Over the past 14 months, Tom Singleton has split time between Nashville and New York, where he serves as interim chief executive of a three-hospital system.
Faced with challenges, including reimbursement cuts by New York's Medicaid program and private insurers, the system hired Singleton's employer, FTI Cambio, to help it improve performance.
A confluence of factors has turnaround specialists such as Singleton expecting more business over the next two years. That's because hospitals face a tougher road ahead — proof that even the once recession-proof health-care industry isn't immune to the current economic downturn.
"Most of the hospitals feel like there's going to be another major cut next year because (New York's) tax revenues are going down," Singleton said, citing lingering effects of Wall Street's meltdown on that state's treasury.
Among problems ahead, analysts expect cuts in Medicare reimbursements next year along with more states searching for ways to cut their Medicaid budgets.
On top of that, with many hospitals relying on investment income to fund expansions, the recent drop in stock prices means there's less money for that new emergency room or cancer treatment program. And health-care executives fear that donors might also reduce contributions to nonprofit hospitals and health systems.
A tighter credit market has reduced access to capital; and rising unemployment threatens to add to the ranks of the uninsured. That means more patients may be unable to pay their medical bills, a problem that has already plagued a lot of hospitals in Tennessee and nationwide.
"It's going to be a tough go," said Darren Lehrich, an analyst with Deutsche Bank, adding that Medicare and Medicaid account for half of all revenues at most hospitals.
Sheryl Skolnick, an analyst with CRT Capital in Stamford, Conn., said she expects more hospitals to seek outside help for financial counseling, consulting and distressed workouts in the future.
But she said how serious the repercussions are for individual hospitals depends on a lot of factors, including insurance payments, investments and how bad the economy is where a facility operates.
Specialists take over
Companies such as Brentwood-based FTI Cambio, the health-care arm of global consulting firm FTI Consulting Inc., provide consultants to help in specific areas or interim management to run hospitals or hospital systems.
At the New York system, Singleton led a team of 10 financial and operations specialists that helped recruit doctors, improve the mix of patients and reduce the length of hospital stays where possible.
Curt Whelan, a managing director of Chicago-based health-care consulting firm Wellspring Partners, said activity is strong nationwide but there's more demand for interim management and performance consulting in the Northeast and Midwest.
"It's a healthy sector that will get stronger given all of the environmental factors in health care," he said. "It's a market that has a lot of need and limited resources."
Nancy Falls, managing partner in the Nashville office of Atlanta-based executive services firm Tatum LLC, said executives today hope to manage expenses more closely and find new ways to save money.
Clients of Tatum have included Nashville-based Saint Thomas Health Services, whose current chief financial officer initially was brought in from that firm on an interim basis.
Upon his arrival in mid- 2006, Alan Strauss evaluated the role of financial staffers at each of the system's four hospitals and set specific operational and performance goals. Tatum also helped with a turnaround at the Spokane, Wash., hospital system Empire Health Services before its recent sale to Community Health Systems of Franklin.
Mark Turner, senior vice president of operations with Brentwood-based Brim Healthcare, said that hospitals often seek the company's help after they have tried on their own to get through a crisis or improve operations. Brim manages 35 hospitals nationwide mostly under long-term contracts.
Turner expects to start receiving more calls in the next six months to a year, adding that it can take up to a year for sour swings in the economy to start affecting hospitals. "It's business as usual, but I anticipate we're going to see more in the next year," he said.
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