How A CEO Bounced French Hospital Back From Bankruptcy's Brink

One should never start a story with a series of numbers. But the amazing turn of 112-bed French Hospital Medical Center in San Luis Obispo away from the brink of bankruptcy justifies an exception.

Here the dollars—pre-tax net income—do tell a lot about the struggles and successes of this hospital near the Central California coast.

• 2000: $-2,682,415.
• 2001: $3,371,702.
• 2002: -$6,229,620.
• 2003: -$2,612,078.
• 2004: -$1,397,690.
• 2005: $1,977,660.
• 2006: $16,868,195.
• 2007: $1,800,282.
• 2008: $6,827,234.*

In 2004, those leaks from its bottom line were matched by 200 leaks in its roof, beneath which buckets dotted the hallways and rooms to catch periodic torrents of rain.

Its once prized cardiac program's equipment had deteriorated so badly, physicians repaired it with equipment from older devices no longer fit for use. Disgusted doctors started admitting their patients to Sierra Vista Regional Medical Center, French's primary competitor.

French's pain management and psychiatric programs were closed in 1999. Its pediatric program closed in 2001. Sierra Vista started its own heart program a few miles away.

"They had taken it from what was a very successful and prosperous hospital to one that was sorely, almost criminally in neglect," says Alan Iftiniuk, who took over as CEO in 2004 under the hospital's new operator, Catholic Healthcare West. "There were serious discussions about padlocking the building and developing the grounds for condominiums, although the community rallied to stop that from happening," he says.

David Garth, president and CEO of the San Luis Obispo Chamber of Commerce, says he knows a man who was undergoing a cardiac catheterization procedure at French during its period of poor management. "He was getting his heart cathed when the machine broke, and they had to take him by ambulance over to Sierra Vista," Garth says.

He added that during these tempestuous times, "the employees had a tremendous spirit that was kind of a tradition. They were doing everything they possibly could under very difficult circumstances to try to keep the hospital afloat."

That neglect stemmed from events beginning in 1996, when French's owner, OrNda Health was purchased by Tenet Healthcare Corp.

Tenet also owned Sierra Vista and another French competitor, Twin Cities Community Hospital in Templeton.

A year later, the Federal Trade Commission acted on anti-trust laws to order Tenet to sell French and another hospital. Many in the community suggested that from the way the hospital languished, the buyer, Vista Hospital Systems, did not appear motivated to operate a thriving healthcare facility.

"I believe the previous management did not negotiate properly for costs that it could charge for services, or that's what I was told," says San Luis Obispo Mayor Dave Romero. "Now, French has a much better, superior management."

Iftiniuk echoed his view. "It seemed that Tenet looked to find the least experienced buyer, some would say a corrupt new owner to take it over," Iftiniuk says.

The turnaround came after Vista filed for Chapter 11 in 2004 and prepared to sell both French and Arroyo Grande to a for-profit company in Pennsylvania. A group of about 50 physicians stopped the deal. They organized the San Luis Obispo Physicians Alliance, which purchased the property and persuaded Catholic Healthcare West to lease the building and run the hospital.

Long a for-profit facility, the 1972-built French Hospital would now become a non-profit facility for the very first time.

In came Iftiniuk as CEO, and after talking with the doctors and the community and his bosses at CHW, he immediately launched a plan of attack. Here he describes 10 key steps to making the successful turnaround.

• Convinced key former hospital executives to come back and terminated others who couldn't meet performance expectations, which boosted employee and physician staff morale.
• CHW made a capital investment to improve the physical plant and shored up medical equipment.
• Conducted community-wide survey with town-halls to find out what people wanted in their hospital.
• Hired a vice president of medical affairs to help rebuild bridge to physicians in the community, and gave him a seat at the management table.
• Infused the cardiac program with expertise and equipment with $4 million from Catholic Healthcare West and $5 million from philanthropic donations. Cardiac program is now in the process of becoming a county-designated STEMI receiving center.
• Conducted employee satisfaction surveys twice a year, and allowed employees to help support the hospital's mission through a donation program.
• Crafted a philosophy that if the hospital improves quality, safety and service, the rest of success will follow.
• Conducted and incorporated patient satisfaction surveys. "The hospital culture became very metric driven," Iftiniuk says.
• Established a Community Board Development with key business and community leaders and charged them with oversight responsibility. "Past boards had been ineffective, and not taken seriously," Iftiniuk says.
• Created a hospital foundation with a separate board to connect with donors. The foundation has thus far raised $7 million for services in the community.
• Focused on marketing and promotion through chamber mixers, direct mail newsletters and ads to get out a message that the hospital has changed.

The leaks are fixed. Many of the physicians have reactivated their staff privileges and last year, the reinvigorated and modernized cardiac program was recently named one of the 30 best community hospitals in Thomson Reuters' Top 100 cardiac hospitals, and the only one named in California.

There's a new 64-slice CT scanner, a cardiac MRI, two mobile C arms for imaging during vascular surgery and two state-of-the-art cardiac catheterization labs to better treat emergent patients. The "Brain Lab" offers cutting edge surgical navigation tools for orthopedic and ear, nose and throat specialists.

In 2008, it received a grant from the Hearst Foundation to open the Hearst Cancer Resource Center to bring cancer support and education groups together under one roof, free of charge for participants and visitors.

Average daily census for fiscal year 2008 is up 33% from fiscal year 2005.

Open heart procedures have increased 13%.

Emergency visits increased by 20%, because patients have more trust in the facility, and patient satisfaction with E.R. services was in the top tier of all CHW hospitals.

By most reports, the physicians, the staff, CHW and Iftiniuk have made sure the hospital won't ever become condominiums.

"He really has turned it around 180 degrees," says the Chamber's Garth. "The fact is that it went from being a substandard hospital to being a profitable, well-managed one."

*Based on Office of Statewide Health Planning and Development Calendar Year Pre-Tax Net Income.