimately will determine our legacy…
And I trust that the profession will be far better off tomorrow with the efforts of these rising stars
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That sounds like a great future. What would you do if you weren’t a lawyer?
I’m passionate about practice of law, but an ibanker, trader on Wall Street or economist? Or, future politico? No comment!
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I look forward to saying “I knew her when….” How do you want to be remembered?
LOL. In a few simple words, I hope I’m remembered as: Bold. Authentic. Smart. Tough. Purpose Driven. Principle Centered.
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What do you do when you’re not working?
Always working, but on occasion move from negotiations to the sparring ring.TKD olympic style fghtng & medalist @ AAU nat’ls
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Wow. We’ll cover that in the next iview! What advice do you have for lawyers under- / unemployed due to the econ crisis?
As the daughter of a breast cancer survivor (saved by Herceptin @genentech), I’ve had my share of challenges…
Our response to crises ultimately defines us and, if we choose, can stimulate us to take action to enhance lives of others…
Be resilient. Look closely for the opps that lie beneath the wreckage. Trust that they’re there. Find them, then give back
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And our last question for you: what advice do you have for people going to law school today?
Dare to dream. Always. “The world you desire can be won. It exists. It is real. It is possible. It is yours.” Ayn Rand

Thank you, Jayne for this great twitterview and especially for your beautiful and eloquent advice!

And thank you so much for having me today, Lance! RT @22twts Thx Jayne for this twitterview & eloquent advice!

Obama to Hold Online Town Hall on Health Care Reform

Jayne E. Juvan — Tue, 30 Jun 2009 23:01:38 -0500

President Barack Obama will hold an online meeting to discuss health care reform tomorrow. In the video announcement, he calls reform the most important issue for the long term fiscal health of the United States.

House Committees Unveil Health Reform Legislation

Jayne E. Juvan — Fri, 26 Jun 2009 21:14:45 -0500

About a week ago, three House committees released legislation designed to reform America's health care system. The more than 850 page bill proposes the creation of a public health insurance plan and bundling of payments to hospitals and certain post-acute care providers.

Milton Friedman on Health Care Reform

Jayne E. Juvan — Sun, 21 Jun 2009 22:16:36 -0500

Back in 2001, Milton Friedman weighed in on health care reform. Gain insight into his views by reading his article entitled How to Cure Health Care.

PE Funds' Health Care Services Companies Could Struggle as Consumers Delay or Forgo Treatment and Can't Pay Medical Bills

Jayne E. Juvan — Sun, 31 May 2009 20:45:39 -0500

Closer to the beginning of the recession, at health care investing events, many health care deal makers spoke a common theme – the downturn would have little impact on health care services companies, as consumers will not delay or forgo medical treatments. After all, many health care services are necessary, much unlike other discretionary items such as a fifty-inch flat screen television set or that convertible at a family vacation house used only part of the year. Consumers will put off the latter, not the former, and reimbursement concerns, not recession related concerns, would continue to take center stage.

But this recession has impacted industries in ways never thought possible, and health care is no exception. In a recent post, Kristen Gerencher of Marketwatch’s Health Matters blog cites two studies suggesting that consumers have cut back on care and are delaying payments to providers for treatment received.

The American Academy of Family Physicians study indicated that nine out of ten members reported patient concerns over the ability to pay medical bills, and six out of ten reported a rise in appointment cancellations. Additionally, delaying preventive care has created a surge of more expensive procedures needed to treat health problems. Providers have also seen an uptick in charity care and have been forced to discount fees.

Raleigh Durham-based Sageworks also reported delayed payments to providers. For example, home health agencies are, on average, waiting 34 days to receive payment, up from 30 days. The drop in household income makes it difficult for consumers to pay medical bills timely.

Unfortunately, the data suggests that this downturn is indeed different for health care companies. Thus, some health care portfolio companies could potentially struggle – or already are struggling – from the downturn in ways that industry experts previously did not anticipate.

A Study Comparing Boards of Private and Publicly Held Companies

Jayne E. Juvan — Tue, 26 May 2009 17:20:46 -0500

If you're interested in knowing differences in the ways boards of PE portfolio companies and publicly traded companies function, the publication entitled Private Equity vs. PLC Boards in the U.K.: A Comparison of Practices and Effectiveness (highlighted in this morning's edition of Bowne) is a must read. The study concludes that boards of publicly traded companies are more effective at compliance and risk management, but that their PE counterparts outshine them when it comes to value creation, commitment of board members and strategic leadership. The only caveat is that the paper is dated August 2008, before many of the events surrounding the financial crisis unfolded.

