Cash Flow Management Case Study

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					St. Mary’s Hospital – Passaic, NJ
Case Study - Distressed Hospital


  Phase I
  Healthcare Services Group & Accounting Services

  St. Mary’s Hospital (SMH) was being considered for a New Jersey Stabilization Fund grant. The New Jersey Healthcare Facilities Financing Authority requested that
  a Cash Manager from an independent organization be hired as part of the grant process. Amper, Politziner & Mattia LLP (Amper) was retained by SMH in
  December of 2008 to assist senior management with the effective use of Hospital Stabilization funding and to evaluate the appropriate course of action to
  financially turnaround SMH. SMH had less than three day’s cash-on-hand at the start of the engagement. Amper and SMH’s senior management developed an
  effective team and were able to fund all payroll periods.

  Amper‘s responsibilities included the following:
  1) Developing a six-month cash flow projection. The projection would be updated on a weekly basis to determine if SMH was still on target to attain the
      projected cash flow targets.
  2) Concentrating on generating additional cash flow to meet daily operational needs and payroll, which, in turn, reduced costs and increased billings and
      collections.
  3) Talking to key vendors and developing an installment payment arrangement. Vendors were classified as A, B and C vendors. Part of this task was to
      reestablish relationships with the vendor community. Amper also set up an approved vendor’s list for the processing of payments to vendors.
  4) Determining if SMH has a high risk of becoming insolvent and may need restructuring services. Amper’s Restructuring Services was introduced to the CEO
      and CFO of SMH.

  Phase II – 1st Thirteen Week Period
  Restructuring Services, Healthcare Services Group and Accounting Services

  It was determined by the Board of SMH that Bankruptcy protection was the appropriate strategy. Amper was retained by SMH and approved by the Federal
  Bankruptcy Court to provide Restructuring, Consulting and Accounting Services. The key goals included Federal Bankruptcy financial information requirements
  and stabilizing the cash flow of the hospital.

  Amper’s responsibilities included the following:
  1) Preparing the Statement of Financial Affairs for the Federal Bankruptcy Court. This document requires a substantial amount of financial and operational
      information about SMH.
  2) Issuing monthly operating reports (MOR) to senior management and the Bankruptcy Court.
  3) Developing updated 13 week and 12 month projections of cash flow for SMH. Amper also provided weekly comparisons of actual versus forecast.
  4) Engaging in union negotiation sessions. Amper worked towards a business plan that has the support of all unsecured creditors.
St. Mary’s Hospital – Passaic, NJ
Case Study - Distressed Hospital


  Phase II cont’d
  5) Paying all vendors at the time of purchase. In order to obtain goods and services, an organization in Bankruptcy must pay upfront for items purchased.
  6) Establishing a safety stock goal for all hospital department managers. The goal was set at one week or less of inventory on hand. Teams were set up to assist
      management in this effort and were successful in saving $200,000 to $300,000 a week compared with pre-bankruptcy supply levels.
  7) Reviewing the opportunity to standardize the purchasing of supplies and equipment. Cost reductions can be significant if various supplies are ordered from a
      single vendor as the sole source.
  8) Reestablishing payment terms with vendors. Approximately one third of all vendors now offer terms that vary from 15 to 30 days. No key vendors left SMH.


  Phase III – 2nd Thirteen Week Period
  Restructuring Services, Healthcare Services Group and Accounting Services

  The Federal Bankruptcy Court agreed with SMH that additional time was needed to determine the best option to exit Bankruptcy protection. Amper has played a
  key role in developing strategies to exit Bankruptcy protection.

  Amper’s responsibilities included the following:
  1) Issuing MORs to senior management and the Bankruptcy Court.
  2) Developing updated 13 week and 12 month projections of cash flow for SMH. Amper also provided weekly comparisons of actual versus forecast.
  3) Assisting management in developing a plan to exit Bankruptcy protection. Alternatives include a standalone plan versus a partner option.
  4) Engaging in union negotiation sessions. Work towards a business plan that has the support of all unsecured creditors.
  5) Paying all vendors at the time of purchase. In order to obtain goods and services an organization in Bankruptcy must pay upfront for items purchased.
  6) Establishing a safety stock goal for all hospital department managers. The goal was set at one week or less of inventory on hand. Teams were set up to assist
      management in this effort and were successful in saving $200,000 to $300,000 a week compared with pre-bankruptcy purchase levels.
  7) Reviewing the opportunity to standardize the purchasing of supplies and equipment. Cost reductions can be significant if various supplies are ordered from a
      single vendor as the sole source.
  8) Reestablishing payment terms with vendors. Approximately 40% of all vendors now offer terms that vary from 15 to 30 days. No key vendors left SMH.
  9) Obtaining vendor financing for Capital Expenditure requests. It has been difficult for SMH to finance the purchase of capital expenditures, because it is under
      Bankruptcy protection.

  “The material contained in this presentation is for general information and should not be acted upon
  without prior professional consultation.”

				
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