Slash N Burn: The Hunter Goup

[NRSKarenRN, BSN, RN]

June 2002

Hospitals

Reality Check

Free registration required.

http://www.healthleaders.com/magazine/feature1.php?contentid=34929&categoryid=152

Last year, Gail Warden had at least two headaches he wanted to get rid of. As president and CEO of the Henry Ford Health System in Detroit he wanted to make Henry Ford Hospital profitable and drive down losses at its medical group. He decided it was time for harsh medicine: He called The Hunter Group.

The results?

"We've seen a big pickup in productivity, a reduction of $3 million a month in payroll costs and an increase in revenue," Warden says. "I'm a fan of theirs. I think there's a lot of good reasons to be concerned if you're on the receiving end of their recommendations but they get the job done." Warden himself has served as an adviser to The Hunter Group.

Those kinds of results have helped the St. Petersberg, Fla.-based healthcare management consulting firm more than double its revenues in recent years. The Hunter Group raked in revenues of $25 million in 2001-up from $10-$13 million in the mid-1990s-and grew from three employee-owners in 1987, the year of its founding, to 15 owners and about 45 full-time staff members today. "Our reputation and our references support the magnitude of results that our clients have been able to achieve with our support...and to sustain over the long term," says David Hunter, Hunter Group CEO.

Until recently, much of the firm's work has centered on turning around ailing hospitals. The firm has made its name by encouraging hospitals to make sometimes-drastic budgetary and staffing cutbacks, with the goal of bringing the organizations back to profitability. But looks can be deceiving, Hunter says.

"The idiosyncrasy of The Hunter Group is that a minority of revenue comes from acute turnarounds but a majority of our reputation comes from that type of work," Hunter says. "We've been involved in some very large and very unpleasant turnarounds."

Case in point: the University of Pennsylvania Health System in Philadelphia. In the fiscal year ending June 30, 1999, the system's three major hospitals, practice group and clinic lost $54.1 million on $540.4 million in revenue, according to returns filed with the IRS. The next year, losses dropped to $13.9 million on increased revenues of $600.5 million. Hunter says that Penn instituted about 70 percent of the firm's recommendations in the interim.

A lot of that turnaround was based on "blocking and tackling" in hospital collections and other basic hospital functions as well as staff reductions, says Lawton Robert Burns, director of the Wharton Center for Health Management and Economics at the University of Pennsylvania, who has studied The Hunter Group.

"You could tell the difference" when the firm was finished, Burns says, noting that his wife had been a patient at one of the hospitals at the time and experienced the assertive billing practices firsthand. Billing and collections became "very aggressive," he says. In addition to repeated mailings and phone calls, the new information system tied in a patient's balance with his or her appointment. When you went in, "they made sure you knew how you much you owed."

It's not just patients who notice. Hospital unions break out in hives when they hear that The Hunter Group is even being considered by a hospital board. Indeed a January-February 2000 issue of Revolution magazine, a hospital union publication, devotes a nine-page feature to the firm, accusing it of a "scorched- earth" hospital turnaround philosophy where only the "bottom line matters."

Hunter readily admits that making painful decisions and cost cutting is central to his firm's turnaround philosophy.

"We follow almost every other consulting company" into a hospital, Hunter says. "By the time hospital management gets to us, they're in bad shape."

Since 60 percent to 70 percent of hospital costs are in staffing, that is a prime area for cutting, he says. His firm always seeks to relate the number of man-hours or some other standard relative to patient workload, Hunter says. It then seeks to get hospital staffing in line with local staffing benchmarks. Hunter says that it aims for local benchmarks or higher for two reasons. First, Hunter doesn't want its client hospital to lose patients to local competitors as patients would see a sudden drop, in, say nurses, and leave for hospitals where staffing levels are higher. Second, Hunter doesn't want standards agencies to give client hospitals bad marks for quality.

Indeed, Hunter says that the Joint Commission on Accreditation of Healthcare Organizations has never lowered its ratings on hospitals after one of the firm's consulting engagements concludes. Such turnaround work is getting harder and harder, the 56 year-old Hunter admits. First, hospitals are much larger and more complex than in the past, and often are affiliated with multiple hospitals, nursing homes and practice groups. To make turnarounds even more difficult, much of the fat in hospitals has been eliminated over the last five years.

In an attempt to diversify revenue, The Hunter Group has expanded-helping "hospitals that serve a large base of "worried well" patients improve financial performance-to the point where that constitutes about 60 percent of the firm's business today, such as its recent work with the Henry Ford Health System.

Clients seem pleased with the firm's results, says Dick Clarke, president and CEO of the Healthcare Financial Management Association in Westchester, Ill.

"They have very excellent people with a wealth of experience," says Clarke. "Feedback from folks who have used them has been positive."

Burns, who has interviewed hospital CEOs who have engaged the firm, also says that the company is "well-known" in hospital industry circles and that the firm "probably injects a dose of what those hospitals need." Yet Burns is somewhat skeptical about the true worth of management consulting firms in general. Sure, hospital management believes they provide value, which ultimately is all that counts in business. But the knowledge such firms bring to bear isn't rocket science, he says.

"I've been on the stump for six or seven years, arguing that hospital boards and management should have dissenting voices," he says. Something as simple as hiring a local healthcare management professor to consult part time could help enormously in that regard, Burns adds.

One thing is clear: For hospitals that have been avoiding their problems, management consulting firms such as The Hunter Group can play a key role as messengers in waking everyone up from the board on down and delivering and acting on bad news without fear or bias, Burns says.

"It's hard to fault them for what they're doing-they're brought in to do hard, dirty work."

Howard Isenstein is a Washington, D.C.-based freelance writer.

[oramar]

What do you think about this article Karen? I think it sounds as if this group gets called in when the managment has failed to do it's job.

[Hardknox]

My question: DOES THE HUNTER GROUP EVER CALL FOR A REDUCTION IN THE CEO'S SALARY AND BUNUSES????? And yes I am shouting in capitol letters. This group devasted our hosptol with it's cuts as I wrote in an earlier post.

[TIREDmidnightRN]

Henry ford Hospital system already has bare-bone staffing.....and recently spent a fortune on new entrance doors (purely for looks) and other costly physical plant ungrades......Henry Ford Wyandotte has spent who knows how much money moving the peds floor all over the hospital for several years now......but nursing is the problem.....right!

[oramar]

THe two previous posters make my point. It appears that a certain percentage of hospitals are badly managed. They then proceed to call in groups like Hunter and pay them large amts of more squandered money to punish innocent employees. Even if the CEO gets cut loose they get their severance pay and package that was agreed to in first places. When are the boards and other people in charge going to face up to this abdication of responsibility.