Cardinal Fastener President Inspires Audience at Cleveland ACG Meeting

Jayne E. Juvan — Mon, 25 May 2009 18:52:24 -0500

What does it take to be a success in business? If you ask Cardinal Fastener & Specialty Co., Inc. President John Grabner, he will likely focus on the following three elements: (1) persistence; (2) perseverance; and (3) pit bull (being aggressive is key, he says).

Why should you take Grabner seriously when he offers these remarks? Because the Cleveland based Cardinal Fastener has grown since its founding in 1968 to the largest and most responsive company in the hot forge bolt industry, is becoming an integral part of the renewable energy industry, and received a nod from President Obama himself back in January 2009 when President Obama and members of his transition team visited the plant.

Presenting before the Cleveland Chapter of the Association of Corporate Growth at the monthly breakfast meeting last Thursday, Grabner explained that the company was not always as efficient as it is today. But focusing on the three "Ps" allowed the company to successfully adopt "Lean Thinking," causing the company to now be in a position to provide same-day service on most orders. The company uses raw materials that are mostly made in America, and bolts for wind turbines account for approximately 20% of the company's sales.

If you're a company like Cardinal Fastener, how do you know when you've made it - when you've developed into a truly "great" company? For Grabner and his team, the numbers were telling, but it was likely when they received a call from President Obama's transition team requesting a visit to their plant. After secret service spent days sweeping the premises, President Obama visited and publicly promoted his economic agenda, his focus on renewable energy sources and Cardinal Fastener.

The visit led to worldwide media attention, valued at approximately $22 million for the company. Most importantly, Grabner noted that the occasion was an unforgettable experience for the Cardinal Fastener employees, who now feel like they can change the world and already are doing so one bolt at a time for the wind turbine industry.

Congratulations to Grabner and his team - a true success and leader in Cleveland!

Visit Jayne on Twitter

Jayne E. Juvan — Mon, 25 May 2009 14:37:03 -0500

Jayne Juvan is now on twitter. Check out her page at http://twitter.com/JayneJuvan.

Cuomo Gets Tough on PE Fund, Announces Assurance of Discontinuance

Jayne E. Juvan — Sun, 17 May 2009 20:01:13 -0500

On Friday, Andrew Cuomo announced a "landmark agreement" with The Carlyle Group resulting from the alleged use of intermediaries to obtain investments from the New York State Common Retirement Fund. The forty-five page Assurance of Discontinuance (the "AOD"), issued pursuant to Executive Law section 63(15), centers around the use of placement agents to obtain public pension fund investments, a practice the attorney general deems to be fraught with abuse.

In essence, the AOD states that an aura of suspicion is created when campaign contributions are made to the New York State Comptroller, the elected official with oversight powers over the Common Retirement Fund, currently valued at $122 billion. These contributions are made, albeit indirectly, in exchange for investment commitments.

Cuomo found that such conduct is contrary to the central goal of ensuring that public pension fund assets are protected from manipulation and invested solely in the best interests of public pension fund beneficiaries. Such conduct creates the appearance of "pay to play" practices that undermine the public's confidence in state government.

According to the AOD, Carlyle - which obtained about $730,000,000 in investment commitments -cooperated with the investigation and approves of reform efforts. In connection with the investigation, Carlyle agreed to pay the State of New York $20,000,000 and to comply with the Public Pension Fund Reform Code of Conduct, which requires the following:

A ban on placement agents and lobbyists;
A ban on campaign contributions to avoid pay to play;
Increased transparency through disclosure;
A higher, fiduciary standard of conduct in connection with public pension fund business; and
Strengthened conflicts of interest policies.

Currently, the Code of Conduct applies only to Carlyle. Federal or state legislative intervention could make the Code of Conduct binding industry-wide, though there could be changes to the language if the Code works its way through the legislative process. Even though non-binding, the Code of Conduct serves as a warning to other private equity funds and hedge funds, and such funds should consider the appropriateness or necessity of voluntary compliance with the mandates.

Health Care Corporate Governance Non-Binding Guidance

Jayne E. Juvan — Sun, 10 May 2009 23:59:25 -0500

Recently, I have been asked several questions concerning the responsibility of directors of health care organizations to implement corporate compliance programs and to ensure that patients receive quality care. For my readers with similar questions, I direct your attention to the three non-binding guidance documents published by the United States Department of Health and Human Services, Office of Inspector General, in collaboration with the American Health Lawyers Association. These documents do not answer all of the many complex questions that directors face, but nevertheless provide a starting point.

