One in three rural hospitals may be forced to close their doors in the next decade.2 With guidance from an experienced healthcare financial consulting partner, it doesn’t have to be yours.
While only 83 rural hospitals in the U.S. have closed since 2010,1 nearly 700 more face the same possibility. You know the reasons: lower reimbursements, rising bad debt, worker shortages and competition from newer regional facilities, to name a few. Most likely, you feel the pain of some or all these issues in your own organization.
While business as usual is not an option, many rural hospital executives simply don’t know where to turn for help. They often assume financial consultants are cost-prohibitive, don’t understand healthcare and certainly can’t relate to a small-town hospital’s daily challenges. The truth is, the right financial consultant can help rescue rural hospitals and communities they serve.
Just as hospitals’ problems and needs have changed dramatically in recent years, so has one consulting company’s approach. Warbird Consulting Partners is different because it’s made up of people who have been where you are and faced the same problems you face. Their consultants are former CEOs, CFOs, CIOs, revenue cycle directors, AR managers and other key players in hospitals of all sizes. They know the issues, they speak your language and they know what to do to get you back on track.
Warbird’s other big difference is cost. They know cash-strapped hospitals can’t afford big consulting fees. On performance improvement engagements, they provide flexible pricing options including charging a percentage of the results they deliver. By sharing in the upside, Warbird has skin in the game. If they don’t deliver, you don’t pay.
One in three rural hospitals may be forced to close their doors in the next decade.2 With guidance from an experienced healthcare financial consulting partner, it doesn’t have to be yours.
Contact us today to see how we can help you.
Contact Info
Michael Draa, CEO
404-496-5230
mdraa@warbirdcp.com
Doug Fenstermaker, Senior CFO
404-496-5230
dfenstermaker@warbirdcp.com
[1]Ellison, Ayla. “State-by-state breakdown of 83 rural hospital closures,” Becker’s Hospital CFO Report, January 26, 2018.
[2]“New report indicates 1 in 3 rural hospitals at risk,” National Rural Health Association, February 2, 2016.
“I would highly recommend Warbird to any organization seeking project or comprehensive engagement to improve financial performance,” said the hospital’s CEO. “Their contribution will deliver a positive return on investment and you will have lifelong colleagues who will always be there for you.”
Bankruptcy filings by U.S. hospitals and medical companies more than tripled in 2017, hitting an alarming high in a multiyear trend. Since 2010, Chapter 11 filings by healthcare companies with more than $1 million in assets rose 123%, even as filings in the broader economy fell 58%.1 With the healthcare industry’s financial woes expected to continue, hospital executives know things can go downhill quickly. Many are scrutinizing every corner of their operations to help ensure they survive and thrive.
The president and chief executive officer (CEO) at a mid-Atlantic community hospital proved the efforts pay off. While her hospital had a long track record of healthy margins, she became concerned when performance declined sharply in first quarter 2016. Rather than waiting to see if things would improve, she responded immediately, bringing in Warbird Consulting Partners to analyze the situation, pinpoint underlying issues and execute a plan of action.
The hospital CEO and Warbird agreed there would be “no stone left unturned.” The Warbird consultant, who has more than 30 years’ experience as a healthcare chief financial officer (CFO), looked at every line on the financial statement including supply expenses, services contracts, depreciation expense and labor costs. As interim CFO, he worked closely with the hospital CEO and chief operating officer to quickly develop revenue cycle objectives, establish a budget and assign executive sponsors to each performance improvement initiative. He positively influenced the operational culture, helping hospital teams move from analysis to action and instilling a sense of urgency and confidence to deliver on big promises.
The results speak for themselves. The organization was at breakeven by the end of second quarter 2016, profitable in third and fourth quarters and ended the year with a 3.8% operating margin, substantially better than the 2016 hospital median of 2.21%.2 Salaries and wages went from 42.8% of net revenue to 39.7%, saving $9 million; and other expenses decreased from 57.5% of net revenue to 56.6%, for $3 million in savings. Annualized savings totaled more than $20 million and exceeded seven percent of operating expenses. Warbird met its guaranteed return on investment for the engagement, delivering significantly more value to the community hospital than what they paid in fees.
“I would highly recommend Warbird to any organization seeking project or comprehensive engagement to improve financial performance,” said the hospital’s CEO. “Their contribution will deliver a positive return on investment and you will have lifelong colleagues who will always be there for you.”
Contact us today to see how we can help you.
Contact Info
Michael Draa, CEO
404-496-5230
mdraa@warbirdcp.com
Doug Fenstermaker, Senior CFO
404-496-5230
dfenstermaker@warbirdcp.com
[1]Kary, Tiffany. “Next U.S. Restructuring Epidemic: Health-Care Companies,” Bloomberg, November 27, 2017.
[2]Hospital Medians, Merritt Research Services.
