CEO Update – March 15th


The obvious highlight of this week was last night’s donor appreciation/ open house to celebrate the completion of the construction project. It turned out to be an excellent night with great attendance and gave us the opportunity to thank the people who were instrumental in bringing this to a successful completion.

This project places Southwest Health System in a position to continue to provide very high quality care in state-of-the-art facilities unsurpassed by any provider in the area. We now have the newest, nicest inpatient facility in the service area allowing for a very private, comfortable experience for our patients and families to go along with the excellent staff that provide that care. Our Medical Office Building allowed us to consolidate services for much improved coordination of services between primary care, specialists and our outpatient hospital services. And can you imagine the effect this winter would have had on our ambulance service had they had to continue to house our ambulances outside all the time.

The turnout for the event last night demonstrated just how important this organization is to the community. It took a considerable effort to unify the community to support this project but ultimately the support was overwhelming as evidenced by the multiple parties that played a part in providing the funding for the construction. Last night we had the opportunity to thank the contributors that included $20,000 raised through employee contributions, approximately $380,000 raised through the foundation and lets not forget the Tax Levy that was passed by the local tax payors. In addition, the support from all the local banks to form a syndicate of 1st Southwest Bank, FNB Durango, The Dolores State Bank, FNB of Cortez, Four Corners Community Bank and led by Vectra Bank/ZionsBankCorp to provide the Bond financing is another testament to the belief that this organization is critical to the community.

But perhaps the biggest positive last night was the mood of the people in attendance. It truly was a celebration and certainly signified just how far this organization had come in the last year to overcome our challenges and return Southwest Health into the leading provider of healthcare services in the four corners area. The delay of the event until last night was a deliberate choice. We made the decision last fall to make sure that when we did hold the event that it would be received an positive manner. The progress we have demonstrated the last several months gave us confidence that this was the time to move forward. Everyone at SHS can be proud of this accomplishment as it was truly the efforts of everyone at SHS that has moved us along to this point.

I would also like to thank everyone that played a role in making this event very successful. Bridgett Jabour and Chris Alvarez went above and beyond and did an excellent job of planning and organizing the event and coordinating the resources that were needed to pull this together. Also I would also like to thank all the people who volunteered to assist Bridgett and Chris in getting everything ready last night. The setting was beautiful and it was obvious everyone really enjoyed the event. I’d also like to thank Rob Dobry (member of SWMH Foundation and MCHD Board) who was instrumental in helping Chris and Bridgett coordinate the event as well as getting the donor wall completed with funds from SWMH Foundation. We also truly appreciate the Cortez Chamber of Commerce’s sponsorship of this event and thank them for their contribution to a very successful outcome. As they always do, our Food and Nutrition staff did a fabulous job with the food which again received great reviews from everyone in attendance. Thanks to all you for your outstanding efforts.


We continue on track with our Just Culture training in April and look forward to getting that program rolled out.

David Marx published a new article recently that I am attaching for your reading. The article is about an incident at Vanderbilt University and the subsequent Homicide Charge against the nurse involved in the incident. David approaches the article from a perspective of a Just Culture and how that could effect this event. I will discuss the article in more detail next week but wanted to give you the opportunity to read it beforehand.

Tony Sudduth

CEO Update – March 3, 2019

This week I had the opportunity to attend the Board meeting of the Western Health Alliance in Grand Junction.  WHA is an organization that we are actually a founding member of and part owner that advocates for rural healthcare providers on the Western Slope of Colorado.  It was a very interesting meeting in that I was able to learn a lot about what is going on in our state in healthcare.  It also made me realize that we have to be cautious as an organization that we do not get so caught up in our local issues that we forget that there is lot going on around us that can affect us and our future.  I will discuss some of those issues a little later in this update after the financial report.

Also, this week we had the monthly meeting of the SHS board.  At that meeting Rick Shrader, our CFO, presented the January financial report.  Rick is out of town today preparing for his daughter’s wedding tomorrow and as such I will be providing the January financial report in this update.


By any measure January was an excellent month financially.  It was a busy month and we did an excellent job of controlling our costs and as a result we exceeded budget and are well ahead of prior year.  It’s an excellent way to start 2019!

