SBS Turnaround Assessment - Overview
SCALE was engaged by a lender to assess a DSO business that is failing, and provide a recommended course of action to management to support closure, or stabilization & future success.
- DSO was owned jointly by a PE firm that held the primary equity stake, and lender holding the debt.
- Management team was in chaotic state and business was losing approximately $1-$1.25mm a month over a 18 month period
- Lender understandably concerned about future prospects given routine capital calls
Client’s current state:
- 2022 losses of $11mm
- Corp spend at 20% of Revenue
- High provider attrition
- Non-aligned corporate team
Clinical Specialties
Clinical Services
Client Profile
-
Size:
40 Providers -
Location:
VA, MD, PA, NJ, NY -
Specialty:
Dentistry
Services Deployed
Consulting
Revenue Cycle Management
Market Research
Execution
- Project was conducted in Two Phases:
- Phase 1- Assessment
- Phase 2- Recommendations
- In Phase 1, the Assessment, SCALE developed a detailed analysis of the base-business as-is. Key areas of focus included:
- Base business performance assessment at practice level
- Corp Strategy assessment
- Corp Spend assessment
- RCM performance assessment
- This analysis and deliverable focused on business sustainability. SCALES’s conclusion demonstrated that while in dire straits, the DSO had the ability to be successful with an aggressive turnaround plan, that itself was not without business risk
- Phase 1 completed 4 in weeks; Phase 2 two weeks thereafter
- In Phase 2, focused on creating a turnaround plan that:
- Addressed areas immediate focus (tier 1) to support performance improvement, with a detailed roadmap, sequencing plan and likely financial impact
- Longer term tactics (tier 2) to support stability and growth that required more time to execute and mature
- Recommendations to reduce and right-size Corp spend near-term to help support cash-burn concerns
The Below Profitability Bridge Shows the Impact of Various Initiatives, Mostly Completed in H1 2023
Financial targets assume some variability in actual value based on execution success, SCALE is using a mid-range value in this bridge
Project Execution Tactics- Phase 1
- Diligence accumulation, review, analysis
- Off and on-site interviews with key stakeholders
- Internal collaboration among SCALE team/workstreams
- Routine reporting to project sponsor, including interim assessment, leading to greater focus and refinement of final product.
- Read out to Lender on DSO status, assessment of capabilities, and recommendation to complete Phase 2, which was agreed to by the Lender
Project Execution Tactics- Phase 2
Development integrated turnaround plans including 9 separate workstreams, built off Phase 1 findings, stakeholder involvement and feedback, and sequencing that allowed business to improve in structured, realistic manner.
- Workstreams focused on:
- Cost reductions including site consolidations.
- Driving revenue vis new patient growth
- Improvement of RCM/Operations harmonization
- Stabilizing of provider relationships
- Improvement of Hygiene alignment
- Elimination of corporate spend to align with DSOindustry norms while not de-stabilizing core functions
- On site delivery of Phase 2- recommendation to DSO leadership team, DSO Board Members, equity and debt holders including extensive Q&A session
Results
- Successful identification of core issues impacting DSO performance
- Creation of turnaround plan providing a path to profitability
- $14mm in improvement workstreams identified taking client from $11mm loss to $4.4mm in profit over 12-18 month period
- Longer term tactics (tier 2) to support stability and growth that required more time to execute and mature
- Recommendations to reduce and right-size Corp spend near-term to help support cash-burn concerns
- Included in plan is $4mm in Corp overspend identification
- $7.5mm in operational improvements
- $2.5MM in site consolidation savings
- High degree of clarity defining levers of success and DSO current state attributes falling short
- Immediate recognition of lack of alignment of key stakeholders inside DSO Executive team
- Deliverable provided a clear turnaround plan that was data and operations driven, providing key stakeholders with vision that was easy to understand from point of view of:
- Necessity
- Logic
- Execution difficulty
- Buffers to anticipate execution success
- Correctly identified key areas for turnaround success
- Comprehensive turnaround assessment, plan, sequencing, and impact of turnaround plan
- Plan Architecture included cash-flow assessment and bridge to profit
Poor Performance, Starting with Poor Strateg
Acquisition Strategy was Flawed; Poor Integration, Lack of Management have Exacerbated Issues
Let's SCALE together
SCALE Healthcare is based on the foundation of a singular focus – elevating management performance across healthcare services. We are focused on the entire suite of operational advisory and diligence services exclusively to healthcare service organizations, with local team presence across 10 states.
Unlike the many consulting firms that offer more narrow and often more impractical solutions borne of limited or very general expertise, we rely on our team of 75+ carefully selected senior operational healthcare experts to ensure we provide the most relevant and value added experience across the full range of management disciplines and clinical specialties that fall within healthcare services.
