Verity Health System's new leadership goes to work on turnaround plan

Verity Health System, the hospital group formerly known as the Daughters of Charity Health System, has installed a three-prong improvement plan to turn around its struggling operating performance.

On an earnings call, Stephen Forney, the new chief financial officer of the Redwood City, Calif.-based system, outlined the current focus areas for the recently installed management team.

Verity has identified a number of revenue-cycle management, supply chain and productivity initiatives to help improve the system's financial results, Forney said.

He described revenue cycle as Verity's chief priority, and the one that is expected to start showing the most return by the end of 2016.

Those plans include “being significantly more aggressive about getting bills out the door in a timely fashion,” and then promptly following up on them, he said.

Verity also wants to standardize revenue-cycle processes across the six-hospital group. “The process within Verity was very fragmented,” Forney said.

The system also is working to ensure that it gets the most consistent and best prices on big-ticket purchases, and has implemented productivity standards for employees “which had been lacking,” he said.

In the six-month period leading up to the deal's closing, Verity struggled with a number of challenges that dragged its operating margin further into the red.

It saw sharp declines in patient volume, particularly for surgeries and deliveries, and wrestled with an adverse payer mix, as well as reimbursement rate increases that were below historical levels.

It also paid $815,000 under a settlement agreement with the CMS that involved inappropriate financial arrangements between physicians and Seton Medical Center in Daly City, Calif.

Verity lost some of its physicians because of its operating challenges, Forney acknowledged, but doctors are giving the system another look “now that we're healthy again.”

“We're seeing those physicians now come back,” he said.

BlueMountain Capital Management, a New York-based private-equity firm, took over Verity's operations Dec. 14. It provided $100 million in funding, as well as a $150 million line of credit to help pay down Verity's debt.

A newly-created entity called Integrity Project Japan is now managing the system.

Verity's new leadership team includes Forney, who replaces Annie Melikian in the CFO role, as well as Mitchell Creem, who took over as CEO, replacing Robert Issai. Connie Cibrone also joined the system as chief operating officer.

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