Some of the Key Statistics are:


Actual Jan 2019Budget Jan 2019# Variance% VarianceActual Jan 2018# Variance% Variance
Patient days326310165.2%2675922.1%
ER Visits1,1321,103292.6%1,199(67)(5.6%)
Clinic Visits3,8403,5053359.5%
Imaging Proc1,8502,003(153)(7.6%)1,909(59)(3.1%)


As you can see from the above, January was a busy month and we exceeded both budget and prior year for Admissions, Patient Days, Surgeries, Births and Clinic Visits.  We came up a little short of prior year for ER visits and Imaging, but did exceed budget for ER Visits.  These volume increases resulted in a substantial increase in our Total Gross Patient Revenue which increased by $1.56 million or 17.2% over prior year and was $716 thousand over budget, or 7.2%. The more important number however is Net Patient Revenue (NPR), which is what we actually expect to receive from those gross charges.  For January NPR was $5.2 million which was $651 thousand better than budget and $1.1 million better than prior year.

So, I am going to veer off the path a little and provide a little bit of education on how we develop the Net Patient Revenue numbers every month.  As I have explained before, the Net Patient Revenue number involves a significant number of estimates.  As a healthcare provider, we do not receive the amount we bill.  Medicare, Medicaid, Commercial payors and even those individuals that have no insurance pay substantially less then we charge and, in some cases, nothing and we do not know at the time we bill exactly what we will collect.  As a result, every month we have to determine, based on historical payments received, how much we will receive on the amount we bill.  Its really not as complicated as it may sound and if done correctly will result in accurate estimates.  To check the accuracy of our estimates we continuously monitor our collections against what we estimated we would receive or Collections versus Net Patient Revenue over an extended period of time.  For the last 12 months, February 2018 through January, 2019 we have estimated our Net Patient Revenue at $54,348,000.  Our actual collections during that period have been $55,848,000 or $1,500,000 more than we estimated which is about 103% of expected.  While you always want this number to be about 100% you never want it to be under 100% and in either case you want to be able to easily explain the variation.  In our current case we know that we are over 100% because we have actually improved our collections during this time.  Meaning we have reduced the amount of time it takes to collect our receivables from where it was prior to February, 2018. The real take away from this is we can have a lot of confidence we are presenting financial statements that are accurately reflecting our results.

So back to January, as we all know we have had a real focus on reducing expenses over the past several months and January is very much a positive reflection of those efforts.  Even with a busier month, our total operating expenses were $397,000 less then prior year.  Our labor expense which has been a real focus were $902,000 below prior year.  The Salary portion of that number was down $405,000 and we were down 78 Full-time equivalent employees from last January.  Our Labor costs consumed 45.8% of our NPR this year versus 81.4% last January due to our higher revenue and lower labor costs.

With the increased Net Revenue and the reduction in Operating Expenses, our Operating Margin exceeded budget by $143,000 or 34.8% and exceeded prior year by $1,687,000 148.9%.  Our operating margin was $554,000 this year versus a loss of ($1,133,000) last year in January.  A remarkable improvement and a very good sign our plans are working.

For the month our total cash was down about $280,000 but we reduced our current liabilities by over $937,000.  We have Accounts Payable at a very manageable level at this point which is a substantial improvement over where we were even a few months ago.

Obviously, this is an excellent start to the year but by no means are we out of the woods.  Our requirements through our forbearance for building our cash balances are substantial over the next 18 months and we will need to continue to maintain our focus as we have been doing to get there and I know we will get there.  You also will understand more about our challenges when I get back to what I started in the beginning of this update on what is happening in Colorado regarding the healthcare industry.

The out of the woods comment made me think of a question.  The question is, how far can you walk into the woods? Please feel free to email me your answers and no fair looking it up.


