Case Study
An existing facility in Ponca City, Okla., was more than 20 years old and being managed by its physician owners, who hadn't seen a distribution in seven years or an employee raise in five. The salaries, wages, benefits and equipment costs were too high compared to industry averages, and fixed expenses were well above the national average for facilities of this size. Many physicians had become disheartened with the return on investment potential given the history of the facility, which resulted in lower case volumes. Some investors were no longer performing cases at the center, so the operating entity needed to be resyndicated to divest physicians who no longer worked at the facility.
With numerous challenges facing the physician owners, they decided to bring in a corporate partner–Nueterra Healthcare. The existing entity was set up as an S Corp. so the existing investors needed to find a way for Nueterra to come in without affecting the S Corp. status and, therefore, the investors' tax classification. Nueterra needed to evaluate wages, benefits and salaries to increase net revenue without significant layoffs of local employees. The company also needed to get existing owners to commit to increasing their case volumes.
Changes implemented by Nueterra quickly resulted in increased profits. Nueterra implemented its proprietary supply value analysis and group purchasing organization strategies, which significantly reduced inventory costs. After conducting a thorough review, Nueterra also moved the facility under its insurance umbrella, resulting in $16,000 in savings annually, and transferred billing operations to its regional billing office, resulting in a reduction in the average AR days and giving the facility the ability to bill within 24 hours and collect within 45 days. Finally, Nueterra purchased the interests of non-performing physicians, reconfirmed volume commitment from existing physicians and identified potential new physicians to increase volume.
The changes at the facility resulted in it becoming profitable within a year after resyndication. The center also had a 95 percent patient satisfaction rating in 2009 and an infection rate of less than 2 percent.
"For many years we have not been profitable and a lack of raises affected morale", said Dr. Ron Kregar. "The quality of Nueterra's supervision, guidance and resources has lead to a significant improvement in efficiency and morale leading to profitability. This has resulted in improved esprit de corps that has been noticed by patients, staff and physicians."
The State of Oklahoma started surveying all operational facilities in 2009 and Ponca City passed its state survey, which it would undoubtedly have failed without Nueterra's operational expertise. Physician owners received their first distribution in seven years in 2009, nine months ahead of schedule. In addition, employees received their first raise in five years.
Dr. Terrence Boring, chairman of the Board of Managers, said, "Our affiliation with Nueterra saved our outpatient surgery center from almost certain closure. Now we are on our way to financial recovery with a sound business footing. We surgeons are able to do what we do best–provide outstanding patient care–while Nueterra does what they do best–provide a great management team to run the business side of our organization."
Now, with Nueterra's help, the facility will continue to conduct long-term business planning. New goals include further reducing supply costs and increasing case volume. Moving forward, Nueterra has the infrastructure to sustain a competitive advantage throughout the lifecycle of the facility. Nueterra is able to drive quality outcomes while controlling expenses in ways that result in increased patient satisfaction, physician satisfaction, cash flow and profitability. The company's business life-cycle management can ensure the continued growth of the facility and provide the visionary thinking needed to ensure success into the future.