Academic medical centers face unique financial vulnerabilities. The right healthcare consulting partner, like Warbird Consulting Partners, can help them manage these challenges and maintain their status as the centerpieces of the American healthcare system.
Academic medical centers (AMCs) have long been positioned at the top of the healthcare provider pyramid. But behind the prestigious brands and flawless reputations, financial threats loom. Declining reimbursements, narrowing healthcare exchange networks and dwindling research funds are among the market dynamics forcing AMCs to reevaluate their missions and strategies.
As margins shrink, AMCs are trying to shore up performance, exploring everything from simple cost-cutting measures to technology investments to partnerships and acquisitions. Most AMC executives, however, don’t have the bandwidth to lead major operational or revenue cycle initiatives. They’re there to teach and care for patients, not worry about making money. So where can they turn for help?
Business consultants are an option, but they tend to bring a corporate or traditional health system perspective that frankly doesn’t apply to the academic environment. What AMCs need are healthcare experts who understand the culture, governance processes, reimbursement mechanisms, referral flows and other forces unique to academic medical center operations.
Equally important in sizing up healthcare consultants is their hands-on experience. AMCs should look for practitioner consultants who have actually done the work they recommend, whether it’s planning strategy, troubleshooting technology or building spreadsheets.
The final consideration in hiring a healthcare practitioner consultant, of course, is cost. It doesn’t make sense to pay high fees when expense control and margin improvement are primary objectives. A good healthcare consulting firm has the confidence to charge a percentage of the results they deliver. If they don’t turn things around as agreed, the AMC doesn’t pay.
Academic medical centers face unique financial vulnerabilities. The right healthcare consulting partner, like Warbird Consulting Partners, can help them manage these challenges and maintain their status as the centerpieces of the American healthcare system.
Contact us today to see how we can help you.
Contact Info
Michael Draa, CEO
404-496-5230
mdraa@warbirdcp.com
Doug Fenstermaker, Senior CFO
404-496-5230
dfenstermaker@warbirdcp.com
The Warbird approach produced a quick win and ongoing performance improvement. In two short months, the hospital’s denials went down, revenue went up and cash collection improved by $3.2 million with $2.2 million pending.
If you’re feeling pressure from tight margins and sluggish cash flow, you’re not alone. Almost half of rural hospitals lost money in 2017,1 making it tough to manage cash for everything from day-to-day operating expenses to long-term lending requirements and capital plans. Given today’s reimbursement uncertainties, days cash on hand is a critical measure for every hospital.
Many hospitals lack the resources to pinpoint and fix their cash flow problems, putting themselves at financial risk. A smart alternative is to bring in third-party consultants who can objectively assess the situation and implement solutions the hospital can sustain long after the consultants are gone.
A southern U.S. hospital with fewer than 65 beds did just that, hiring Warbird Consulting Partners to help address bad debt, slow cash collection and increased accounts receivable (AR), especially those 90 days and greater. Warbird, whose consultants all have hands-on experience in healthcare finance, revenue cycle and IT, brought in AR specialists to review, correct and resubmit claims to payers to accelerate reimbursement. The Warbird team identified denial trends by payer, type and hospital department to pinpoint root causes and documented denials tracking and appeal processes. Finally, they trained the hospital staff to do the work themselves to sustain positive results.
The Warbird approach produced a quick win and ongoing performance improvement. In two short months, the hospital’s denials went down, revenue went up and cash collection improved by $3.2 million with $2.2 million pending. The denials backlog shrunk, reducing AR inventory by 34.6%. The ratio of project cost versus return, based on $3.2 million, was one to five, proving that regardless of size, hospitals have the potential for a big payback using the right partner and approach.
Contact us today to see how we can help you.
Contact Info
Michael Draa, CEO
404-496-5230
mdraa@warbirdcp.com
Doug Fenstermaker, Senior CFO
404-496-5230
dfenstermaker@warbirdcp.com
[1]“New Data Reveals More Rural Hospitals Losing Money,” The Hospital & Healthsystem Association of Pennsylvania, February 7, 2018.
Within one year, the AMC went from a projected $70 million loss to an estimated $39 million profit and with another $20 million in AR reserves.
While academic medical centers (AMCs) operate differently than typical community health systems, they often face similar reimbursement pressures, rising costs and patient demands for more holistic care. An example of how financial vulnerabilities can affect an AMC and how they can overcome those issues is a multi-hospital system based in the Southeast. The organization is made up of several hospitals including an AMC with 1,100 employed physicians and a school of medicine.
In fiscal year 2014, the AMC faced several operational challenges resulting in a forecasted $70 million loss. To quickly identify and resolve the problems, they hired a new chief operating officer and chief information officer, and brought in an interim chief financial officer (CFO) from Warbird Consulting Partners.
