About The Study

Industry: Healthcare

Services:
  • Management Services
    • Interim
    • Strategic

Situation

ToneyKorf was retained to provide Interim Management and Financial Advisory services to a three-hospital, for-profit healthcare system (the “System”), in one of the Northeast’s fastest growing sub-markets.  The System was undergoing several corporate and financial challenges:

  • First, the System had exited contracts with its key commercial insurers several years prior and was contemplating re-entering agreements one at a time under carefully re-negotiated terms. The execution of this “going in-network” strategy was critical to the financial viability of the System as this process would result in significant rate decreases, to be offset by estimated volume growth at each facility. The execution of this growth strategy would be paramount to profitability;
  • The System was comprised of several independently managed hospitals with unique demographic challenges and no system-wide budgeting, reporting, or strategic planning processes;
  • Before ToneyKorf’s retention, the Board of Directors engaged an investment bank to commence a sale process that had been idling, since existing personnel were not able to provide consistent, normalized historical reporting, and financial projections (which ToneyKorf later prepared); and
  • Lastly, the CFO had abruptly resigned, months after the CEO was replaced. In mid-2018, the owners sought a healthcare advisory firm to serve as interim CFO and advance several corporate and short-term liquidity generating initiatives.

ToneyKorf’s prior experience as C-Level executives within several hospitals undergoing significant change was a fundamental reason why we were engaged to serve in the interim CFO and Finance Director roles, while managing critical aspects of the in-network strategy, System sale process, and managing critical strategic initiatives amidst a liquidity-stressed environment.

Summary of Execution and Results

  • While overseeing all of the System’s finance functions, the ToneyKorf team was able to implement several new initiatives aimed at addressing liquidity constraints, including: a detailed buildout of a 13-week cash flow model, weekly cash budgeting procedures, negotiation of key vendor settlements on past due balances, and the development and implementation of several near-term savings initiatives.
  • Introduced detailed bottoms-up 2019 budget and strategic planning process with management coordination across all System facilities (no budget process was previously in place).
  • Managed all financial aspects of System sale process and financial projections modeling, including:
    • Preparing projections of revenue (incorporating complex “in-network” pricing model) and expense category by line item by facility, including financial impacts of all contemplated initiatives;
    • Detailed 2018 and 2019 normalized EBITDA analyses for enterprise valuation modeling; and
    • Preparing, archiving, and indexing 1,500+ corporate documents for due diligence preparation.
  • Oversaw complete overhaul of supply chain with new VP and ~$3m of recurring annual savings.
  • Instated a real-time savings process and tool to track the implementation of several departmental savings plans, resulting in immediate recurring annual savings, including:
    • Right-sizing staffing ($2-3m) and legal needs ($2m), eliminating external marketing firm ($1m).
  • Managed the refinancing and negotiation of Holding Company debt terms, which resulted in lowering the interest rate from ~16% to ~10% and $3m+ of recurring annual savings.
  • Facilitated the hiring of key management, including a new permanent CFO and VP of Finance.
TKP is unique among consultants: excellent personal service and very invested in the client. They do not consider themselves consultants, but rather part of the entity with which they are working.
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