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

Tony Suddeth

CEO UPDATE:
SOUTHWEST HEALTH SYSTEM 2018, A YEAR IN REVIEW

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,

Tony