Kinder, Gentler Restructuring – Chief Restructuring Officer, Transitional CEO
A. Sole Community Hospital Facing Uncertainty and Massive Layoff
Oh, my, what was happening here?
This sole community hospital was being advised to file for immediate bankruptcy and lay-off 80 to 100 staff members - during the holidays.
Solutions leadership understands how awful a hospital bankruptcy is for a rural community. Many citizens depend on the hospital for jobs, as well as health care. Loss of the hospital is a major backward step in maintaining a rural community.
In this situation, Solutions staff immediately assessed the cash flow situation and took action in carefully paying bills and making improvements in revenue cycle. Selective services were also identified for closure, further reducing costs.
Are there more details?
Clearly, staffing needed to be reduced. By improving cash flow quickly, there was more time to make restructuring decisions.
Solutions was able to communicate the areas where staffing reductions were likely so those staff persons could proactively find other employment. This extra time and communication also helped retain other key staff as they became reasonably confident in their continued employment.
In the end, the hospital remained open and retained most services. Most of the 80 positions cut were eliminated through attrition. Only six people actually lost their jobs. The hospital is now stable, acquired refinancing, and is improving health care services for its community.
But wait… the remarkable story continues
With financial stabilization, this health system improved strategic positioning for important service lines. It was also primed to become affiliated with a renowned physician-led health system. The completion of the affiliation positions the local providers to become the market and quality-of-care leader in its region. The integrated approach to services will allow the citizens of this rural region access to a full continuum of health care services. Plans are already in the works for expanding local outpatient surgery, supporting pediatric care with access to specialized services, and strengthening primary care.
B. County Hospital with No Cash
What’s the story?
A large county hospital had been losing money for a couple of years and had virtually no cash. The County Board of Supervisors had provided one emergency loan to make hospital payroll and was extremely uncomfortable at the prospect of providing the hospital more cash.
In its cash flow projection, Solutions leadership determined that approximately 30 jobs needed to be eliminated to create a positive bottom line for the hospital. Other cash flow improvements were made before any downsizing decisions made.
In this case, Solutions staff focused on reducing expenses by returning the hospital to preferred-client discount status with its IT vendor. Also, Solutions collaborated with purchasing and all hospital departments to establish major price reductions from vendors.
So what happened on the downsizing?
The cash flow work was successful enough to limit the restructuring to a reduction of only 12 full-time jobs.
Solutions work continued in the longer-term by participating in the recruitment of permanent leadership, as well as completing open cost-report work for a positive adjustment of over $1 million.