Rebalancing the Cost Structure: Progressive Health Systems, Inc. Bob Haley, CEO Steve Hall, CFO

Transcription

1 Rebalancing the Cost Structure: Progressive Health Systems, Inc. Bob Haley, CEO Steve Hall, CFO

2 THE MARKET & PHS S POSITION 2

3 Progressive Health Systems, Inc. (dba Pekin Hospital) Pekin, IL 3

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6 Nearby Tertiary System OSF St. Francis Medical Center, Peoria, IL 6

7 Nearby Tertiary System Unity Point Health Methodist, Peoria, IL 7

8 Understanding the Hospital s Situation Steady annual EBITDA decline attributable to: Declining volumes Weak local economy Deteriorating payor mix Reduced Medicaid/Medicare payments Shift to outpatient services New provider start up costs Meaningful use funding well drying up Medicaid Provider Assessment funds at risk 8

9 Financial Performance Related to Decline in Inpatient Admissions Steady annual decline in inpatient admissions due to Outmigration loss of market share Overall downward trend in surgical volume and ER/Urgent Care visits Shift from short inpatient stays to observation status Payor efforts to decrease utilization Physician attrition Payor mix heavily weighted toward Medicaid/Medicare reimbursement 9

10 Key Board /Management Concerns Strong Balance Sheet Weak P&L Affiliation: Not if, but when Deteriorating Market Share Competitive Market 10

11 Rapid Cycle Improvement Plan (RCIP) Quorum Intensive Resources Board Hospital Management Team Regional Team 11

12 Three Critical Objectives Strengthen operating performance Position organization for long term viability Fund ongoing capital needs 12

13 THE ASSESSMENT 13

14 Key Volume Indicator Trends Fiscal Year 10/31/2013 Variance Key Hospital Statistics 4/30/2011 4/30/2012 4/30/2013 Trailing 12 Months 2011 vs Trailing Admissions 3,699 3,628 3,547 3,516 (183) Outpatient Visits 104, , , ,576 (1,586) Inpatient Surgeries 1,395 1,432 1,388 1,355 (40) Outpatient Surgeries 3,207 3,054 2,961 3, ER Visits 27,944 28,360 28,072 27,290 (654) ER Conversion to Admissions 2,422 2,419 2,404 3, ER Conversion % 8.7% 8.5% 8.6% 11.5% 2.8% ER Transfers Urgent Care Visits 10,959 12,168 11,022 10,424 (535) Births (3) Home Health Visits 8,980 9,266 9,267 8,764 (216) Home Health Admissions

15 Financial Performance Trends Declining Pekin Hospital P&L - Normalized Fiscal Year 10/31/2013 Variance 4/30/2011 4/30/2012 4/30/2013 Trailing 12 Months 2011 vs Trailing EBITDA - per Financials $7,826,755 $5,408,456 $4,929,122 $4,132,033 ($3,694,722) Less: EHR Reimb - - ($2,554,325) ($3,630,625) Less: Provider Assessment ($3,751,673) ($3,494,306) ($3,267,463) ($4,265,835) Plus: Provider Tax $1,567,049 $1,544,069 $1,546,333 $2,190,135 EBITDA - Normalized $5,642,131 $3,458,219 $653,667 ($1,574,292) ($7,216,423) 15

16 Business and Operations Assessment Overview: Performance assessment focused on: Market Share/Growth Labor/Productivity Service Line Analysis Revenue Cycle Inventory/Supplies/Contract Services Managed Care & Payor Mix ProHealth Performance Debt, Capital Spending, & Cash Flow Accounts Payable 16

17 Market Share and Growth Assessment Overview: Focus - stem outmigration and strengthen service lines Current State: Aging population Inpatient market share ( 06 12) has declined from 50.4% to 39.6% Loss of cases in General Medicine, Orthopedics, Obstetrics, & General Surgery Action Plan: Stabilize, recruit and grow General Surgery Grow Orthopedics via partnering with MOC or recruit into ProHealth Implement new Pain Management program Weekly, intense evaluation of patient transfers 17

18 Declining Hospital Market Share Trends in All Service Lines All Inpatient 44.0% 40.1% 39.6% General Medicine 51.1% 44.6% 42.7% Orthopedics 49.9% 47.9% 45.1% General Surgery 34.4% 32.9% 32.8% Obstetrics 46.3% 49.5% 42.8% 18

