The board of trustees for Loudoun Healthcare Inc. voted unanimously last week to hire a Louisiana management firm to help turn around its financially troubled operation.
Pitts Management Associates Inc. of Baton Rouge began reviewing the hospital's financial records Friday and will manage Loudoun Healthcare for three to six months in its effort to recover from $20 million in losses over the past two years.
Joseph A. Russolo, a senior health executive with the firm who will be leading cost-cutting efforts at Loudoun Hospital Center and other components of Loudoun Healthcare Inc., is scheduled to arrive next week, said Linda Roberts, a spokeswoman for Loudoun Healthcare.
"We looked at the firm's experience and track record and breadth of knowledge and background in turning around hospitals," said Woodrow Turner, the hospital's attorney. Turner has been heavily involved in efforts to resolve the hospital's financial crisis.
James Lapsley, executive director of Loudoun Health Services, said Pitts Management seemed to understand working with physicians groups and communities like Loudoun. "Some of the other firms were larger, flashier firms," he said. "These people are very down to earth."
Turner said the firm's first task will be to "assess and evaluate the situation." Part of Pitts's work also will include helping the hospital renegotiate a dozen of its 30 managed care contracts. In addition, it will evaluate the hospital's staff and operational costs and report weekly to LHI's board of trustees, Turner said.
LHI executives would not disclose how much the firm will be paid, saying only that its fees will range from $200 to $450 an hour. The firm was selected from among 15 companies by a board-appointed committee.
Pitts Management has been helping turn hospitals around for about 20 years, according to industry experts. "By reputation and results, [they] are considered in the top rung of firms that do what they do," said Rick Wade, spokesman for the American Hospital Association in Washington.
Wade said Pitts most likely will begin its assessment by taking a "hard look" at how the federal Balanced Budget Act of 1997 affected Loudoun Healthcare.
The act has reduced Medicare payments for certain services, and, as a result, "hundreds of hospitals across the country are having their financial picture radically changed," Wade said.
In addition, Wade said the firm is likely to act fast to find ways to speed up managed care payments and collect unpaid bills, Wade said. Loudoun officials have cited slow collection rates as one of the primary reasons for the losses.
Since the resignation last month of Loudoun Healthcare president and chief executive officer G.T. Dunlop Ecker--who made $333,366 a year, plus $37,861 in benefits--the hospital has been under the control of an in-house management team, led by consultant Michael Rindler.
LHI executives calculate that they must save $12 million a year for the foreseeable future to keep Loudoun Hospital Center independent. Last week, LHI said it had identified about $5.3 million that could be cut from Loudoun Healthcare's estimated annual operating budget.
Meanwhile, Inova Health Systems, Virginia's largest health care provider, has agreed to provide Loudoun Healthcare with a six-month, $5 million loan, using the hospital's old Cornwall campus in Leesburg as collateral.
"Free-standing community hospitals with solid track records of community service are having the hardest time" in today's health care climate, Wade said.
Any change is difficult, he noted, when community pressure for a full-service hospital is intense, as it is in communities like Loudoun.