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May 23, 2016 01:00 AM

Verity Health System sheds light on first 100 days of turnaround effort

Beth Kutscher
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    The new managers of Verity Health System have their work cut out for them as they seek to revitalize the six safety net hospitals formerly known as the Daughters of Charity Health System.

    But with more than five months under their belts, they're starting to share the progress they've been making to restore patient volume and cut costs.

    Verity came under new management on Dec. 14, when private equity firm Blue Mountain Capital Management extended a lifeline to help save the system from running out of cash. Blue Mountain committed $100 million in exchange for the lease on Verity's information technology assets. It has the option to purchase the system within three to 15 years.

    It also created an entity known as Integrity Healthcare to manage the system, which has suffered from falling patient volume, low reimbursement rates and high labor costs.

    In a report on their first 100+ days, Verity's new leaders outlined a wide-ranging turnaround plan that includes recruiting physicians, renegotiating managed care contracts and a marketing campaign to introduce the rebranded hospitals to the community.

    “I would attribute virtually all of the lower volume to this long, protracted spiral that Daughters had been in,” said Stephen Forney, Verity's chief financial officer, on an earnings call. “Now we're trying to bring them back.”

    Verity has credentialed about 50 new physicians, according to the first 100+ days report. And at least one hospital is seeing additional patients: the average daily census at St. Vincent Medical Center in Los Angeles rose to 176 from 140.

    It also is exploring clinical and other partnerships with a number of providers, including academic medical centers, large health systems and independent physician associations, the report said.

    One recently-formed partnership with Roseville, Calif.-based Adventist Health is expected to save $7 million annually through joint purchasing.

    Verity gave employees a 3% raise—the first in several years—even as it focuses on ways to increase staff productivity. It has reduced its workforce primarily through cutting temporary contract labor and attrition, Forney said. That work will yield $30 million in annual savings, according to the report.

    The system already has forged a three-year agreement with the Service Employees International Union, which includes an annual 3% raise for union members. It is negotiating a new contract with the California Nurses Association.

    Integrity plans to make a number of capital investments, including $11 million this year. Its information technology budget is expected to exceed $50 million over the next three years, with a focus on data security as well as tools that increase efficiency or improve the functions of its electronic health records system.

    It is sprucing up the system's facilities, and preparing to upgrade three hospitals to meet the state's earthquake requirements by 2020.

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