Thomson Reuters released an analysis of hospital financial performance that is showing good news for the sector. The median profit margin of U.S. hospitals has significantly improved from near zero in third quarter of 2008 to more than 8 percent in the second quarter of 2009. The study looked at two dozen key financial indicators from more than 400 hospitals nationwide. Although about 20% of the hospitals are still in the red, the overall improvement has one of the study's authors optimistic about what this means for the sector in the future:

"U.S. hospitals are on track to come out of the recession in better financial shape than they were in when the downturn began," said Gary Pickens, PhD, chief research officer at Thomson Reuters and one of the study's authors. "When we published our first analysis of hospital economic health in the fall of 2008, hospitals were facing unprecedented economic stress and staring down a real crisis. Now, by taking aggressive measures to reduce costs, the majority of hospitals are positioned for a strong recovery."

Now is the time to makes sure you have the strategies in place to be positioned for the future. If you need assistance in crafting those strategies, please contact REDW's healthcare services team.

The snapshot of the commercial real estate market is not pretty:

• Current conditions index at 56 out of 100
• 77 percent say property values down from a year ago
• 71 percent say things will be same or worse in 12 months

And, no one is expecting it to get better any time soon. As rental property owners, both in the commercial and residential sectors, consider their options, it is important to note that the choices they make may very well have tax consequences. A recent article in the Journal of Accountancy looks at some of the tax consequences facing property owners with regard to foreclosure, bankruptcy, debt restructuring or debt buyback. For example the following must be considered on property lost through foreclosure:

The tax consequences of real property being lost through foreclosure will differ depending on whether the note held by the lender is recourse or nonrecourse: cancellation of debt (COD) ordinary income may result from a foreclosure where the debt is recourse but usually will not occur when the debt is nonrecourse. With a recourse note, the sale price of the property is assumed to be the FMV of the property, while with a nonrecourse note, the sale price is the balance owed to the lender.

In order to explore strategies that minimize your tax liabilities as you decide on a best course of action for managing your real estate holdings, please contact REDW's tax team.



The information contained in this blog is not intended to be tax advice, is of a general nature, and is based on authorities that are subject to change. Application to your specific situation should be determined in consultation with your tax advisor. IRS Circular 230 Disclosure: Any tax advice in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any matters addressed herein.

They say every cloud has a silver lining. Well, when it comes to economic downturns, one such silver lining is the reminder it creates to revisit your organization's risk management practices. The Committee of Sponsoring Organizations of the Treadway Commission (COSO) has recently released a thought paper on this subject entitled Strengthening Enterprise Risk Management for Strategic Advantage.

“Management is often being asked to provide their boards with more information regarding key risk exposures,” said COSO Chairman David Landsittel. “The challenge facing management is designing and implementing an enterprise wide approach to risk management that is both strategic and value-adding so that the board and senior management have a rich understanding of the organization’s top risk exposures. This thought paper highlights four specific areas where management can work with their board to provide appropriate risk oversight related to strategies and objectives.”

If your own organization is facing challenges in designing and implementing ERM solutions to reduce risk exposures, please contact REDW's internal audit expert, .

Tough economic times can make selling a business difficult. Valuations are low and obtaining the financing necessary to close the deal is a challenge. Analysts are finding it difficult to agree as to whether or not the recession is over; however, almost all seem to agree that the road to recovery will be a long one.

This means, if you're a Baby Boomer looking to sell your business and retire, waiting for a stronger economy may not be a viable option. Even further reducing the attractiveness of this option is the fact that capital-gains taxes may soon rise beyond their current level of 15%. Considering all of this, it's probably not surprising that there is an increase interest in employee stock-ownership plans:

That's pushing some business owners to create their own buyers — in the form of employee stock-ownership plans that also serve the purpose of providing employees with retirement benefits.

ESOPs are employee benefit plans subject to regulation under ERISA, the Employee Retirement Income Security Act of 1974. But they're also an efficient exit strategy for owners of privately held companies, whose ranks are expected to swell now that Baby Boomers are beginning to retire. In a typical ESOP deal, the company creating the ESOP borrows the money to fund the transaction and then pays it back over time. It contributes shares to the ESOP trust annually and allocates them to employees, usually in proportion to their compensation but sometimes incorporating a years-of-service criteria, too.

There are some critical issues that must be considered if you want to utilize an ESOP as part of your exit strategy. Your first step should be to contact REDW's benefits and business valuations experts, and .

Despite the billions that flowed into the banking sector from the federal government, many businesses are still finding it very difficult to obtain financing:

“There is still some tightening of credit taking place in certain parts of the country where economic conditions are deteriorating,” says James Chessen, chief economist at the American Bankers Association in Washington.

U.S. banks continued to tighten standards and terms on all major types of loans to businesses and households during the past three months, the Fed said today in reporting on the results of its latest survey of lending officers. About a net 15 percent of banks tightened standards on commercial and industrial loans, half the prior survey.

This is especially making it hard on small to mid-sized businesses that can't directly access capital markets for finance. Considering that small businesses "have generated 64 percent of net new jobs during the past 15 years," this continued credit crunch poses some serious challenges on the road to economic recovery. If your business needs to explore strategies to improve your chances of obtaining financing, please contact REDW's or .