The Scenerio

Marycrest Assisted Living is a 138-unit assisted living facility located in Denver, Colorado. The Sisters of St. Francis of Marycrest owned and operated a Catholic High School for girls on this site for 25 years. After the school closed, the Sisters, in keeping with their mission of serving the greatest need, decided to provide residential care for low-income seniors and non-elderly persons with disabilities. Marycrest Assisted Living opened in early 1998 under the oversight of a local management company.

Because Marycrest’s mission includes providing services to Medicaid-eligible individuals and chronically disabled younger adults with limited financial resources, Marycrest faced significant financial challenges. Indeed, few health care organizations have sought to serve these persons in need because of the inherent financial challenges.

Health Dimensions Group assumed the management of Marycrest in the summer of 1999. At that time, the Marycrest operations could be characterized as follows:

• The occupancy had peaked at 65.

• Recurring expenses in many categories had exceeded industry benchmarks.

• The total debt burden of $9 million was unmanageable.

• There was no marketing budget.

Diagnosing the Situation and Developing an Action Plan

Health Dimensions Group utilized its turnaround management team to diagnose the operational and financial performance of Marycrest. Following an intensive analysis, our experienced management team determined that Marycrest served a unique niche and could survive. We reached the following working conclusions:

• The debt burden on the facility was unmanageable even if the facility achieved maximum occupancy in the future. Loan payments were stopped and discussions commenced immediately with the Colorado Housing and Finance Authority to renegotiate the terms of the loan.

• A line-by-line analysis of operating costs revealed the need for immediate expense reductions. A plan was developed to decrease operating expenses by 15 percent within a 60-day period. For example, some staff reductions were taken and some benefits were reduced for existing staff to bring Marycrest’s operating costs in line with industry benchmarks.

• A comprehensive market analysis revealed that although Marycrest operates in a competitive market area, it serves a unique niche and is desirable to seniors and non-seniors seeking affordable residential care in a Catholic-sponsored milieu. A marketing plan was developed so that occupancy could be increased and then stabilized at a higher level. A budget was authorized so that the marketing plan could be effectively implemented.

Achieving Results and Moving Forward

Health Dimensions Group truly believed that an aggressive, but realistic, turnaround plan would result in a financially viable organization that could achieve the original mission desired by the Sisters of St. Francis. An integral part of implementing this turnaround plan was to combine intensive on-site management with daily management by a dedicated administrator. How did we achieve success?

• First, immediate action was taken to implement an expense reduction plan that brought positive cash flow within 60 days of implementation. This plan led to reductions in certain staff and reductions in staff benefits. However, instead of reducing employee satisfaction, we found that these actions led to an increase in employee satisfaction over a two-year period

• Next, aggressive implementation of the marketing plan grew occupancy to 95 percent within 12 months.
  

• Finally, the key to long run viability was renegotiating the debt. Health Dimensions Group viewed the Colorado Housing and Finance Authority as a partner in making Marycrest a viable organization. After a process of communication and negotiation, the loan balance was reduced to 25 percent of its original value and the balance was refinanced.

In conclusion, the actions of Health Dimensions Group restored profitability and viability to Marycrest Assisted Living within 18 months of assuming management responsibility.

As a Catholic-sponsored organization, Marycrest is unique in Colorado and the nation because of its unwavering commitment to providing affordable assisted living to younger disabled persons and Medicaid eligible persons. With its financial stability assured, Marycrest is now able to look to the future and is in the process of developing a forward-looking strategic plan.

Health Dimensions Group is pleased to have been given the opportunity to assist the Sisters of St. Francis to fulfill their mission and plan for the future.