Corporate Responsibility and Health Care Quality: A Resource for Health Care Boards of Directors;

Corporate Responsibility and Corporate Compliance: A Resource for Health Care Boards of Directors; and

An Integrated Approach to Corporate Compliance: A Resource for Health Care Organization Boards of Directors.

M&A and Investment Trends in Health Care: Outlook for 2009 and Beyond

Jayne E. Juvan — Sat, 02 May 2009 21:00:48 -0500

On Friday, I moderated a panel - M&A and Investment Trends in Health Care: Outlook in for 2009 and Beyond - at the Cleveland Metropolitan Bar Association's 25th Annual Health Law Institute. The panel featured two local health care M&A attorneys - one from Benesch and another from Jones Day - and a member of GE Health Care Finance.

The panelists covered a wide range of issues, reflecting back to the glory days of M&A activity in 2006 and 2007 and the doom and gloom of the recession and corresponding dramatic deal decline. The panelists generally agreed that credit is available, but that it's a flight to quality and often times very expensive. So, essentially, you have to be both the "right" company and willing to pay the price. Deals are still underway, but often get tripped up in due diligence or when parties try to renegotiate terms (imagine the deal fatigue!). Reimbursement concerns continue to stay at the forefront of many investors' minds, as they (quite obviously) do not want to pay $1.00 today for something that's worth $.67 tomorrow.

When asked when the rebound will begin, the panelists responded that investors are waiting on the sidelines until there's more certainty, and they refused to speculate as to the approximate date. They all agreed that we're in for a long haul and that the recovery will be slow in coming. Still, there are opportunities in certain sub sectors of health care (there's always a silver lining, right?) - sub sectors that benefit from the stimulus package and Obama's budget and reform efforts are likely to be winners (such as health information technology companies and companies that provide home and community based care).

Sincere thanks to the panelists for their participation!

Juvan's Blog Featured on Real Lawyers Have Blogs

Jayne E. Juvan — Sat, 02 May 2009 20:41:43 -0500

Interested in learning about the evolution of Juvan's Health Law Update to Juvan's Health Law & Private Equity Report? Then head over to Kevin O'Keefe's site Real Lawyer's Have Blogs and check out Lisa Kennelly's story, entitled Blog Evolves Along with Practice for Cleveland Attorney Jayne Juvan. Many thanks to Lisa for the coverage.

8th Annual MedTech Investing Conference, May 6-7

Jayne E. Juvan — Tue, 28 Apr 2009 13:09:23 -0500

8th Annual MedTech Investing Conference, May 6-7

The 8th Annual MedTech Investing Conference, May 6-7 is right around the corner and looks like it will be a great conference! I have a conflict and can't attend, but would encourage you to take a minute to view the agenda topics, as well as the stellar line-up of speakers! Continue reading for a quick over view of the program and registration information.

Wednesday May 6th

7:30-8:30 am	Breakfast & Networking Reception

8:30-8:45	Welcome & Opening Remarks Don Gerhardt, President & CEO - LifeScience Alley

8:45-9:00	The State of MedTech Venture Capital Trends Jay Hare, Partner - PricewaterhouseCoopers

9:00-10:00	The State of the Public Device Market Moderator: Eric Tardif, Senior Vice President, Corporate Strategy Gen-Probe Inc. Panelists: Robert DeSutter, Managing Director Co-Head of Health Care - Piper Jaffray Kevin Davies, Managing Director, Co-Head, Healthcare Investment Banking - RBC Capital Markets Jeff Hoffman, Managing Director - JP Morgan Securities Luke Sarsfield , Managing Director Goldman, Sachs & Co.

10:00-11:00	Operationally Building Device Companies in the New Economy Moderator: Evan Ng, Partner - Dorsey & Whitney Panelists: Kadir Kadhiresan, Principal Johnson & Johnson Development Corp. Doug Kohrs, CEO - Tornier, Inc. Mike Partsch, Founder & CEO - AcceleMed Management, Inc. Howard C. Root, Co-founder & CEO - Vascular Solutions Inc.

11:00-11:30	Networking & Refreshment Break

11:30-12:30	Corporate Buyers Shopping List: What are they looking for? Moderator: Sami Hamade, Partner - Aberdare Ventures Panelists: Chad Cornell, Vice President, Corporate Development Medtronic, Inc. Ann Hickey, MD, VP, New Business Development Peripheral Vascular Division - ev3 Inc. Scott R. Miller, Vice President, Corporate Development & Licensing Covidien Ltd.

