Case Studies: Strategic Advising
Case studies provide insight on how we stabilize, turnaround, and enhance healthcare organizations. Use the table of contents to navigate through the case studies in this section.
Table of Contents
- A 702-bed inner-city, teaching hospital system
- A diversified mental health organization consisting of a 110 bed psychiatric hospital; a 19 bed residential care facility, a 50 resident group and assisted living home, and an outpatient school program for 100 day students.
- A Third Party Administration firm (TPA) processing 4.5 million claims annually.
- A medical risk management firm focusing on research, development and practical deployment of scientific evidence-based content and clinical decision-support software products.
- A Medicaid Health Maintenance Organization (HMO) serving 56,000 members in southeastern Pennsylvania.
- A Medicaid Health Maintenance Organization (HMO) serving 19,000 members in central Pennsylvania.
- A 392 bed acute care hospital system.
A 702-bed inner-city, teaching hospital system
Challenge
A $74.8 million loss; multiple loan defaults; vendors refusing to ship; non-functioning billing system; increasing competition; misplaced expansionary strategy.
Results
Today this hospital system is a successful health care system providing high quality medical care in Brooklyn, Queens, and Nassau County, New York through a hospital, multiple free-standing ambulatory care centers, and two nursing homes. The hospital system is now operating at an annualized gain of $4 million and is on schedule to repay its creditors.
Solution
Full service management agreement with Kurron with financial restructuring imperative.
Kurron was engaged by the health system's Board of Managers to provide strategic advice and leadership, to develop and implement a Turnaround Plan and to evaluate financial restructuring alternatives.
Within 30 days, Kurron developed a Turnaround Plan. Just four months later, Kurron implemented cost reduction, revenue enhancement, and program improvement initiatives with annualized value of $31 million. Hospital inpatient discharges were stabilized through intensive development of strong physician relationships and a customer focused approach. Bad debt expenses and net days in Accounts Receivable were reduced.
With the participation of restructuring counsel, Kurron determined a Chapter 11 bankruptcy filing was the appropriate course of action.
Kurron effectuated a nearly $100 million sale transaction, disposing of poorly performing assets including a hospital, nursing home, home health agency, and a HUD-subsidized retirement village. In order to support a Plan of Reorganization and avoid liquidation of the corporation, Kurron obtained $11.8 million from a state-administered health care restructuring pool.
The system emerged from bankruptcy in just 13 months and began positive earnings immediately post-emergence.
A diversified mental health organization consisting of a 110 bed psychiatric hospital; a 19 bed residential care facility, a 50 resident group and assisted living home, and an outpatient school program for 100 day students.
Challenge
A $1.6 million loss; accumulated debt of nearly $14 million; rapid and complete failure and imminent closure.
Results
Kurron facilitated the organization's Chapter 7 closure and liquidation of assets while ensuring the continuum of care for its patients. Kurron also secured new or continuing employment for the staff with new program sponsors and paid outstanding debt. The company realized nearly $9 million in proceeds from the sale of corporate assets. Kurron transitioned staff and patients within two months of the decision to liquidate.
Solution
Kurron was engaged by the Board of Directors of to provide analysis and strategic alternatives and to evaluate possible restructuring and disposition of assets for this failing mental health care system.
Kurron began the engagement by reducing expenses within the workforce and a hospital wide cost reduction plan that reduced operating expenses by 12%. Kurron implemented an outsourcing arrangement for the billing and collection of patient accounts, which resulted in an increased monthly cash flow of 20%. While working with the Board to determine a possible plan of reorganization through cost reductions and improved operational efficiencies, Kurron developed a liquidation plan, which was ultimately approved by the Board. Kurron's liquidation program included the sale of corporate assets, real and personal property, and transfer agreements with other mental health care providers to ensure a seamless transition of patient care with their respective caregivers. Kurron also developed a closure plan in conformity with state and local regulations that enabled the organization to have an orderly wind-down of operations while supervising the financial transactions (cash collections and disbursements, payroll and accounts payable), ensuring the ability to maintain operations throughout the entire liquidation process.
A Third Party Administration firm (TPA) processing 4.5 million claims annually.
A Third Party Administration firm (TPA) processing 4.5 million claims annually, providing claims adjudication and care management services for approximately 270,000 employees representing 640,000 members. It also administered 800 medical and 350 dental plans for 85 entities with processing centers in Minneapolis, Minnesota and Kalamazoo, Michigan. The company generated $37 million in revenues in year 2000. 4YourCare clients are Fortune 500 Companies, self-insured employers, unions, government entities, insurance companies, and preferred provider organizations all across the country.
