The agency’s license was suspended for five months due to several incidents. A new management team was put in place and the approved corrective action plan was implemented. However, during and after the suspension revenue declined dramatically and the agency incurred losses of $250,000 per month (which were funded from cash reserves), and the agency defaulted on its municipal bond debt.
Management and the Board of Directors decided to hire a financial advisor to assist in negotiating with its lender/bond underwriter who was pressuring the Agency to use its cash reserves to pay down debt.
Fort Dearborn Partners was retained to develop a plan to return the agency to positive cash flow, monitor plan implementation, and assist with lender negotiations. Working closely with management and the Board, FDP:
•Challenged the agency to eliminate non-core service offerings and focus on its core competency - residential care
•Convened a series of meetings with senior management to redefine staffing models
•Convinced the Board to sell non-core assets, primarily real estate, to further pay down debt
•Implemented cost cutting initiatives including headcount reduction, increased employee medical premium contributions, contract renegotiations for healthcare, facility maintenance, etc.
•Encouraged management to challenge the State agencies when they reduced reimbursement rates
•Imparted a stronger sense of urgency to the Board that didn’t fully grasp the magnitude of the situation