Jewish Hospital & St. Mary's HealthCare hired consultants to improve operations by $70 million to better position the struggling health system for a merger, said Martin Bonick, president and CEO of Jewish Hospital, who spoke about the turnaround on the final day of the Healthcare Financial Management Association's yearly meeting.

The Louisville system, one of three Kentucky healthcare providers in a recently announced merger, successfully curbed spending and increased revenue by $70 million, Bonick said. But revenue dropped by $40 million as fewer patients were covered by more favorable insurance contracts. Had the system not moved to aggressively reduce its spending, its financial distress would have been more severe and any deal would have been perceived as a takeover rather than merger, he said.

Jewish & St. Mary's closed its books in December with an operating loss of $12.6 million, an increase from the prior year's loss of $7.5 million. Consulting fees contributed to the system's operating expenses that year, he noted.

Bonick, joined by the health system's board chairwoman and former interim CEO, cautioned the crowd of about 100 people against growing comfortable with recent success. Jewish & St. Mary's took longer than it should have to respond to declining cash reserves and was close to violating lending terms for its outstanding debt, he said.

LouAnn Atlas, the board chairwoman, said Jewish & St. Mary's was not nimble enough to respond to changing markets and did not heed troubling signs, including too little cash for capital investments and a decline in volume, she said.

The system's one-year turnaround effort included its March 2010 announcement it would cut 500 jobs, including 250 layoffs. Bonick said efforts involved roughly 200 initiatives. The system saved $17 million on labor and productivity efforts and another $18.25 on non-labor initiatives, such as supply costs.

Atlas underscored the system's need to review its operations with two anecdotes about idiosyncratic supply costs uncovered during the effort. Employees unearthed one contract from the 1970s, drafted on a typewriter, that had not been reviewed, she said. The hospital had also been paying storage for an iron lung, she said.

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