Served as CEO, CFO, COO
A $250+ million revenue, ESOP-owned elder care provider based in Tennessee with 31 skilled nursing facilities, 4 behavioral healthcare hospitals, 10 homecare and 5 hospice branches, in-house pharmacy and rehabilitation, and a growing Nurse Practitioner business. The company was in technical default on its loan covenants, and upon Healthcare Management Partners’ arrival it had 8 days’ cash on hand and was considering filing for Chapter 11 bankruptcy protection.
Issues
- Failed installation of a new electronic medical record (“EMR”) system resulted in a significant backlog in billing and a subsequent cash crisis
- Inefficient processes in the Billing Office led to significant numbers of claims timing out (thereby becoming unbillable) and bad debts were increasing
- Excessive costs in the corporate overhead structure
- Ineffective executive management with poor teamwork and accountability
Approach
- Set up a Cash Collections Team which included temporarily repurposing the accounting staff to the Central Billing Office, improving and prioritizing processes and procedures
- Implemented a significant reduction in overhead cost; staff reduction “at the bedside” was not considered to be a target opportunity
- Managed the sale of surplus assets including the disposal of 2 non-strategic nursing facilities
- Instigated company-wide procurement including centralized managed care contract negotiation
- Engaged with the EMR provider to assess the dysfunctional installation, revise the software, and reinstall the product, facility-by-facility, including extensive retraining of users
- Implemented a strategic HR function which was absent from the 4,000-employee organization
- Engaged with the leadership of the organization to improve the culture by encouraging transparency, team work, and working towards a common goal
Results
- The board unanimously voted to engage HMP as turnaround managers and replaced the C-suite
- The company went from $6.6 million in operating cash (8 days’ cash on hand) to $46.5 million (75 days’ cash on hand) within 13 months; only 22% of the cash increase came from asset sales—the remainder was from operational improvement
- 45% reduction in corporate overhead expense
- All financial covenants returned to compliance within 6 months of appointment, and the affected loan was refinanced with new lenders on more favorable terms than the original loan
- Days Accounts Receivable went from 48 to 31, EBITDA margin more than doubled from 6.7% to 15%, bad debt expense as a percentage of patient revenue went from almost 6% to 1.5%, EBITDA in dollars for the 8 months to August went from $11.9 million in 2014 to $28.1 million in 2015