12:30-2:00	Luncheon & Keynote Stephen N. Oesterle, M.D. , Senior Vice President for Medicine and Technology Medtronic, Inc

2:00-3:00	Impact of the Economic Meltdown on Financing Private Device Companies Moderator: Kevin Wasserstein, Managing Director - Versant Ventures Panelists: Rich Bowman, President - Debt Advisors Group Carter McNabb, Managing Director - River Cities Capital Funds Jonathan Norris, Managing Director, Private Equity Group Silicon Valley bank Jonathan Silverstein, General Partner - OrbiMed Advisors LLC Dennis Wahr, President & CEO - Lutonix

3:00-3:30	Networking & Refreshment Break

3:30-4:30	Lessoned Learned by Serial Entrepreneurs Moderator: William Kaufman, Partner, Corporate Finance and Transactions Group Oppenheimer Wolff & Donnelly LLP Panelists: Mike Berman, Medical Device Venture Catalyst - Berman Medical Dan Sullivan, President & CEO - superDimension Inc

4:30-5:30	The Lightning Round Moderator: Bill Harrington, Partner - Three Arch Partners Panelists: Nathan Every MD, MPH, General Partner - Frazier Healthcare Ventures Richard Ferrari, Managing Director - De Novo Venture Peter McNerney, Partner - Thomas McNerney Partner Thomas D. Weldon, Chairman, Managing Director Accuitive Medical Ventures

5:30-6:30 pm	Cocktail Reception

Thursday May 7th

8:00-9:00 am	Breakfast & Networking Reception

9:00-10:00	Health Plan & How Medical Directors Establish Medical Policy Moderator: Brent O’Connell, Chief Medical Officer - Argenta TEC Advisors Panelists: Fredrik P. Tolin, MD, MBA, FACS, Medical Director Chicago Commercial Market Elizabeth Brown, MD, Board Certified Pathologist

10:00-11:00	The New Administration Moderator: Todd Evans, Director, Pharmaceuticals and Life Sciences PricewaterhouseCoopers Panelists: Chuck Cutler, Former CMO - Aetna Mike Thompson, Head of Payer Practice - GHRS

11:00-11:30	Networking & Reception Break

11:30-12:30	FDA Fireside Chat: The 510(k) Program Under Siege Interviewer: Mark DuVal, President - DuVal & Associates Special Guest: Don St. Pierre, Associate Director for Policy and Operations - Office of In Vitro Diagnostic Device Evaluation and Safety

12:30-2:00	Luncheon & Keynote: "Research that Can Pay for the Lab Rat" Marie Guion Johnson, PhD, Director - Medical Devices Center Innovation Fellows Program University of Minnesota

2:00 – 4:00	Master Class – New! Managing the Burn Rate While Meeting the Regs – Moderator: Randall Nelson, President - Evergreen Medical Technologies Panelists: J. Robert Paulson, President & CEO - NxtThera, Inc. Paula R. Skjefte, President & CEO - Waterford Consulting Tom Waddell, Principal - Project Leadership Services

4:00pm	Program Adjourns

To register please visit http://www.medtechconference.com/registerNow.html for contact IBF’s registrar, Cathy Fenn at (516) 765-9005, Ext. 210 or e-mail: cathy@ibfconferences.com. DISCOUNT OFFER: Last minute discounted rate of 15% off General Registration or MedTech Start-ups use discount code: MTAG

Webinar: A Case Study - Bankruptcy Acquisition of a Distressed Health Care Enterprise

Jayne E. Juvan — Thu, 23 Apr 2009 21:49:14 -0500

Interested in learning about acquiring a health care company in bankruptcy? Then tune into Benesch's webinar entitled A Case Study: Bankruptcy Acquisition of a Distressed Health Care Enterprise.

