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Rural Hospital Turnaround Case Example

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This case example demonstrates how NewLight Healthcare helped turn around a failing rural hospital by transforming their operations, resulting in a positive operating profit through growth rather than through cost-cutting.

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Rural Hospital Turnaround Case Example

  1. 1. GALLUP, NEW MEXICO Rehoboth McKinley Christian Health Care Services is a 60 bed licensed hospital that was struggling to remain open. In 2014, the Board of Trustees and Administration had exhausted all cost cutting opportunities after failing to meet their bond covenants. The Board was facing the difficult reality that their hospital may close. NewLight Healthcare was contracted to improve profitability and grow revenue. Rehoboth McKinley Christian Health Care Services Case Example +32% in Admissions +69% in IP Surgeries +6% in OP Surgeries +11% ER Visits +11% OP Visits Renegotiated Contracts Identified Specialty Needs Improved Facilities Optimized FTE Hours + 17% in Collections +38% in Net Revenue $3MM Net Income for FY15 +$7MM Net Income Turn Around NewLight Healthcare was able to bring the only hospital that serviced the local community of Gallup, New Mexico back to profitability and avoid the devastating loss of jobs by focusing on growth. KEY TO SUCCESS Decline in Inpatient ADC Decline in Net Income Net Income Shortfall -58% -400% -$4MM RESULTS
  2. 2. Approach NewLight Healthcare’s philosophy and approach focuses on growth. When a hospital has exhausted all the cost cutting opportunities, the only viable long-term approach for sustaining profitability is growth. NewLight Healthcare utilized this approach to help Rehoboth McKinley Christian Health Care Services return to a position of sustained profitability. Patient Volumes When NewLight Healthcare began its review, Rehoboth McKinley Christian faced diminishing patient volumes. Its Inpatient ADC was down 58% from 2013; Outpatient Testing had double digit declines; and there was strong Patient Outmigration, over 40%, due to a reputation of poor quality, community relations, and financial performance. By analyzing the factors causing the declines in patient volumes, NewLight Healthcare was able to identify opportunities to grow both the topside and bottom line. Rehoboth McKinley Christian Health Care Services Gallup, New Mexico Case Example © 2015 NewLight Healthcare. Page 1
  3. 3. Rehoboth McKinley Christian Health Care Services Gallup, New Mexico Case Example © 2015 NewLight Healthcare. Page 2 New Services & Enhanced Productivity The health care industry is a service industry. Like any service industry, improvements to customer service and the introduction of new service offerings can have a significant effect on financial performance. NewLight implemented a number of key initiatives: As part of the performance reviews, NewLight Healthcare also implemented Cost Controls. By analyzing departmental spending trends using an internal database, NewLight Healthcare was able to work with internal departments to update performance metrics and spending policies, which reduced costs through pricing as well as efficiency. By working collaboratively, NewLight Healthcare was able to gain the buy-in, support, and commitment that helped generate the positive impact and growth to patient volumes. Revenue Cycle Improvements In addition to new services and enhanced productivity, managing cash flow by improving billing and collections can have an immediate and significant impact. NewLight recommended that Rehoboth McKinley Christian outsource the revenue cycle functions to a third party company. The outsource billing company produced the following results: The net result was a 17% increase in collections, which had a direct and immediate impact on profitability. Contract Changes: Renegotiated managed care contracts. New Service Offerings: Through demographic research, identified and prioritized key physician specialty needs to improve market capture. Performance Reviews: Implemented productivity system and discipline to match staffing to volumes, reducing FTE’s and over time, improving customer service. • • • reduced collection cost improved collection performance updated charge description master improved revenue cycle processes to reduce bad debt • • • •
  4. 4. Rehoboth McKinley Christian Health Care Services Gallup, New Mexico Case Example © 2015 NewLight Healthcare. Page 3 Financial Results The financial results of NewLight Healthcare’s efforts were realized within a year’s time. From 2014 to 2015, Rehoboth McKinley Christian Health Care Services’ had a dramatic improvement in both topside and bottom line performance: The successful turnaround in net income allowed Rehoboth McKinley Christian to meet the terms of bond covenants and regain compliance. With external funding secured and positive net income, the long-term future of Rehoboth McKinley Christian remains bright. Conclusion Rehoboth McKinley Christian Health Care Services is a success story and demonstrates the importance of focusing on growth. Cost cutting can help improve cash flow in the short- term but cannot be sustained. In 2014, Rehoboth McKinley Christian Health Care Services had cut as deeply as they could and was on the verge of failing. With a focus on growth, NewLight Healthcare transformed financial performance by focusing on both the topside and bottom line levers of success. Net Revenue: +38% FY15 Net Income: +$3MM Net Income Turn Around: +$7MM • • •
  5. 5. Rehoboth McKinley Christian Health Care Services Gallup, New Mexico Case Example © 2015 NewLight Healthcare. Page 4 About NewLight Healthcare is a hospital management and consulting company. Our professional team has extensive experience and is inspired to ensure the long-term success of your hospital. NewLight is passionate about providing the necessary tools and services for your healthcare organization to flourish. We will work with your Board of Directors to select a set of Key Performance Metrics and create a plan for reaching the metrics. The plan and schedule will be monitored on a monthly basis. We are determined to get healthcare organizations into a healthy, self-sustainable state, and with our resources we are confident we can achieve this. NewLight Healthcare was founded to be of service to communities throughout the World. We operate from the highest level of integrity and make decisions from our hearts.
  6. 6. Download the Turnaround Through Growth Case Example and others at newlighthealthcare.com/casestudies

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