HEALTH CARE
- CASE STUDY 1
ESBA was engaged by the Board of the largest Home Health Agency (Agency) in New Jersey to provide services as Interim Chief Executive Office/Crisis Manager. The organization has several subsidiaries including three Medicare Certified Visiting Nurse Agencies – Northern New Jersey, Southern New Jersey, and North Carolina. In addition it includes a Hospice, a Private Duty Nursing Service, a Durable Medical Equipment Company and an Infusion Pharmacy. Peak revenue was as high as $90 million but major Medicare reimbursement reductions forced a downsizing to about $50 million. Prior to ESBA’s retention, the agency had experienced 11 consecutive quarterly deficits, staff morale was very low, and vendors were initiating lawsuits.
Key Turnaround Steps
- A major reorganization was instituted to eliminate redundant and unnecessary positions and restructure operations in line with the organization’s current situation.
- Fifteen highly compensated managers were terminated.
- Strong immediate focus was put on cash flow and cash management. A rolling cash flow forecast became the primary management tool used to keep the Agency sharply focused.
- An outside collection firm was retained to collect older receivables.
- A new Chief Financial Officer (CFO) was brought in with special expertise in Home Healthcare billing and collection. Results were attained almost immediately and improved cash inflow sustained the organization through the tenuous first months of the turnaround process.
- A complete reorientation of the Agency’s field staff – nurses, therapists, and home health aides – was instituted in response to a new payment system (“PPS” or Prospective Payment System) introduced by Medicare, one of the Agency’s major revenue sources.
- The organization’s Medicare billing system was revamped.
- Management of field staff visits was strengthened significantly to insure effective management and control of rendered services to insure viability of billing to Medicare and ultimate payment for services rendered based on a fixed rate for a required/projected level of care.
- Outstanding lawsuits - totaling more than thirty – were catalogued, prioritized, and analyzed. Negotiations were instituted to buy time. As cash availability improved suits were settled based on the Agency’s ability to pay.
Results
Revenues were stabilized, and operating surpluses and positive cash flow were restored within four months through dramatic cost reductions and improved collections. Management and systems were strengthened improving day-to-day operating performance. A weak subsidiary was sold to reduce losses. A forbearance agreement was negotiated with the Lender, and the revolving line-of-credit was paid down over time to bring the loan back within formula.
After the recovery ESBA’s consultant continued to function as CEO as the Board sought a merger partner or a buyer for the organization. During this period the organization continued perform very effectively both in providing effective services and generating surpluses. The search process eventually resulting in an acquisition by a very highly regarded local health care operation, and the transition went very smoothly with ESBA’s consultant’s continuing to provide leadership in facilitating this process.
HEALTHCARE - CASE STUDY 2
ESBA was engaged by a rapidly growing firm which providing outsourcing for the Medical Records departments in hospitals and medical clinics. The company had generally been profitable but, due to the flawed conversion of its billing and accounts receivable systems, was experiencing serious cash flow shortages.
ESBA worked with the owner and key company managers to develop and implement a plan to stabilize the cash flow.
The first step involved assessing the cash flow systems, procedures and controls then in place. The business involved a large number of small dollar transactions. The customer base was large and the locations from which invoices were created were numerous. Careful training of field personnel and monitoring of their performance was implemented.
Changes in the procedures were implemented so that the home office collections function was streamlined, and collectors could concentrate on collecting cash rather than reconciling receivables balances.
A rolling cash flow forecast was developed for use as a monitor of performance and a management tool. Initially, the forecast included the next four weeks of activity. Gradually, as the staff became more comfortable with the forecast, it was lengthened to thirteen weeks.
Cash disbursements became more focused upon the critical payments, rather than the vendors who "screamed the loudest." As the process continued, past due vendor payables were paid. Cash flow improved and the company was stabilized.
About six months after the initial assignment, the owner asked ESBA to return and assist him in his planning for the sale of the company. The sale was ultimately concluded on terms favorable to the owner. He remained in the acquiring company as Chairman of the Board. ESBA assisted thereafter in the integration of the three companies that had been merged.
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