Challenge
Ridgecrest Regional Hospital (RRH), a 25-bed, not-for-profit Critical Access Hospital (CAH) located in Kern County, California, serves as the primary healthcare provider for the 40,000+ people in Ridgecrest and surrounding communities, including the Naval Air Weapons Station (NAWS) China Lake. With the nearest hospital 90 miles away, RRH is a vital institution for this geographically isolated region.
RRH has faced significant financial and operational challenges in recent years. The hospital’s declining financial health resulted from multiple factors, including decreased inpatient and outpatient volumes, increased labor expenses due to reliance on contract nurses, and inefficiencies in revenue cycle management. RRH’s Labor & Delivery services were temporarily suspended due to financial losses and staffing concerns, further impacting community access to essential care.
Recognizing the critical need for intervention, the Federal Office of Rural Health Policy (FORHP) called upon the National Rural Health Association (NRHA) to help facilitate a strategic financial and operational turnaround. RRH then engaged Stroudwater Associates, supported by funding from the United States Department of Agriculture (USDA), to develop a performance improvement plan to restore financial stability and ensure long-term sustainability for this critical community resource.
Process
Under the leadership of CEO Jim Suver, who has served RRH for over 16 years, the hospital began working closely with Stroudwater Associates to uncover the root causes of its financial struggles. Suver had long suspected inaccuracies in RRH’s cost report and persistently advocated for a deeper examination. His leadership, intuition, and supportive team played a crucial role in driving this turnaround effort.
Stroudwater Associates conducted a comprehensive evaluation of RRH’s operations, finances, and strategic positioning. The process, which spanned four months, involved the following:
- Financial and Operational Assessment: A detailed review of RRH’s cost report, which uncovered misallocations, particularly within the Labor & Delivery department, leading to an overstatement of losses.
- Revenue Cycle Optimization: Identification of inefficiencies in billing and collection processes, leading to a projected $7 million improvement in revenue cycle management.
- Service Line Optimization: A strategic review of service offerings to determine areas of financial and operational inefficiency, leading to necessary service adjustments and targeted investments.
- Physician Recruitment and Retention: Analysis of providers’ needs to address shortages and improve access to primary and specialty care.
- Long-Term Care and Swing Bed Census Expansion: Efforts to grow the swing bed census from a daily average of 1.8 to 6 within just six months, significantly enhancing reimbursement rates and overall financial performance. Targeted efforts to grow the long-term care census resulted in a nearly 25% increase.
- Board and Leadership Engagement: Stroudwater facilitated an educational session with RRH’s board to align leadership on the hospital’s financial strategy and the future of rural healthcare.
Results
The strategic interventions identified by Stroudwater Associates have led to substantial financial and operational improvements, including:
- Revenue Cycle Gains: Enhancements in billing accuracy and collections to drive increased financial sustainability.
- Cost Report Adjustments: Addressing misallocated expenses to optimize Medicare reimbursement and maximize financial efficiency.
- Service Line Enhancements: Strategic modifications to underperforming departments to improve financial performance and patient care.
- Labor Cost Reductions: Efforts to decrease reliance on costly contract nurses and optimize staffing to control expenses.
- Growth in Swing Bed and Long-Term Care Census: Expanded utilization of swing beds and long-term care to increase reimbursement and enhance long-term care services.
- Reopening the Labor & Delivery Unit: Through cost report improvements and operational efficiency measures, RRH restored this critical service to the community.
Impact
The collaboration between Ridgecrest Regional Hospital and Stroudwater Associates has provided a clear roadmap for financial recovery and long-term sustainability.
Reflecting on the journey, Suver shared:
“I knew something wasn’t right with our cost report, and I kept pushing for a deeper look. Partnering with Stroudwater helped us uncover the root causes and take actionable steps that have made a real difference for our hospital and the community.”
With strategic improvements underway, RRH is on a path to enhanced financial health while continuing to serve as a critical healthcare provider for its community and the military personnel at NAWS China Lake. The reopening of the Labor & Delivery unit marks a significant milestone, allowing families to receive essential maternal care locally instead of traveling 90 miles.
Using external expertise and data-driven decision-making, RRH is positioned for resiliency and sustainability, ensuring access to quality healthcare for the isolated communities it serves. This case study underscores the importance of targeted financial and operational strategies in securing the viability of rural hospitals facing economic challenges.
“Stroudwater was more than just a consulting firm—they were true partners in our hospital’s turnaround. Their data-driven approach, deep expertise in rural healthcare, and strategic insights helped us uncover opportunities we didn’t know existed. But what truly sets them apart is their commitment—they genuinely care about small hospitals and want to see them not just survive, but thrive. Their guidance has been invaluable, and we continue to rely on them as trusted advisors. I highly recommend Stroudwater to any rural hospital seeking financial and operational improvement.”
— Jim Suver, CEO, Ridgecrest Regional Hospital
To learn more about Stroudwater’s approach to cost report review, click here.