19 Increased Volume of ER Transfers 33% increase in ER transfers between FY Emergency Room Transfers Fiscal Year 10/31/2013 Variance 4/30/2011 4/30/2012 4/30/2013 Trailing 12 Months 2011 vs Trailing

20 Labor, Productivity, and Benefits Assessment Overview: Need to rebalance staffing to align with current patient volumes Current State: Productivity out of balance with volumes and benchmarks Little or no 401K matching since 2009 Retirement Plan funding frozen in 2008 Salary competition with area hospitals Average annual RN turnover rate 6% (Illinois 14%) 2013 Vantage Productivity System staffing standards have been implemented Action Plan: Move all nursing units to 75th percentile productivity level Complete nurse staffing grid engagement Reduce staffing 42 FTEs (productivity and reduction in force) annual savings of $2.1M Suspend 401K matching contributions 20

21 Labor Rebalancing Pekin Hospital Labor Adjustments - Projected Annual Savings FTEs Salary Benefits (avg. 20%) Projected Savings Nursing 20.0 $1,012,000 $202,400 $1,214,400 Ancillary 4.5 $175,450 $35,090 $210,540 Financial 8.0 $268,000 $53,600 $321,600 Administrative 1.4 $63,500 $12,700 $76,200 Total Hospital 33.9 $1,518,950 $303,790 $1,822,740 ProHealth 7.7 $257,780 $51,556 $309,336 Consolidated 41.6 $1,776,730 $355,346 $2,132,076 21

22 Service Line Analysis Overview: Medical/surgical mix is out of balance Current State: General surgery, orthopedics, GI, selected imaging and rehab services and routine medical show robust contribution margins OB, Observation, and Wellness have negative contribution margins Medical/surgical mix below best practice and benchmarks Action Plan: Invest in growth strategies for surgical/procedural services (i.e. general surgery, ortho, GI, etc.) 22

23 Medical vs Surgical Mix* Pekin Hospital Inpatient - Medical vs Surgical DRGs Fiscal Year 10/31/2013 Variance 4/30/2011 4/30/2012 4/30/2013 Trailing 12 Months 2011 vs Trailing % of % of % of % of Cases Total Cases Total Cases Total Cases Total Medical 2,752 2,752 2,780 2,761 9 Surgical % % % % (192) Total 3,699 3,628 3,547 3,516 (183) Excludes Normal Newborns *Benchmark Clinical mix 70% medical / 30% surgical Average net revenue for a surgical case is $13,281 vs. $5,061 for a medical case. NOTE: Also excludes SNF unit which was closed April C-section cases counted in surgical. 23

24 Service Line Analysis I/P, Surgical Inpatient Medical Discharges Gross Charges Payment Received Direct Costs Contribution Margin OB/Gyn (non surgical) 551 $6,566,083 $1,802,017 $2,233,227 ($431,210) CCU (excl. surgical cases) 130 $6,797,159 $1,402,192 $1,445,783 ($43,591) Routine Medical 1,733 $44,835,641 $9,053,066 $6,894,604 $2,158,462 Cardiology 372 $10,884,328 $2,044,136 $1,655,213 $388,923 Pediatrics 109 $1,032,492 $349,110 $270,513 $78,597 Observation 1,898 $10,402,049 $1,778,750 $2,531,092 ($752,342) Total 4,793 $80,517,752 $16,429,271 $15,030,432 $1,398,839 Surgical (I/P & O/P) # Cases Gross Charges Payment Received Direct Costs Contribution Margin General Surgery 529 $16,496,060 $4,431,458 $2,802,403 $1,629,055 Orthopedics 478 $20,563,065 $5,926,334 $3,115,348 $2,810,986 GI 791 $12,703,551 $2,943,645 $1,825,934 $1,117,711 OB/GYN 369 $8,512,003 $2,071,827 $1,205,387 $866,440 Urology 242 $5,474,176 $1,396,125 $821,323 $574,802 Ophthalmology 629 $5,678,506 $1,396,788 $847,681 $549,107 All Other 263 $5,009,514 $1,156,530 $726,451 $430,079 Total 3,301 $74,436,875 $19,322,707 $11,344,527 $7,978,180 24