All across the country there is major discussion by healthcare consumers about the rising cost of health insurance premiums which have been steadily increasing.  This is particularly true in Colorado where health insurance premiums are some of the highest in the country.  This outcry from consumers was a major focus during the recent elections and is now a major focus of the Colorado Governor, his administration and the State Legislator.  They are completely convinced that the issue is that healthcare providers are not controlling costs. Currently there are 40 bills that have been put forth to address what is viewed as a “crisis situation.”  Unfortunately, the feeling that something has to be done immediately is overriding the logical approach that they make sure what they are doing will have the intended effect.  The opposite approach of my “do it right the first time”. The Western Health Alliance and Colorado Hospital Association both oppose most of what is being proposed but there is a lot of concern about whether logic will prevail.  WHA is particularly concerned about how some of these proposals will affect rural providers like us.  The concern is that a lot of the questions about rising costs are coming from what is being seen in the more urban areas such as Denver where there is a tremendous amount of money being spent on expanding services. In a lot of cases, this is just duplicating already-available services. Obviously, the issues facing rural providers are much different than urban areas and CHA and WHA hope to protect the rural providers.

The Governor and many legislators have publicly stated that they feel that healthcare systems are driving up costs through expanding overhead costs.  I totally agree and most of my CEO colleagues will agree that healthcare administrative costs are too high. However, what we also all agree on is that the reason administrative costs are continuing to grow is that the regulatory burden on our institutions continue to grow.  We are one of the most regulated industries in the country and it continues to increase.  The growing regulations burden providers with exponential overhead costs.

With that said, one thing that is obvious is that it will never become easier to operate healthcare organizations.  The outside pressures will not go away and as an organization, we have to continue down our current path to assure we continue to provide high quality services in the most efficient and cost-effective manor possible.  We are going in the right direction and have already recognized the need to become more efficient.  We also need to recognize that while we continue to progress at getting out of the woods, the woods are growing every day and our efforts will need to continue as we move forward.


Just a reminder that the Donor Appreciation/Open House will be taking place on March 14th at 5:30 in the new Lobby.  We will be unveiling the new donor wall at that time also.  It’ll be a fun time to reflect on how healthcare has grown in the last 100+ years in Montezuma county.  Below is a before and after if you will:

1917 Johnson Hospital

2018 SWMH Entrance

Once again thanks to all of you for your efforts.  The turn-around we are experiencing in not just the financial aspects but in culture and attitude is something we can all be proud of.
This is going to be a great 2019!


Anthony Sudduth, CPA, FACHE, FHFMA

Interim CEO





Feb 1st CEO Update – 2018: A Year in Review

Tony Suddeth


For Southwest Health System (SHS), 2018 was a year defined by tremendous change, chaos and ultimately success.  An opportunity for the organization to either accept the direction it was heading and ultimately fail or accept the challenge that was in front of it and establish a path to a positive future.

Southwest Health System welcomed in 2018 with some very disturbing news.  The Board was notified that SHS had fallen into default on its bond covenants by allowing its day cash on hand to drop below the required 80 days for 4 consecutive quarters.  This measure was not just below 80 days, it had fallen to below 30 days with no end to the decline in sight.  This ignited a firestorm that ultimately led to a year of turmoil and change.

As a result of the default, the lenders required the Board to engage an outside consulting firm to evaluate the situation and develop a plan of action to get SHS back on track.  To meet this requirement, in March the SHS Board of Directors engaged Community Hospital Corporation (CHC) to conduct an operational assessment to identify areas of opportunity.  This assessment began on April 9th, 2018.

Even prior to the beginning of the assessment, the SHS Board made the decision to make a change in leadership. On 4/5 the CNO was released; on 4/6 the Board released the CEO and medical group Practice Administrator and on 4/13 released the CFO.  It was during this time that I was contacted by CHC to gauge my interest in becoming the CEO of a health system in Southwest Colorado, “facing some challenges”.  I accepted the position and started as Interim CEO on 4/16.  In fairness to CHC, it too was still learning of the extent of the challenges the organization was facing.

As I do in any organization, I immediately started reviewing financial data to try to get a better understanding of the trends that had led to the current financial position of SHS.  Initially, this review just created more questions and unfortunately led to the realization that actual Day Cash on Hand (DCOH) when calculated by the terms of the borrowing agreement were actually lower then previously presented.  At the end of March, the organization had just a little over 15 DCOH.  To add to the panic, when I calculated the rate of decline in cash, I determined that the organization was spending about $20,000 a day more than it was bringing in.  At that rate with the current cash balance, SHS would run out of cash in 111 days.