Pfizer Announces Post-Merger Integration Plan; Chicago Tribune Forecasts that PE Will Have an "Obama" Focus

Jayne E. Juvan — Wed, 08 Apr 2009 21:41:28 -0500

Pfizer / Wyeth Transaction. On January 26, 2009, Pfizer and Wyeth announced that they entered into a definitive merger agreement. The agreement calls for the acquistion by Pfizer of Wyeth in a cash and stock transaction. In connection with the transaction, Pfizer announced that the Federal Trade Commission has made a second request for information pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 regulatory process. Presumably to resolve post-merger integration concerns, Pfizer also announced today the planned leadership and organizational structure for research and commercial operations. The company's research structure will have two distinct research organizations - The PharmaTherapeutics Research Group (with a small molecule research focus) and The BioTherapeutics Research Group (with a large molecule research focus), and the company will have nine diverse business segments.
Private Equity to Have "Obama" Focus? The Chicago Tribune reported on an Association of Corporate Growth meeting that questioned whether the private equity industry will experience an "Obama" effect. The Tribune reported that, among other industries, health care will likely be a focus given the stimulus package. Indeed, the American Recovery and Reinvestment Act of 2009 (the "Stimulus Bill") makes certain health care companies an attractive investment, as it sets aside $53 billion specifically for health care, along with non-specific spending bringing the total closer to $150 billion. The Stimulus Bill provides over seven million unemployed Americans and their families with a 65% tax credit for COBRA premiums for up to nine months and gives unemployed workers who failed to elect COBRA coverage within the applicable time frame a second chance to elect coverage. The Stimulus Bill also provides an estimated $87 billion to states over the next 27 months in the form of a temporary increase in the Federal Medical Assistance Percentage. While by no means a long-term fix, at least temporarily, these two measures are likely to shore up utilization and stabilize revenues where there may otherwise have been a more considerable decline. The Stimulus Bill also provides incentives for the adoption of health information technology and for clinical preventative services and community-based prevention programs.

Forbes on Health Care Reform

Jayne E. Juvan — Sun, 14 Dec 2008 17:32:48 -0500

As the White House transition from the Bush administration to the Obama administration begins in earnest, the current economic climate has caused attention of many, including those in both administrations, to shift away from health care reform to repairing the broken financial sector, bailing out the big three automakers and stopping the bleeding caused initially by the subprime mortgage crisis. While many are distracted on reacting to current crises, Steve Forbes continues to strive to be ahead of the curve (as he often does, in my opinion) and has remained focused on some of our other pressing concerns, including health care reform (Forbes magazine also recently did a noteworthy piece on energy - another critical area of concern but that is no longer front and center on the mainstream agenda in light of recent events and declining oil prices).

In the December 22, 2008 issue of Forbes, Forbes states that "[t]he key to bringing health care costs under control is not cutting back on the quality of care but changing the way that we finance care." Forbes suggests that patients, not other third parties, should be in control of their health care dollars, especially because, "[w]hen there's a disconnect between providers and consumers (patients, in this case), productivity and innovation suffer." He cites to private pay procedures as being a leading indicator of what happens when patients control their own funds. For example - the cost of Lasik surgery has declined over the years by roughly 50%.

Regardless of whether you agree with Forbes on his health care reform position - whether it's in the health care space or energy - unlike others, Forbes conveys a sense of urgency and that positive changes in energy and health care sectors are needed now so that we ward off calamity similar to the one we've seen in the financial services space.

Reforming America's Health Care System: Barack Obama's Health Care Plan

Jayne E. Juvan — Mon, 08 Dec 2008 09:46:22 -0500

Background

According to a recent health tracking poll conducted by the Kaiser Family Foundation,[1] voters in the 2008 presidential election ranked reforming America’s health care system as the one of the most critical issues that influenced their voting decisions, falling second only to the economy and virtually tied with the Iraq war. Registered voters indicated that the incoming administration should make repairing the health care system a priority even in light of current economic woes stemming from the subprime mortgage crisis and the meltdown of the financial sector and that “it is more important than ever to take on health care reform.” Most voters identified affordability as the most important reform area, as approximately 33% have difficulty paying medical bills, up from a 25% two years ago and further exacerbated by the 2008 recession.

An article published by Time Magazine reported that America is the leading spender on health care per capita – health care represents 16% of America’s gross domestic product – but that Americans live shorter lives than others in more developed nations.[2] Moreover, while smoking – a leading cause of disease and premature death – is on the decline, Americans still are not healthy, especially because of America’s obesity crisis. Four out of ten Americans do not exercise, and many Americans are overweight. To America’s credit, treatment innovations have curbed deaths from heart disease, cancer and stroke, but many Americans do not have access to these treatments because they lack health insurance or access to doctors. According to the Kaiser Family Foundation, about 45 million Americans lack health insurance, largely because these individuals do not have access to employer-sponsored health plans and yet are also ineligible for Medicaid, resulting in both negative health consequences and high debt levels from medical bills.[3]

Barack Obama will be sworn in as the 44th president of the United States of America on January 20, 2009. The health care reform agenda announced on Obama’s campaign to take the White House will most likely set the tone for the health care plan that Obama’s administration will submit to the United States Congress next year.[4] Tom Daschle, recently appointed by Obama to head the Department of Health and Human Services and replace current Secretary Michael Leavitt, will likely also have an influence on the plan submitted. Daschle is a former United States Senator and the author of Critical: What We Can Do About the Health-Care Crisis. Though Obama’s administration will not be the first to attempt to tackle the state of America’s health care system, many hope that he will depart from his predecessors and will be able to cure the system’s ills.

