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Is There a Turnaround Consultant in Your Future?

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The Greater Hazleton (Pa.) Health Alliance ended 2006 with a profit of about $4 million. But the outlook wasn't so rosy just a few years ago. After the system was formed in 1996 to jointly operate two competing hospitals, losses steadily accumulated. By 2003, Greater Hazleton was losing as much as $1 million per month, and annual losses neared $6 million to $8 million. Of the potential options-selling the system, hiring a turnaround firm or trying to fix things in-house-the board chose to seek help from Chicago-based Wellspring Partners Ltd. "From January to mid-July 2004, we effectuated about $8.3 million in savings and were profitable for first time that October," says James Edwards, who was chief financial officer when the turnaround began and became president and chief executive officer in June 2004. At Greater Hazelton, now a one-hospital system since consolidation of services caused one hospital to surrender its acute-care license, poor financial performance eventually mandated change. But Edwards says other signs besides deteriorating numbers and recurring operating losses signaled trouble. "We weren't developing plans to become a market leader," he says. "Instead, whatever the theme of the day, whatever threat-perceived or real-that came up modified the strategic plan." For leaders who may be facing a turnaround situation, Edwards offers this advice:

  • Don't look for excuses. Blaming the competitive condition of the external environment for making your organization one of the "multitude of downtrodden" won't change the situation, he says.

  • Don't wait too long. "When the numbers go south, make the decision to get help early and move forward, " Edwards says.

  • Don't just ask "How are we doing?" but "How could we be doing?" "It's not just losing money," says Edwards. Recognize that making a profit doesn't mean you're reaching your potential. You could be missing market opportunities that will hurt you in the long run.

  • Don't let the cost of hiring a consultant make your decision. "It's a lot of money, but I'd encourage leaders to look at how much cash they have and how much they're burning through during the period of time while the bleeding continues," Edwards says.

-Kara Olsen