Case Study #1 Case Study #2 Case Study #3 |
Case Study #2 -- Revitalizing a Suburban Teaching Hospital
In the mid-1980’s, a 600-bed suburban teaching hospital was faced with a myriad of problems. Its previously strong balance sheet had deteriorated by $20 million over the past three years due to non-reimbursable cost overruns on a major modernization and expansion project. An operating loss of 5% had developed and was growing at an alarming rate. Bond covenants were violated; morale was poor. Relationships with physicians, insurers, the state, and local communities were at all-time lows. A nursing shortage triggered by non-competitive wages was prompting the hospital to close beds. In short, the once-proud institution was in a downward spiral; and the hospital’s board of trustees agreed that new, dynamic leadership was needed.
At the same time -- at a nearby major academic medial center, whose 200- year-old charter dictated that only physicians could assume the hospital’s senior leadership position -- an executive with a strong financial background was serving as associate dean and associate director for strategic planning. Utilizing skills learned from multiple mentors, including the head of McKinsey, he was able to solve problems creatively, collaboratively and expeditiously.
Accepting the challenge of leading rather than advising, the executive assumed responsibility and accountability for addressing the problems and reversing the trends associated with the suburban teaching hospital. His first act was to enlist the assistance of all constituencies. Obstacles to success were quickly eliminated and a comprehensive, integrated plan was developed and initiated. A major element of the strategy was to provide open and ongoing communication and access to all key constituencies.
In the ensuing months, expenses were adjusted, where necessary. Nursing issues were addressed and beds were reopened. Increased cooperation among physicians not only helped to control expenses, but also resulted in increased admissions, which facilitated negotiations between insurers and suppliers. Positive cash flow was achieved within six months. Layoffs and unionization were avoided. A foundation for long-term success was in place.
Within one year, profitability was realized, fundraising was reconfigured, bond covenant issues were corrected, and a joint project with the host community was initiated.
Within four years, the hospital’s balance sheet was strong enough to support the acquisition of 500 long-term care beds and the construction of a medical office building, employee child care center and parking garage.
As a result of these fiscal, organizational and patient care enhancements, the hospital received national citations for quality of care and community collaboration.
Case Study #3 -- Preparing for the Capital Markets >>