The most pressing revenue cycle issue stemmed from the AMC’s Epic patient accounting system, which was not implemented correctly and did not recognize net revenue accurately. After an accounts receivable (AR) review, they wrote off more than $110 million in net AR dating back to the Epic implementation two years before. To ensure accuracy going forward, the new team reinstalled seven major Epic modules, wrote new policies and procedures and retrained 700 revenue cycle employees.
Reimbursement was another significant pain point for this AMC. Following a thorough analysis, the Warbird interim CFO renegotiated payer contracts to bring reimbursements in line with the complex services provided. He created a separate managed care function, taking it from a one-person function inside the business office to a team with a vice president (VP) and seven additional staff members to support analytics and negotiations. To encourage community hospitals to send patients to their tertiary referral center, executives reviewed patient transfer and scheduling policies to facilitate same-day or next-day appointments with their many specialists.
Finally, the AMC’s new executive team made expense control a high priority. They reviewed all open positions to confirm their necessity and implemented a VP-level review and approval process for all new hires. Every month, each department director reviewed his or her operating and financial performance with their VP, explained variances and presented plans to get back on budget.
Within one year, the AMC went from a projected $70 million loss to an estimated $39 million profit and with another $20 million in AR reserves. A strong focus on operational efficiencies and adapting to the shifting healthcare landscape resulted in this $129 million turnaround on the AMC’s $2.3 billion revenue base.
Contact us today to see how we can help you.
Contact Info
Michael Draa, CEO
404-496-5230
mdraa@warbirdcp.com
Doug Fenstermaker, Senior CFO
404-496-5230
dfenstermaker@warbirdcp.com
With a merger on the line, Centegra Health System navigated financial challenges to put themselves on the path to profitability.
Healthcare mergers and acquisitions are off to their strongest start in more than 10 years,1 continuing a trend shaped largely by value-based, at-risk reimbursement. Providers are bracing themselves for more to come. In a recent survey, more than 70% of respondents said they expect their organizations’ merger, acquisition and partnership activity to increase in the next three years.2
Strategically, a merger can make sense for both parties, provided the financials are in order. That was the case with Illinois’ Centegra Health System and Northwestern Memorial HealthCare when they announced a merger in 2016. But in early 2017, Centegra bore the brunt of a “perfect storm” of a series of simultaneous financial issues. These included opening a new hospital in a suburban area, closing the acute care function in another hospital within the system and the need to accrue more than originally anticipated due to increases in uncompensated care and growth in self-pay patients (a universal phenomenon in the last few years). Needing to make several mid-course corrections quickly, Centegra’s CEO reached out to Warbird Consulting, a financial consulting firm he had engaged in the past for select financial support expertise.
The magnitude of the financial impacts of the “perfect storm” issues was significant. The CEO wanted to take a comprehensive look at broad performance improvements ranging from revenue enhancements to labor productivity, among others, across the total health system. He also wanted his operations executives and directors to drive the process . A Warbird Sr. CFO, teaming with an operations executive from its partner, the CEO Advisory Network (CAN), moved quickly, creating six performance improvement teams led by executives and comprised of vice presidents and directors from across the organization. Warbird and CAN facilitated team activities, helping them form charters, establish financial objectives to make Centegra profitable within two years, and holding them accountable for metrics, decisions and results.
All six of Centegra’s performance improvement teams met weekly and made many major decisions, including reducing staff, outsourcing revenue cycle management and investing in technology. Warbird’s and CAN’s collaborative approach uncovered problems the staff had known about for years but didn’t know how to surface and resolve in a timely fashion.
“This worked for Centegra,” said Mike Eesley, CEO, “because Warbird didn’t tell us what to do. They gave us the structure and process to find the right solutions ourselves.”
Within four months of Warbird’s arrival, performance started turning around. Centegra forecasted a loss for 2018 but is on track to beat that prediction by more than $10 million, as a result of successfully implementing more than $30 million in “real and tracked” economic benefits emanating from the six performance improvement teams. EBIDTA also improved. The “run rate” for sustainable performance improvements is at $4 million per month moving into the next fiscal year. Centegra expects to reach their goal to be profitable in 2019, building Northwestern Medicine’s confidence in Centegra’s performance and their future partnership. In May 2018, Northwestern Medicine announced a joint signature for the definitive agreement to merge by September 1, 2018. That process is now in the planning stages.
Contact us today to see how we can help you.
Contact Info
Michael Draa, CEO
404-496-5230
mdraa@warbirdcp.com
Doug Fenstermaker, Senior CFO
404-496-5230
dfenstermaker@warbirdcp.com
[1]“5 M&A Trends Investors Should Watch in 2018,” Morgan Stanley, February 6, 2018.
[2] Bees, Jonathan.“Mergers, Acquisitions, and Partnerships: Examining Financial and Operational Impact,” HealthLeaders Media, April 1, 2018.