Obama’s announced plan includes a three-pronged approach that focuses on (1) lowering costs, (2) offering affordable, accessible, universal health insurance coverage and (3) promoting prevention and strengthening public health. A recent article published by The Wall Street Journal summarized the planas reforming health care through learning (making information available), rewarding (tying reimbursement to patient outcomes), pooling (allowing individuals and small firms to join large insurance pools), preventing (ensuring Americans have access to regular screenings and health information) and covering (lowering premiums so that uninsured have access).[5] A report issued by the Lewin Group – a group that purports to have a 38 year record of providing objective analysis and consulting services in the health care space – estimates that Obama’s plan would provide health insurance to an additional 26.6 million people and result in a net federal cost of $1.17 trillion between 2010 and 2019.[6] Highlights of the plan are set forth below.

Barack Obama’s Health Care Plan

Lowering Costs

The first prong of Obama’s health care plan centers around lowering health care costs by promoting the use of electronic health information technology programs, improving access to prevention and disease management programs and ensuring the delivery of high quality care.

Despite technological advances, most health care providers continue to use paper medical records. According the Obama plan, electronic health information technology allows providers to more easily coordinate care, measure quality and reduce medical errors. Thus, Obama’s plan calls for the investment of $10 billion dollars a year over the next five years to move toward the broad adoption of a standards-based electronic health information system.

Moreover, Obama has advocated for improving access to prevention and proven disease management programs. First, providers who accept federal health care funds would be required to offer patients participation in disease management programs because health care costs decline when patients are able to manage their conditions. Second, the Obama plan calls for measures that increase coordination among providers. Third, Obama advocates for transparency. The Obama administration will seek to require health care providers to report cost and quality data such as data on preventable medical errors, nurse staffing ratios, hospital-acquired infections and disparities in care and costs. Insurance companies must also disclose the percentage of premiums that pays for patient care and administrative costs.

The Obama plan further seeks to improve quality of care. If presented and passed in its current form, reimbursement will be aligned with quality of care measures. Providers that achieve performance thresholds on outcome measures will be rewarded for their performance. The plan further targets tackling health care disparities – health care providers will be required to have a diverse workforce and support and expand safety-net institutions that provide a disproportionate amount of care for underserved populations but are underfunded and lack the necessary resources.

In addition, the Obama plan seeks to drive down costs by increasing competition in the insurance and drug industries. For example, in areas where the insurance industry is not competitive, insurers will be forced to pay a reasonable share of premiums for patient care instead of keeping these amounts for profits and administration. As for the drug industry, the plan would allow consumers to import safe drugs from other developed countries if prices are lower, prohibit brand name prescription drug companies from paying generic companies to refrain from entering the market and allow Medicare Part D to directly negotiate with drug companies to reduce the prices for prescription drugs.

Finally, the plan recognizes that employers are currently burdened by costs tied to catastrophic illnesses. The plan seeks to reduce catastrophic expenditures by reimbursing employer plans for a percentage of catastrophic costs incurred over a threshold amount if the savings realized by the employer are used to reduce premiums paid by workers.

Universal Coverage

Citing the statistics that over 45 million Americans lack health insurance, rising costs burden employers and that two million fewer Americans receive health insurance coverage through their employers than they did eight years ago, the second prong of the plan aims to provide universal health care coverage. The Obama plan would require insurance companies to cover pre-existing conditions and would offer Americans the opportunity to enroll in a new public plan – the National Health Insurance Exchange – or an approved private plan and would make available income-based sliding scale tax credits. The plan further calls for increased transparency – plans would be required to provide information concerning the plans as well as the costs of the services. Small business owners would receive a tax credit of up to 50% on premiums paid on behalf of employees, and large employers that do not offer meaningful coverage would be required to contribute a percentage of payroll costs toward the costs of the national plan. All children would have health care coverage and eligibility for Medicaid, and SCHIP would be expanded.