25 Milestone Targets Progressive Health Systems Quarterly Milestones - Consolidated Normalized EBITDA Trailing 12 Months ($1,574,300) Improvement Normalized EBITDA Target Milestone February - April 2014 ($1,574,300) $771,500 ($802,800) May - July 2014 ($802,800) $857,500 $54,700 August - October 2014 $54,700 $1,058,500 $1,113,200 November - January 2015 $1,113,200 $1,389,500 $2,502,700 February - April 2015 $2,502,700 $1,638,500 $4,141,200 Cumulative Improvements $5,715,500 26

26 RCIP Transition Report 1/31/2015 Initiative Results Target Variance 1 st Quarter (Feb-Apr) 1,185, , ,500 2 nd Quarter (May-Jul) 1,396, , ,000 3 rd Quarter (Aug-Oct) 1,059,400 1,058, th Quarter (Nov-Jan) 1,575,000 1,389, ,000 Results to date 5,216,400 4,077,000 1,139,400 5 th Quarter (Feb-Apr) 1,638,500 TOTAL RCIP 5 Quarters 5,715,500 27

27 Key Financial Ratios 5-Year Trend [ Red/Yellow/Green compared to Fitch BBB ] 4/30/11 4/30/12 4/30/13 10/31/13 (6 months) 4/30/14 1/31/15 Operating Margin 2.9% 0.2% (0.6%) (3.7%) 0.6% 3.3% EBITDA 9.9% 6.8% 6.4% 3.3% 7.3% 9.7% Days Cash Net Days in A/R LT Debt / Capital % 35.5% 30.9% 27.3% 25.4% 19.6% 28

28 Consolidated Net Operating Income Quarterly 29

29 STRATEGIC INITIATIVES & FUTURE PLANS 30

30 Above all, success in organizations requires two things: a winning competitive strategy and superb organizational execution. Distrust is the enemy of both. ~ Robert Shaw, Trust in the Balance 31

31 Strategic Positioning: Value Drivers Partnerships: Orthopedics Park Court Pharmacy Park Court Ltd. Differentiation based on creating value in the patient experience: A. Patient Experience to focus on: 1. Convenience/Ease of Use 2. Health Care Information to the Patient 3. Individual Attention B. Build, Strengthen, and Control the Primary Care Channel Patient Interactions that drive referrals C. Offer Payors/Employers health care solutions Communicate with Payors and Employers to determine expectations and offerings of Progressive Health services. D. A limited, targeted scope of Progressive Health services integrated with hospital care. Foundation? 32

32 WHEN CULTURE SHIFTS, SO DO RESULTS Experience Thoughts Beliefs Attitude Behavior Action Results When patients, employees, leaders, providers and members of the community engage with PHS, they encounter a myriad of experiences. These experience shape their thoughts, beliefs, attitudes, behaviors and actions they take in response. Experiences, when designed with purpose and executed well ultimately impact every single outcome. Determine the current experiences that are delivered by employees, managers, providers, hospital community at large. Identify what thoughts, beliefs and attitudes are fostered by each specific experience. Don t judge the experience (good/bad), just document typical situations that consistently occur. 33 Based on the thoughts, beliefs and attitudes listed, determine the current behaviors and actions taken by patients, employees, managers, providers, hospital community at large. Don t judge the behaviors and actions (good/bad), just document typical responses that consistently occur. Now determine the projected, anticipated outcomes/results that will occur when these behaviors and actions are taken by patients, employees, managers, providers, hospital community at large. Explore whether the experience created is yielding the desired outcome/result. If not, design a plan to alter the experience to create best outcomes.

33 Quality Improvements Core Measures October Dec 2014 Inpatient Scores: Improved 76.7% to 96.9% 23 Criteria = 100% compliance 30 of 31 Criteria Meeting > National Benchmark Outpatient Scores: Improved 80% to 82% 9 of 11 Criteria Meeting > National Benchmark 34

34 Growth Initiatives ER Admissions from Observation to Inpatient Engaged Physician Advisor Sep 2013 Midwest Orthopedic Center Partnership to Increase Volumes Sep 2014 ENT Recruited Dr. Schinkel Nov

35 Growth Initiatives, Cont. Pekin Hospital Pain Clinic, LLC Opened 9/1/2014 First Profitable Month Dec 2014 Reduced ER Transfers Changed ER Physician Group Jun 2015 General Surgery Recruited Dr. Hanshaw Aug

36 Pekin Hospital 37

37 Future Building Plans 38

38 Bob Haley, CEO Steve Hall, CFO Pekin Hospital (309)