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Due Diligence on a Lease Arrangement for Wake Forest Baptist Medical Center to Operate Wilkes Regional Medical Center
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Due Diligence on a Lease Arrangement for Wake Forest Baptist Medical Center to Operate Wilkes Regional Medical Center

Client/Profile

Wake Forest Baptist Medical Center (WFBMC), an academic health system with three campuses, including a 1,000+ bed medical center and medical school campus in Winston-Salem, North Carolina, as well as two other hospital campuses.

Challenge/Situation

To provide WFBMC with a valuation calculation of the projected business operations of Wilkes Regional Medical Center (WRMC), and to partner in the due diligence process for a proposed long-term arrangement under which WFBMC would lease and operate WRMC.

WRMC, a municipally-owned facility in North Wilkesboro, North Carolina, had previously been operated by another large North Carolina health system.

Process

In the first phase of the engagement, Veralon completed a valuation calculation of WRMC’s operations. Based on that calculation, WFBMC decided to negotiate for a long-term lease agreement to operate WRMC.  Following these negotiations, the two organizations executed a Letter of Intent to proceed with formal due diligence as a precursor to entering into the lease arrangement.

Veralon was a primary advisor to WFBMC in the due diligence process, serving as lead on seven of the 11 topic areas (financial, medical staff and physician enterprise; compliance; reimbursement and payer contracting; human resources; facilities, equipment, and property; marketing and business development). Other topics were handled by WFBMC Due Diligence Partners (WFBMC Partners). The objectives of the process were to:

  • Identify risks and benefits of the proposed transaction
  • Consider implications for post-transaction integration
  • Form an overall conclusion about the proposed transaction

Veralon collaborated with WFBMC Partners; with the WFBMC Core Team, which consisted of members of WFBMC’s leadership team, as well as legal counsel; and with the combined Operating Team for the transaction, which included in-house subject matter experts from WFBMC, WRMC, and the health system currently managing the hospital. The Operating Team was tasked with post-transaction, implementation-focused efforts.

Data and documents sharing for the due diligence process was facilitated by use of two data rooms, one for general data and accessible by WFBMC Partners, Veralon, and legal counsel, and one containing competitively sensitive data that was accessible only by Veralon and legal counsel.

Interviews were jointly conducted by Veralon and WFBMC Partners.

Results

Both parties agreed on the terms of the lease agreement. The agreement went into effect on July 1st, 2017 and will last a minimum of 30 years.