Case Study

Team Approach Turns Around Troubled Hospital


SITUATION

In February 2013, the board of directors of Palo Verde Hospital, a 51-bed acute care District Hospital in Blythe, California, contacted HFS to conduct an operational assessment. The hospital had been losing substantial amounts of money over a two-year period, and was close to losing its accreditation. Hospital executives did not have a plan to become profitable. It was expected that the hospital would run out of money within four months.

OPERATIONAL ASSESSMENT

The assessment was completed in May 2013. It was estimated that operations could be improved in the $8 million to $11 million range, and by fiscal year end June 2015 achieve a profit of approximately $750,000.

It was also projected that if nothing were implemented, the hospital could not survive and would experience a deficit cash position in early FY 2014 and lose over $7 million annually by FY 2015.

IMPLEMENTATION

Just after the assessment was started, the hospital’s management team experienced a shake up, requiring the placement of HFS’s Larry Blitz as interim CEO for approximately six months, and Richard Gianello as interim CFO. Subsequently, Sandy Anaya was hired to replace Larry Blitz as the permanent CEO, and to collaborate with HFS on the improvement plan. Gianello has continued as interim CFO, serving in an oversight role, and is available to bring in resources when needed.

CHALLENGE

The assessment implementation brought on numerous challenges including:

  • A board of directors that had little healthcare industry financial background, and was not consistently provided financials, creating a lack of trust in the hospital’s financial position.
  • A disgruntled medical staff that had lost credibility with the administration
  • A staff that needed training on how to bill Medi/Cal and other third party payors
  • Local press that focused on the negative aspects of the situation, damaging the hospital’s public reputation.

Hospital management and HFS met the challenges together, working as a team. There was ongoing communication and education, resulting in increased trust and improving the hospital’s image internally and to the community.

ACTION PLAN

The following areas were identified for improvement:

  • Renegotiation of Commercial Contracts: Potential additional revenue: Approximately $1.8 million annually
  • Revenue Cycle Processes: Potential additional revenue: Approximately $2 to $2.4 million
  • Supply Chain Management and Purchased Services Contracts: Potential cost reduction: $1.2 to $1.4 million
  • Labor Productivity and Pay Practices: Potential cost reduction: $1.1 to $2 million
  • New Services: Establish hospital based RHC and swing or DP/SNF beds. Potential additional revenue: $1.4 million by FY 2015.

STRATEGIC TEAMWORK

HFS identified the areas of improvement and worked as a team with hospital management to pinpoint which areas the hospital could implement and those where it needed HFS’s support.

  • HFS handled revenue cycle, payor contracting, identified a new ER physician group and successfully negotiated its contract. The community is widely accepting of the physicians.
  • The board of directors had a good database of contacts and found the new CEO, Sandy Anaya, who came in with a solid clinical operations and quality assurance background. She took on accreditation, quality issues and some labor staffing and restructuring.
  • Hospital management and HFS worked together on the supply chain and purchased services area.
  • What also led to success was that the physicians voluntarily took an approximately 20 percent reduction in compensation.

"HFS Consultants worked with key members of our hospital team to help design and execute strategies that helped lead us to increased financial stability, innovative program design, and streamlined operations. They have the capabilities to help drive transformation and provide practical solutions to complex problems. The breadth of the “hands-on” knowledge of strategic change management was just what our organization needed during a pivotal time."

-Sandra J. Anaya, MSHA, BSN, RN, CPHQ, HACP CEO, Palo Verde Hospital

RESULTS

HFS had projected that if the hospital implemented the assessment’s recommendations, the hospital could achieve a profit of approximately $750,000 by June 2015. Although the 2015 estimate was not achieved, the hospital ended up with a profit of just under $400,000. HFS, working together with the hospital board, CEO, Sandy Anaya, Assistant CFO, Christa Rohde and other hospital staff successfully took the troubled Palo Verde Hospital, which had lost approximately $5 million per year in 2012 and 2013 to a better than break-even point by FY ended June 2015. Currently the hospital has a cash reserve of approximately $5.1 million, and thanks to the work of Sandy Anaya, accreditation from DNV.

CONTACT

For information on HFS’s services and turnaround strategies, contact Richard Gianello at 510-768-0066, or richg@hfsconsultants.com.

More about the Clinical Operations practice.