Warbird deployed a CEO and CFO for this small health system located in northern Illinois to provide performance improvement. Centegra had fairly well-developed affiliation discussions with a major Chicago-based health system, Northwestern Medicine, but Northwestern did not want to move forward unless the financial operations of Centegra were sustainably turned around.
Centegra is a small health system ($550 million in Net Patient Service Revenues) with above average inherent credit features- favorable market demographics, solid market share, a core group of employed physicians within a multi-specialty group practice, etc. However, the health system had significant operating losses for FY 2017. Warbird was hired to examine each functional area of the organization and make operating changes to effectuate a meaningful financial improvement. Centegra has only two goals: 1. Turnaround implements sustainable financial improvements and 2. Effect the merger with Northwestern Medicine with the same one-year time frame. Warbird was also engaged to provide strategic financial advice and an interim CFO with senior talent and experience. The end-results was that Warbird, partnered with one of the CEO Advisory Network CEOs, was able to successfully leverage Centegra to improve its performance by about $35 million in one year and drive a monthly run rate of $4 million by the end of the engagement (this translated into another $48 million in sustainable economic benefits for the ensuring year). As an intended consequence, Northwestern agreed to move forward with the affiliation effective September 1, 2018. Both goals were achieved within 12 months of the initiation of the engagement with Warbird.
Before Warbird began its assignment, Centegra Health System has been losing approximately $62 million per year. Warbird examined the entire situation and executed on the following first-year economic improvements:
Centegra is a prime example of how Warbird was hired as the new executive management team to run hospital operations with the goal of making substantial financial improvements. The key here is the speed in which the economic improvements were realized to the financial statements as well as their magnitude. EBIDTA improved from negative to positive within 9 months of the engagement and to the degree that Northwestern Medicine agreed to execute the Definitive Agreement and proceed with the affiliation. This was a primary goal for both these organizations.