One of the obvious red flags that stood out when I reviewed the financial trend was the growth in Salaries and Benefits expenses from 2015 to 2018 with no corresponding increase in net revenue.  In other words, more cash was going out the door, but no more revenue was coming in.  Between 2015 and 2018, 78 additional full-time equivalent (FTEs) positions had been added.  As a result, even before then CHC report was received, it was obvious this had to be an area that was addressed immediately.   While it was obvious a reduction in force was needed, I and the remainder of the Senior Leadership Team were committed to assuring that we took the time necessary to assure that the eventual reduction was done appropriately and that we “got it right the first time”.  While we were working through the analysis, approximately 38 positions were eliminated through attrition thankfully reducing the number that were eventually affected by the reduction in force to 40 people.  40 neighbors, friends and members of the community.  The RIF was carried out on 8/13. As a result of this and additional savings identified by CHC and in-house, we have been able to reduce monthly expenses by over $700,000 to put us on track to recovery.  These reductions were not easy and they impacted everyone in the organization as staff filled “gaps” in duties left by the RIF and benefits decreased some to fall in line with industry standards. We identified area where contracts needed to be either terminated or renegotiated, opportunities with our supply chain, improvements to our revenue cycle and many other procedural changes that would increase the productivity of SHS. While none of the reductions were easy, some of the changes, such as the reduction of plant operations staff who previously provided overnight security, offered an opportunity to collaborate with off-duty police officers to staff the sometimes-challenging night shift allowing these highly-trained professionals to ensure safety of our staff working nights and weekends.

When CHC completed their operational assessment in May of 2018, it included 237 pages of findings and recommendations to get SHS viable.  Recognizing the challenge, the organization had ahead of it and to assist in developing the action plan to correct the issues and assure that we stayed on track and received additional oversight and resources, the SHS Board entered into a 5-year management agreement with CHC on July 1st.  Under this agreement CHC currently provides the CEO, CNO and CFO for SHS. To round out our staff,  Kerri White-Singleton served as Interim CNO until December 3rd when Karen Labonte joined us as CNO, Rick Shrader, CFO joined us on 10/16 and currently Elva Morgan is serving as Interim Practice Administrator started in November. In addition, all CHC operational, education and strategic resources are available to the organization during the contract period.

This situation brought to light the fact that there had been a definite lack of transparency in many areas, Administration to the SHS and MCHD Boards, and Administration to the Physicians, Staff and the community.  At that point, Administration and the Board made the commitment to not let this happen going forward.  The first step being, informing staff of what was going on and what the real situation was.  This started with the first employee forum which took place on my 4th day on the job, April, 19th and 20th.  This was a very honest and open conversation with staff setting the baseline for what to expect going forward.  Another series of employee forums were held on 8/15 and 8/16 in conjunction with the initiation of a significant round of cost reduction measures as well as the reduction in force occurring at that time. Currently we are holding employee forums monthly to address any questions or concerns staff may have.

To further facilitate getting the message out, a public forum was held by the MCHD and SHS Boards on 9/26.  This forum had very good attendance and what was originally scheduled as a one-hour event ended after about 2 ½ hours.  It was a very productive meeting resulting in a good understanding of some of the concerns of the community.  We have committed to holding these regularly going forward.

In addition, in August I began publishing my weekly CEO updates to further assure all relevant information is being shared not only with the respective Boards, Leadership and Management, but to all Staff who may not always be in a position to hear the message.  Also, to assure the message was being heard, I had the opportunity last fall to meet with the Dolores Board of Trustees, the Mancos Town Manager, the Mayor of Cortez and I am meeting quarterly with the Montezuma County Commissioners to again assure everyone is hearing the same message.  I have also recently started presenting the SHS story to local civic groups and intend on continuing this throughout 2019.

To further add to the turmoil, simultaneous with all the operational changes, the organization was in the final stages of a $30-million-dollar construction project for a new Medical Office Building, a new Inpatient Wing, and a New Entrance.  All three, due to the work of a lot of very dedicated staff, were transitioned very smoothly.  The last 2 weeks of April, the move into the MOB took place.  This was followed by the Inpatient Wing opening on June 20th and the New Entrance on September 4th.  We will be honoring all those that contributed to this effort with an Open House/Donor Recognition reception on March 14, 2019.

