Merger Creates A Short Term Interim Need In Finance
Requirement: Loan Staff Augmentation Services
The serviced client, a rural hospital in Upstate, NY, signed a letter of intent to merge with a large health system. The facility is already associated with a larger health system, but that system is realigning its business model to focus on nursing homes and assisted living centers. ProNexus was engaged to fill the role of Interim Director of Finance, overseeing the day to day operations of the finance department. ProNexus also assisted in financial modeling and carving out financials in association with the pending merger.
Business & Operational Challenges
The client had many challenges – most significantly being the financial impact associated with declining volumes and reduced reimbursement. On top of that, the skill level and professionalism of the existing finance staff was not that which would be seen at larger, high-performing facilities. From an operations standpoint, there was conflict between the physicians and administration, particularly in regards to the expectations coming from the affiliation partner. As the engagement progressed, other items came to light that had been addressed. A potential compliance issue associated with payroll was discovered and had to be investigated. Modeling surrounding an Electronic Medical Record (EMR) had to be updated, as the previous analysis contained errors and could not be relied on.
The client engaged ProNexus on a full-time basis with the project that was anticipated to be completed within 2 to 3 months. As there was no one within the client’s current staff that could fill this position, ProNexus remained on board for 10 months.
Once underway, it became apparent that the engagement was going to be longer than the original estimate of 2 to 3 months. Much of the analysis that was originally completed with the affiliation partner needed to be updated or corrected. With the EMR solution that was being discussed, the final costs associated with it were more than four times higher than what was first projected. This lead to the company having to research other options. Other projects/assignments included:
- Assistance with the monthly close, including review and presentation of financial statements for all 3 entities – Hospital, Foundation, and For-Profit Real Estate Corporation
- 5 year projection for various initiatives that were being proposed
- Completion of the operating capital budget
- Assistance with the current year’s annual audit, including leading the project related to impairment of capital assets
- Cash flow projections by month for the current year and the following year
- Strategic financial analysis on various service lines to determine whether or not they should continue operations
- Assistance with an overhead project completed by another department which helped to identify excess overhead costs and where the organization should reduce expenses
- Ad hoc analysis – including consulting and legal costs incurred in the current year and the following year, requests from the current parent organization and affiliation partner, as well as third party consultants completing analysis on the affiliation agreement
- Auditing of payroll records related to underpayment of overtime in accordance with FLSA standards
- Completion of various reconciliations including Accounts Receivable, Allowance for Doubtful Accounts, Asset Retirement Obligation, and various accruals.
- Oversight and supervision of finance personnel. There was a staff reduction shortly after ProNexus was brought on, whereby ProNexus was responsible for identifying 1.0 FTE reduction in the department and communicating it to the individual as well as the larger finance department.
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