How to Turnaround a Distressed Hospital

Picture of Ryan Nestrick
Ryan Nestrick
Senior Vice President, Advisory Management

In September, KaufmanHall released a report prepared for the American Hospital Association about the state of hospital finances. As Kenneth Kaufman, KaufmanHall’s chair and managing director, wrote about the report,

“Our optimistic projections are for a 37% drop in operating margins, relative to pre-pandemic levels. Brace yourselves—our pessimistic projections show margins falling off a cliff with a possible 133% decline. And a growing number of hospitals are feeling the pain: More than half of all hospitals are projected to experience negative margins this year, up from 36% in 2021.”

Under a pessimistic scenario, KaufmanHall expects more than two-thirds of hospitals (68%) would have negative margins in 2022.

KaufmanHall projects more than half of hospitals will have negative operation margins in 2022.

That means in 2022 that far too many hospitals will find themselves in similar straits as Springfield Hospital.

As the newest member of Octave Leadership Advisory Services’s team, I am proud to share how my colleagues worked closely with Springfield Hospital, its leaders and staff, its board of directors and government officials to navigate a financial turnaround. In January 2019, the hospital had one day of cash on hand. Thirty-two months later, as of September 30, 2021, Springfield Hospital had “$6 million in reserves, 42 days cash on hand, $1.6 million in operating income (per audited financials).”

From one day of cash on hand to 42 days is quite a financial turnaround.

At the risk of restating the obvious, there’s nothing easy or cookie cutter about turning around a distressed hospital. That’s why hospitals like Springfield Hospital choose a partner like Octave to help.

How the Octave Leadership Advisory Services’ Team Helps Turnaround Distressed Hospitals

Octave Leadership Advisory Services’ is caring strategic hospital management consulting and advisory services guided by our proprietary cornerstone methodology of 52 operating principles. As hospital operators and leaders for more than 40 years, we bring the expertise, discipline, best practices and resources needed to help independent hospitals flourish. Our long-term relationships initiate with an assessment of operations, finance and strategy, the development of the vision, priorities and plan, and help to achieve the metrics and execute the plan.

Octave hospitals have access to:

  • Operating principles to guide and metrics and tools to track success,
  • Experienced coaches who used to be CEOs, CFOs and hospital board members to participate in day-to-day operations and challenges and identify and groom future talent,
  • Access to the pedigree and professionals on the Octave’s staff as well as shared services to execute the plan,
  • A community of peers and opportunities for support and collaboration to take advantage of lessons learned by other Octave hospitals, including CEO and Chief Nursing Officer councils,
  • Leadership U, a multi-month educational and coaching program to strengthen the leadership capabilities of emerging rural healthcare leaders and potential hospital CEO candidates, and
  • Octave’s Leadership Institute, leading-edge, in-person and virtual education and training of hospital leaders that features 80 courses and learning opportunities each year.

When asked about Octave Leadership Advisory Services, Alvin Hoover, the retiring CEO of King’s Daughters Medical Center said,

“As a CEO at an independent hospital, I think it’s so important to have a partner like Octave. You’re not alone on an island. You’ve got somebody that you can network with and easily contact and say, hey, I’ve got a challenge with this. What do you think I should do?

I’m the guy that’s utilized the resources the most over the years that I’ve been with Octave because they’re so valuable to us. Whether it’s physician recruitment, information systems, health information or patient financial services, Octave has got a resource available that helps us do a better job of running our hospital.”

Octave Leadership Advisory Services helped Springfield Hospital with board support, executive leadership, financial and operational improvement, care transformation services and market positioning, leading to improved financials and operations with a better cash position, enhanced services and identified strategic opportunities.

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