Thursday marked the first day of work for Pitts Management Associates Inc. of Baton Rouge in its effort to help heal the ailing Loudoun Healthcare Inc.
In about 30 days, the consulting firm will present its initial assessment of Loudoun Healthcare's strategic and financial situation to the staff and board of directors and recommend ways to recover from losses totaling $20 million in the last two years.
Specialists in the health care business said Pitts, led by health care industry veteran David R. Pitts, has been a quiet but steady force in health care and has developed across-the-board expertise in facility planning, mergers and acquisitions and business strategy.
Since its founding in 1981, the company has kept a sharp focus on not-for-profit hospitals, a mission about which Pitts feels strongly.
"We don't believe that shareholders in some distant city . . . should be dictating what types of services a hospital" offers, Pitts said in a recent telephone interview.
Before founding his company, Pitts served as chief executive officer of the Ochsner Foundation Hospital in New Orleans. Pitts said his current company has worked with health systems in most metropolitan areas, including Inova Health System of Falls Church, Virginia's largest not-for-profit health provider. For 10 years, he and his wife have owned a house in Arlington where they set up housekeeping while Pitts is working in the Northeast.
Pitts would not disclose financial information about his privately held company. According to a recent Dun & Bradstreet Report, the company estimated in July 1998 that its revenue would reach $3.5 million for the year. However, Pitts said that number does not reflect revenue from Pitts Management's two subsidiaries, an insurance company and a firm that provides insurance and consulting services to employers.
During the next few months, as Pitts Management attempts to effect a turnaround at Loudoun Healthcare, Pitts will consult daily with Joseph A. Ruffolo, a Pitts senior vice president who has been named interim chief executive officer of LHI. Ruffolo will assume day-to-day CEO duties in addition to a consulting role.
Ruffolo, who initially will commute to Loudoun from Buffalo three to four days a week, has served in various hospital executive positions. Before coming to Pitts Management, he served as executive vice president of health services at the CGF Health System in Buffalo, a $750 million regional health system.
Within a couple of months, LHI will begin a search for a permanent chief executive, according to the hospital's attorney, Woodrow Turner. Pitts Management may be involved in that search, he said.
Mary M. Ward, a vice president at Pitts Management, is also part of the turnaround team. Ward, who previously worked for the CGF Health System and has a doctorate in microbiology, will help negotiate with managed care companies. Turner has said the hospital will be renegotiating a dozen of its 30 managed care contracts; cuts in managed care reimbursements have helped create the financial crisis.
LHI chose Pitts Management from among 15 firms. Some members of the selection committee said they were attracted to the consulting firm because of its low-key presentation.
"They didn't seem like a big, slick company coming in," said Michael A. Kavanagh, chief of the hospital's orthopedics department and a member of the selection committee. "We don't need somebody to come in and say, 'Do this and do this,' and leave. We need somebody who's going to help us learn for the future so this doesn't happen again."
Among those who have worked with Pitts is Bill Jennings, who hired Pitts to help turn around the struggling Cookeville Regional Medical Center in Cookeville, Tenn.
"I think he was very objective," said Jennings, now an administrator of a hospital in Florida. Cookeville is a public hospital that operates as a department of the City of Cookeville. Before Pitts Management was hired, there had been several efforts to sell the hospital.
Ultimately, the hospital's board did not change the ownership structure of the hospital, Jennings said, which had been one of several options Pitts had suggested. But the hospital's leaders did not take other suggestions Pitts made, either. Today, he added, Cookeville continues to struggle with financial and political difficulties. "They never made a decision," he said of the hospitals leaders.
The LHI board of directors will have the ultimate say in what action the hospital takes. Already, Pitts said, he and his team have been asked by the board "to try to make this thing work on its own. . . . I would think the last thing they would want to do is to sell to a for-profit" organization.