Challenge
While this TPA was a healthy business -- generating $37 million in revenues in 2000 -- its parent company was in dire financial trouble due to an expensive and elaborate corporate infrastructure, the development cost associated with web-enabled software and poor cash management which led to excessive borrowings from the subsidiary operations.
Results
The organization was sold to an administrator of employer-sponsored self-insured health benefits for $5.6 million plus 90% of the outstanding accounts receivable. The sale took three months, record-breaking time.
Solution
Kurron was engaged by the Board of Directors of the parent company of to provide crisis management. On initial diagnosis, it appeared that the company could be restructured through aggressive expense reduction and a change in strategic direction. Kurron developed and implemented $10 million in expense reductions and secured $11 million of much needed working capital financing. The company appeared to be on the road to recovery; however, the auditors discovered a material accounting error, which increased the company's fiscal 2000 losses from $27.5 million to $37 million. As a result, the promised financing was rescinded and bankruptcy became the only option. Kurron assisted in filing for Chapter 11 bankruptcy protection on August 7, 2001 and facilitated the sale of the firm on November 9, 2001.
A medical risk management firm focusing on research, development and practical deployment of scientific evidence-based content and clinical decision-support software products.
A medical risk management firm focusing on research, development and practical deployment of scientific evidence-based content and clinical decision-support software products. Created in 1977, 230 physicians in the U.S. and abroad translate current scientific evidence into clinical support algorithms and software using IHQ systems. The customer base covers approximately 10 million lives.
Challenge
This business was marginally successful, generating annual revenues of $4.7 million. The parent company had financial troubles including poor cash management practices and expensive infrastructure that necessitated the disposition of the organization.
Results
The firm was sold to an industry leader in medical management software products for $1.8 million excluding accounts receivable.
Solution
Kurron was engaged by the Board of Directors of the parent company of to provide crisis management. On initial diagnosis, it appeared that the company could be restructured through aggressive expense reduction and a change in strategic direction. Kurron developed and implemented a fiscal recovery program; however the parent company's auditors discovered a material accounting error related to a subsidiary operation that dramatically increased the company's fiscal 2000 losses. As a result, bankruptcy became the only option. Kurron assisted in filing for Chapter 11 bankruptcy protection on August 7, 2001 and ultimately facilitated the sale of the firm on November 9, 2001.
A Medicaid Health Maintenance Organization (HMO) serving 56,000 members in southeastern Pennsylvania.
Challenge
This organization was first managed and then purchased by a diversified company to complement its existing Third Party Administration business. Since being purchased, enrollment dropped from 65,000 to 56,000 member lives resulting in a $15 million loss in fiscal 2000. Contract pricing was inadequate and cash advances to the parent company left insufficient reserve requirements for the State of Pennsylvania. The parent company developed significant financial difficulties further putting the HMO in peril.
Results
The HMO was sold to another HMO, for approximately $9.4 million.
Solution
Kurron was engaged by the parent company to provide crisis management and fiscal stability. Continuing financial problems led to the filing of an Order of Rehabilitation by the Commonwealth of Pennsylvania, the equivalent of a Chapter 11 bankruptcy filing for the HMO industry. Kurron secured a purchaser within 30 days.
A Medicaid Health Maintenance Organization (HMO) serving 19,000 members in central Pennsylvania.
Challenge
This HMO was acquired by a diversified company to complement its existing Third Party Administration business. Enrollment had been constant. Cash advances from the HMO to the parent company left insufficient reserves for HealthMate, and continuing financial difficulties with the parent company put the otherwise stable HMO in peril.
Results
The organization was sold to another HMO for approximately $3.8 million.
Solution
Kurron was engaged by the Board of Directors of the parent company to provide crisis management and fiscal stability. Although the HMO had posted a $712,000 gain in fiscal 2000, continuing financial problems plagued the parent company, leading to the filing of an Order of Rehabilitation by the Commonwealth of Pennsylvania, the equivalent of a Chapter 11 bankruptcy filing for the HMO industry. Kurron secured a purchaser for HealthMate within 60 days.
A 392 bed acute care hospital system.
Challenge
An annualized net deficit of $18 million in the midst of Chapter 11 bankruptcy protection.
Results
South Fulton Medical Center was sold to Tenet Healthcare for $18 million plus the accounts receivable collateralized at $12 million.
Solution
Corporate restructuring.
Kurron was engaged by the Board of the Hospital to conduct a situational analysis of the financial condition of the organization including staffing, physician support, market share, and employee morale and community support. Based on its analysis, Kurron undertook a comprehensive program to turn around the failing organization by reducing payroll by 39%, reducing the average length of stay by 19%, closing underutilized or underperforming outpatient clinics and improving physician and community relations.
Kurron's successful efforts to turn around the hospital resulted in increased value and interest from potential buyers due to the realization that it could be operated in the black and return a significant profit.