Bankruptcy Filing for Documentation Vendor M*Modal

M*Modal, a major vendor of clinical documentation software for physicians, on March 20 filed for voluntary Chapter 11 bankruptcy protection.

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Comments (1)
M*Modal Bankruptcy - This is a second Chapter 11 dance after Spheris. The growth gated by acquisitions is a norm both for M*Modal and Nuance. M*Modal acquired CHS [200+ hospitals] by purchasing Spheris assets. CHS is or will add 80 more facilities and waived its lost investment of $10M in Spheris. M*Modal following Spheris work flow acquitted M*Modal Voice Recognition technology for $120M. Total acquisition cost $250M. Spheris added revenue while M*Modal added technology cost. This was the base line when JP Morgan acquired MedQuist Holding for $1.1B in cash.

Puzzling items:

1. If JPM paid $1.1B in case the debt from acquisition should be $-0- !
2. How did the debt ballooned to $750M after JPM acquisition?
3. M*Modal claims 3,600 clients and 6,000 transcriptionists. That is less than 2 per customer. CHS with 200 facilities will require 1,500 transcriptionists - a disclosure problem?

There appears to be a gross mismanagement at M*Modal. Too much borrowing out of balance with the transcription out-sourcing market space that required 90 days of operational cash coverage against active client collection. M*Modal in its press release asserts operating cash flow will cover the needs. Putting these elements together serious restructuring is necessary. Divide M*Modal into a service company, a technology company and a holding company. Let holding company keep and retire the debt obligations.

The ship is about to sink. Time is now.
Posted by Karnal D | Sunday, March 23 2014 at 12:01PM ET
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