Performance Improvement Assessment Provides Distressed Rural Hospital with Plan and Resources that Delivers $4M in Savings in First 9 Months
Summary of Work:
The Stephens County Hospital Authority, the governing body for a $40M NPR rural community hospital, retained Warbird’s professionals to perform a Performance Improvement Assessment. Warbird’s professionals developed a comprehensive report that identified approximately $5M in cost savings and revenue enhancing opportunities. 13 and 26-week cash flow analyses were performed that provided the Board with critical information concerning the hospital’s liquidity constraints. Ultimately, the Board elected to implement the performance improvement plan and retained Warbird’s professionals to serve as a strategic advisor to the Board. The hospital also retained a Warbird revenue cycle specialist to serve as Interim Revenue Cycle Manager. Warbird’s performance improvement plan was executed upon, allowing the hospital to avoid significant liquidity issues and realize sustainable operations.
“I have never seen such a dead-on assessment. Warbird’s performance improvement projections were eerily accurate, and every bit of projected savings were realized.”
-Roger Forgery, FACHE,
Stephens County Hospital, Interim CEO
Background:
Stephens County Hospital was experiencing operating losses varying from $200K to $500K per month and a rapidly declining cash position. Limited management resources constrained the hospital’s ability to develop and execute on performance improvement initiatives. The board, growing concerned for the hospital’s financial viability, retained Warbird’s professionals to perform a Performance Improvement Assessment and advise on the hospital’s available strategic options.
Warbird’s professionals provided the board with a comprehensive performance improvement assessment and plan. The assessment identified opportunities in the hospital’s revenue cycle, labor productivity, and case management processes to enhance and secure the hospital’s financial performance. Absent effective execution of these initiatives, the hospital was projected to exhaust its cash reserves within 6 months’ time.
Areas of Focus:
- Peer Benchmarking & Stakeholder Interviews. Warbird’s performance improvement assessment included both a qualitative and quantitative review of the hospital’s operations. The hospital’s historical financial and operating data were analyzed. The hospital’s performance was analyzed relative to a cohort of other independently owned and operated community hospitals in similar markets across the state. Alongside this benchmarking exercise, hospital stakeholders – board members, management team members, physician leaders, and hospital staff – were interviewed to capture qualitative information designed to refine the findings of the peer benchmarking exercise. This exercise provided a baseline for identifying specific performance improvement opportunities.
- Revenue Cycle Enhancement & Interim Revenue Cycle Management. A significant source of improving the hospital’s operating performance rested on a complete overhaul of its revenue cycle operations. Warbird’s professionals initially analyzed revenue cycle data as part of the performance improvement assessment. When that assessment identified a preliminary opportunity measured in the millions of dollars, Warbird professionals were later retained to assist with the related implementation work that delivered significant cash collection enhancements for the hospital.
- Labor Productivity. After multiple years of declining volume, the board and hospital leadership realized that staffing practices needed to better align with the volume and service demand that the hospital was experiencing. Based on a staffing and productivity analysis, Warbird’s professionals provided the board with a set of recommendations to enhance labor productivity by approximately 19 percent.
- Revenue Growth. Importantly, Warbird’s professionals shared with the board that the hospital could not cut its way to prosperity. Revenue growth opportunities were imperative to the long-term success of the hospital. Specific growth goals focused on improving surgical, ER, and total admission volumes. Warbird’s professionals also provided recommendations concerning direct contracting opportunities, aligning physician contracts to market-appropriate production levels, and enhancing regional physician relations to engage the community and reestablish clinical volume.
- Cash Flow Monitoring. Additional performance improvement recommendations included daily and weekly cash flow monitoring to coordinate cash availability vs. cash demands; placing controls on non-mandatory capital expenditures; and analyzing the return-on-investment prior to spending limited funds.
Conclusion:
Within nine months of launching its performance improvement activities, Stephens County Hospital realized $4M in savings. During those same nine months, the cash position remained steady at $3.2M, thereby controlling further cash erosion.
Using the Warbird team’s analysis and performance improvement assessment, Roger Forgey, FACHE, Interim CEO began implementing the turnaround plan. Forgey stated that he had never seen such a “dead-on assessment,” and added that the Warbird team’s performance improvement projections were “eerily accurate.” The performance improvement assessment’s recommendations were the most effective measures for the hospital to pursue and “every bit of projected savings was realized.”