Promoting Prevention and Strengthening Public Health

The third prong of the plan targets the avoidance of the pain and suffering caused by chronic diseases including obesity, diabetes, heart disease, asthma and HIV/AIDS. The Obama plan acknowledges that worksite and school site health promotion programs and onsite clinical preventive services such as vaccinations and exercise facilities improve employees’ health. Accordingly, the plan rewards efforts to offer such worksite and school site interventions. The plan further calls for financial rewards for community based prevention efforts such as sidewalks, biking paths and walking trails and wellness and educational campaigns. Collaboration between federal, state and local governments is also strongly encouraged.

[1] The Henry J. Kaiser Family Foundation, Kaiser Health Tracking Poll: Election 2008, available at http://www.kff.org/insurance/upload/7828.pdf.

[2] Alice Park, America’s Health Checkup: The Sorry State of American Health, Time Magazine December 1, 2008 at 41.

[3] The Henry J. Kaiser Family Foundation, Five Basic Facts on the Uninsured, available at http://www.kff.org/uninsured/7806.cfm.

[4] Barack Obama’s health care platform is available online at http://www.barackobama.com/pdf/issues/HealthCareFullPlan.pdf.

[5] David M. Cutler and J. Bradford Delong et. al, Why Obama’s Health Plan is Better, The Wall Street Journal, Sept. 16, 2008, available online at http://online.wsj.com/article/SB12215229221369569.

[6] The Lewin Group, McCain and Obama Health Care Policies: Cost and Coverage Compared (October 15, 2008).

Health Care Deal News

Jayne E. Juvan — Tue, 12 Aug 2008 22:58:19 -0500

CVS Announces Acquisition of Longs Drug for $2.9 Billion. CVS Caremark Corp. (CVS) announced the $2.9 billion dollar acquistion of Longs Drug Stores (LDG), resulting in the addition of 521 drug stores in California, Hawaii, Nevada and Arizona. According to the press release, the network of stores opens the doors to highly attractive markets. Shares of CVS stock closed down .49 at 38.05, off 1.27%, and shares of LDG closed at 54.04, off 1.07 or 1.94%. Check out the story from MarketWatch.
Icahn Announces Stake in Biogen Idec, Inc. Activist investor Carl Icahn announced his 6.03 percent stake in the common stock of Biogen Idec Inc., a biotechnology company. Icahn reports that he raised his stake because the shares were undervalued. Note that a link to Icahn's blog has been added to the blogroll.

Officers and Directors Take Note: Don't Check Your Fiduciary Duties at the Door

Jayne E. Juvan — Tue, 29 Jul 2008 20:24:32 -0500

In Miller v. McDonald, No. 06-10166 (Bkrtcy. Ct. D. Del. Apr. 9, 2008) (available online under the opinions section), an opinion recently released by the United States Bankruptcy Court for the District of Delaware involving a health care company, the court concluded that fiduciary duties apply not only to directors, but also officers, including a company’s general counsel. While the conclusion is well supported by case law, the opinion serves as an important reminder of the strength of the fiduciary duties owed by directors and officers and that courts will not allow such individuals to check their responsibilities at the door. The opinion emphasizes the necessity of implementing strong internal controls and that a court will frown upon directors and officers who fail to put systems of checks and balances in place.

Facts

The facts of Miller are particularly egregious. World Health, Inc. (“World Health”), the debtor in the case, was in the business of providing healthcare staffing services to hospitals and health systems nationally. The company went public on February 20, 2003, and, during 2003 and 2004, used $38 million raised in a series of private placement transactions to acquire eight companies. World Health thereafter obtained secured debt from CapitalSource Finance, LLC to refinance existing indebtedness and obtain additional liquidity. These transactions included a term loan in the amount of $7,500,000 and a revolving credit facility with a $37,000,000 cap. World Health also pledged assets to secure debt obligations due to certain sellers in connection with the acquisitions.

Despite the company’s rapid growth, red flags began to appear, signaling the company’s inescapable demise. For example, in May 2005, World Health issued a press release announcing changes to financial results. On August 16, 2005, announcements of both the discovery of fraudulently reported financials and the abrupt resignation of the company’s president and chief financial officer “for health and family reasons” sent shockwaves. Only a few days later, on August 24, 2005 came the announced the “discovery” of approximately $22 million in debt and the engagement of a professional services firm in connection with a turnaround. The Bristol Investment Fund, Ltd. issued a notification of default on the terms of convertible debentures and related warrants to purchase common stock and demanded payment of over $6 million. In early 2006, the Internal Revenue Service (“IRS”) filed liens against the property owned by a California subsidiary. The IRS alleged that the outstanding tax liability exceeded $4,000,000. A securities class action lawsuit was filed, and World Health filed a Chapter 11 petition for bankruptcy, later converted to a Chapter 7.

