Case Study

HFS Consultants Found Millions in Labor Savings for Hospital System


Hospital Financial Turnaround and Support

SITUATION

A two-hospital system, with approximately 550 beds in the Midwest, had until recently been relatively profitable, performing in the top half compared to similar hospitals. In 2010 it earned $12 million on revenues of $275 million.

The year 2011, however, told a different story. While volumes remained relatively stable, revenue deteriorated and charity care increased 10-fold. The financial picture had changed due to the national recession hitting the local community especially hard when major employers had to close their doors.

COBRA benefits had run out for those workers who either affiliated with the low-reimbursement Medicaid program, or who took on financial responsibility for their own care as “self-pay” patients. Charity care ballooned to $12 million in 2011 from $1 million the prior year.

SOLUTIONS

A new CFO retained HFS Consultants in August 2011 to pinpoint potential areas of opportunity for facilitating a financial turnaround by identifying and implementing $16 million in annualized cost reductions. HFS Consultants used its proprietary benchmarking database tool to help hospital executives identify significant cost savings opportunities and to set targets based on the data. Over a five-month period, HFS worked with the hospital to implement cost reductions in labor areas. Management chose to implement savings on its own in non-labor and in other areas where cost savings opportunities were identified.

RESULTS

The hospital achieved about $9 million in labor savings, well surpassing its $7.9 million goal. HFS continues to review data and make follow-up visits, and reports that the hospital has continued to keep its cost savings in check.

 


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