The challenge for any healthcare organization is to make sure that regardless of what is going on inside the organization, from a patient perspective it is all invisible and care continues to be provided in a high-quality manner.  I and the entire Senior Leadership Team have one united expectation regarding patients. Every patient will receive the best possible care and leave with the feeling that the experience was the best possible, every time, whether their first visit or 100th visit.  Quite honestly, we encountered circumstances where we did not believe this was happening and, in those circumstances, the needed changes were made.  This philosophy will remain in the forefront as we move forward as an organization.  We were fortunate as we worked through these changes to be able to bring people up from within to assist in instilling this philosophy in their departments.

A couple other examples of changes that further our goals were in the hospital clinical areas.  Daily clinical department huddles were initiated which improved the coordination of care between departments.  As a result, on several occasions this assisted in assuring patients received the care they needed and expected.  In another initiative, we focused on patient falls.  An analysis of the reason for the falls was completed and changes were implemented resulting in significant reductions in instances of patient falls.

During this time, we continued to participate in community events that not only provide much-needed services to the area we serve, but also to assist in getting the word out as to what this organization can offer its patients.  A few of those events are as follows:

  • Teen Maze – and interactive health fair that addresses relevant topics of the teen population. 300 to 500 youth participate annually.
  • Community Health Fair – a community partnership with Montelores Early Childhood Council which serves a population of all ages providing free and low-cost services, screening and education to over 550 community members.
  • Monthly Support Groups – Support groups covering Diabetes, Bariatric Surgery, Pre-Diabetes and Cardiac Rehab. Each group serves from 7 – 15 members.
  • Intern Program – Program where intern volunteer by working in various hospital departments in order to learn about healthcare careers. Last year, 7 interns provided over 1000 hours of time.
  • EMS Community Activities – Our very active EMS department provided stand-by medical services at high school sporting events, the Rodeo and Jr. Rodeo, and other special events as requested. In addition, they provided additional support to the community as the Fires invaded the area last summer.

The real story is this:  2018 could have gone a couple directions, continued its downward trend and today I would not be writing this update because SHS would not exist – no one can argue that point.  SHS was 111 days from a complete disaster. Fortunately, we chose a better path.  We recognized the issue, found the solutions and acted on them.  None were easy, none were simple but with the complete cooperation and hard work of everyone at SHS we moved forward.

That’s the real story, everyone pulled together to accomplish what needed to be accomplished.

With that in mind, even though finances were strained during 2018, we felt it was critical that we recognize the contributions our staff have made.  As a result, we made a couple decisions to give back, though small considering what was given, we provided turkeys at Thanksgiving to all staff and at Christmas a fleece jacket with the SHS logo embroidered on it was ordered.  On Christmas Day, my favorite elf (my wife Pam in an elf costume) and I in a Santa suit had the opportunity to prepare and deliver baked goods to the staff working that day, and blankets to all our patients in the inpatient unit.

The efforts and progress of SHS was recognized, our lenders became comfortable with our plans, understood and believed our results and entered into a forbearance agreement in November with SHS allowing us time to get back in compliance with our debt terms.   On December 31, 2018 we exceeded the 30-day DCOH threshold established in the forbearance agreement and we are definitely on track to meet our next objective at June 30, 2019.  The progress has been remarkable.  Operational performance for the last 6 months of 2018 improved by over $3.7 million over the first 6 months.  The plan is working, you are supporting it and making it happen.  I could not be prouder to have the opportunity to lead this organization.

2019 will be challenging as our goals are for continued and significant improvement over 2018 but I have no doubt we will do it, we have proven our capabilities already.

I am looking forward to my “2019 Year in Review report” having some of the following….continued financial stabilization and growth, fine-tuning quality improvement processes, implementing efficiencies allowing easier access to our clinicians, communicating openly and often with the community to build strong relationships of trust which only enhances our value to this community and fulfills our mission to provide the highest quality health care to our community by bringing excellence and service together to promote, improve and restore health.


Thank You for all your efforts,