Allegations

Miller, the bankruptcy trustee (the “Trustee”), filed a 13 count fiduciary-duty based complaint against World Health’s senior officers and directors that included the following claims: breach of fiduciary duty; corporate waste; negligent misrepresentation; fraud; turnover of property of estate; fraudulent transfer under state and federal law; equitable subordination; multiple counts of aiding and abetting; and professional negligence. The opinion reviews allegations that the defendants, inter alia:

(1) Engaged in corporate waste of the company’s assets by leasing private jets and paying for luxury cars when the company’s financial health was in question;

(2) Failed to implement a system that contained fraud controls;

(3) Filed falsified documents with the IRS to evidence tax payments;

(4) Created a related party loan account to offset discrepancies when funds were not appropriately paid;

(5) Failed to remit payroll tax checks to the IRS;

(6) Made multiple misrepresentations in financial statements and filings with the Securities and Exchange Commission (“SEC”);

(7) Asserted in press releases and SEC filings that World Health was financially healthy when “World Health lacked adequate internal controls and was, therefore, unable to ascertain its true financial condition”;

(8) Borrowed twice on accounts receivable; and

(9) Entered into indemnification agreements with certain individuals that constituted a fraudulent conveyance.

Procedural Posture and Choice of Law

The case was before the court upon a motion to dismiss filed by Brian T. Licastro, World Health’s vice president of operations and in-house general counsel. Florida law applied because Florida is World Health’s state of incorporation. Nevertheless, the opinion has far-reaching impact, as “[e]ven though Florida law governs this claim, Delaware law is still relevant because ‘the Florida courts have relied upon Delaware corporate law to establish their own corporate doctrines.’”

Fiduciary Duty Claims and Analysis

In reliance on In re Caremark Int’l, Inc. Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996), Stone v. Ritter, 911 A.2d 362 (Del. 2006) and several other cases,the Trustee claimed that Licastro “breached the duty of care by failing to implement an adequate monitoring system and/or the failure to utilize such system to safeguard against corporate wrongdoing.” The court quoted Stone, which provides as follows:

Caremark articulates the necessary conditions predicated for director oversight liability: (a) the directors utterly failed to implement any reporting or information system or controls; or (b) having implemented such a system or control, consciously failed to monitor or oversee its operation thus disabling themselves from being informed of the risks or problems requiring their attention.

The Trustee alleged that Licastro, as the vice president of operation and in-house general counsel, was responsible for failing to implement an internal monitoring system or utilize such system as required by Caremark and its progeny. Licastro countered by arguing that the Caremark line of cases does not apply, stating, “The Trustee has sought to drastically broaden the scope of Caremark by expanding liability for allegedly failure of oversight to not just corporate directors, but also to corporate officers and employees. Delaware law does not recognize this principle.”

The court disagreed with Licastro, holding that the Caremark fiduciary duties apply to officers, including a corporation’s general counsel. The court cited multiple opinions to establish the applicability of the fiduciary duties to corporate officers, including In re Walt Disney Co. Derivative Litigation, No. Civ. A. 15452, 2004 WL 2050138, at 3 (Del. Ch. Sept 10, 2004), which stated,

To date, the fiduciary duties of officers have been assumed to be identical to those of directors. With respect to directors, those duties include the duty of care and the duty of loyalty. There has also been much discussion regarding a duty of good faith, which may or may not be subsumed under the duty of loyalty . . . . [U]pon becoming an officer on October 1, 1995, Ovitz owed fiduciary duties to Disney and its shareholders.

Thus, the court concluded, “it is clear that under both Delaware and Florida law both officers and directors owe fiduciary duties to the corporation,” and such duties extend to general counsel. It was possible that Licastro breached his fiduciary duties by failing to “implement an adequate monitoring system and/or failure to utilize such system to safeguard against corporate wrongdoing.”

This case serves as a reminder that both directors and officers, including a corporation’s general counsel, must strictly adhere to their fiduciary duties and emphasizes the importance of the implementation of strong internal controls designed to protect the corporation against fraudulent activities such as the activities highlighted in this case.