Case Study

Distressed Hospital

Blurred image of hospital hallway

Sierra Vista Hospital was facing significant financial, operational and leadership challenges.

  • Negative annual EBITDA
  • 5 Days Cash on Hand
  • Declining inpatient volume
  • Expense growth exceeded revenue growth by 244%
  • Cash exhausted in 90-120 days
  • $32 million in new debt
  • New hospital building project under way with no ability to meet debt service payments
  • Debt covenant default
  • Disastrous IT system conversion
  • CEO and CFO termination

The Challenge

Recommended by a New Mexico state senator, QHR Health engaged with Sierra Vista Hospital to address the Critical Access Hospital’s declining inpatient volume, expense growth and balance sheet deterioration.

QHR Health Solutions

Over a two-year engagement, QHR Health implemented financial, operational, managerial, quality and patient experience improvements. We worked rapidly to implement a multidisciplinary consulting approach to help strengthen Sierra Vista Hospital’s financial and operational capabilities.

QHR Health’s activities included:

  • Successfully recruiting a new interim CEO and CFO
    to the hospital
  • Rightsizing the hospital’s workforce
  • Enhancing the organization’s revenue cycle process post EHR conversion
  • Reviewing and resolving regulatory compliance protocols
  • Providing guidance across case management, physician relations, managed care contracting and IT conversion activities
  • Implementing a supply chain conversion
  • Improving the hospital’s financial statement reporting and reimbursement modeling
  • Negotiating suspension of debt service payments to allow for financial improvement impacts
  • Reestablishing relationships with the New Mexico Legislative Finance Committee
  • Adjusting proposed new building project to affordable debt level

Results

Fiscal Year End 2019 Audit Results

  • Operating Revenues increased 14% or $3 million
  • Operating income improved by $3.2 million from an operating loss of $2.6 million to
    a profit of $600,000
  • EBITDA improved from -$574,000 to $2.4 million
  • Salaries as a percentage of net patient revenue improved from 58% to 42%
  • Days Cash on Hand increased from 5 days to 82 days
  • Account Receivables improved from 79 to 56 gross days
  • Accounts Payable turnover improved from 46 to 27 days
  • Debt successfully restructured to complete building project
  • Revenue Cycle & payor issues resolved increasing Commercial insurer
    payments by 52% ($4 million)

Fiscal Year End 2020 Interim Results: Prior to COVID-19 Impacts

  • Building Project Phase I successfully completed and put into service in July 2019
  • Building Project Phase II on schedule to open in August 2020 funded largely
    by NM State grant funds.
  • EBITDA of $1.7 million (10%) for first eight months
  • Days Cash at 70

COVID-19

  • Ongoing education and updates on CARES Act
  • Provision of tools to estimate and validate relief payments
  • Clinical, financial guidance, CDC information at https://qhrcovid19.com/
  • Provision of Personal Protective Equipment directly from QHR procured supply
  • “Playbook” providing guidance on re-opening of closed services