Christus Health hasn't climbed all the way out of its financial hole, but at least the 33-hospital Irving, Texas-based system has stopped digging.
After losing $146.1 million on operations in fiscal 1999, which ended June 30 of that year, Christus slowed its operating losses to $65.4 million in fiscal 2000, or enough to show a total profit
of $74 million when investment income is included.
In 2001, the company expects its operations to be in the black, with an estimated operating profit of $10.8 million, with total profits expected to be $66.2 million.
"We have been on a very diligent and focused course," said Thomas Royer, M.D., Christus Health's president and chief executive officer. "At no time have we gone into what I consider a crisis mode."
Like Philadelphia-based University of Pennsylvania Health System and Englewood, Colo.-based Centura Health, Christus used a combination of selling or closing money-losing businesses and improving central-office procedures to effect the turnaround.
The task was all the more difficult because Christus Health is a combination of Sisters of Charity Healthcare System, Houston, and Incarnate Word Health System, San Antonio, that began combined operations Feb. 1, 1999.
Christus sold its interest in Memorial/Sisters of Charity Health Network, an HMO joint venture with Memorial Hermann Healthcare System, Houston, to Louisville, Ky.-based Humana. Christus also shut down a physician contracting network, the Northern Louisiana Physician Hospital Organization.
As a system, Christus worked on supply issues. Christus reviewed its vendor contracts to ensure that the system was taking full advantage of them and worked to set lower inventory levels to save on purchasing costs.
Employees in the billing department were retrained and new workers were hired to make the system's bills more accurate as part of an effort to speed average payment time, Royer said.
Christus also is looking to hire its first "director of the revenue cycle" to work with each of the 14 regional systems that make up Christus Health on payment issues, Royer said.
Each of the regions also reviewed all of its businesses and many trimmed services such as home health and psychiatric care or outsourced functions such as food and laundry services, Royer said.
Mostly through attrition, Christus also has trimmed its workforce by about 1,000 full-time equivalents to about 24,000 FTEs systemwide. About 800 FTEs were trimmed in two of the system's most troubled markets, the San Antonio area and northern Louisiana, Royer said.
Royer said he considers almost all of these moves as one form of growth or another, along the lines of what economists call "creative destruction," in which new, better ideas force out the old ways of doing business.
"In some instances, (growth) means new and more. In some instances, it means less, `garage-saling' some things that we don't think we need to be doing anymore," Royer said. "That is not an easy thing to do," but careful planning and good communications with customers and partners smoothed out the process, he added.
The changes have impressed Standard & Poor's, a New York-based credit-rating agency. Christus Health has stabilized and has retained its investment grade, or A, bond rating, said Martin Arrick, a healthcare analyst for Standard & Poor's.
"Royer has taken the opportunity to call a timeout to put in a comprehensive, strategic management process,"Arrick said. "I think they seem to have a return to an even keel here."