Overcoming Operational Losses to Restore Profitability

Long-term Care Facility: Overcoming Operational Losses to Restore Profitability


This underperforming long-term care facility was owned by ten physicians who practiced in the same community. One of the leading manager physicians had passed away two years prior to when Cadre became involved. While the business was once very profitable, operational losses were mounting and bank lines were exhausted.

Business Challenge

The business needed overall management leadership, which included new business plan development, hiring and managing a new management team, and creating and managing a new sales and marketing program. The board of directors and owners of the business also needed to be convinced that incremental new investments were necessary to return the company to its former glory.


Prior to Cadre’s involvement, the existing management company was distributing cash to the physician owners by shifting resources for operations and minor facility repairs. This engagement had lasted two years. Accounting systems were not capturing the performance of the facility, and while the physician owners knew they had a problem, they did not know where it was. Each and every department, from nursing, to food service, to rehabilitation, was reviewed and restructured. Budgets were built from the ground up and several new key department managers and facility administrators were hired. Personal contacts were made with existing residents and their families and with former residents who now lived elsewhere, to best ascertain patient needs. Likewise, extensive interviews with referral sources provided important data on how to direct the facility’s patient care programs and related marketing efforts. Banking and vendor relationships were also improved and expanded.


After a year, the business returned to profitability. Revenues increased by 20% and retention rates increased. Operating expenses were well managed by department heads who were held accountable for their budgets. Hence, both the bank and shareholders could now project operating performance in a reliable manner. The facility generated enough cash to fund a redecorating program and to purchase new rehabilitation equipment. Operating performance encouraged the physician owners to use profits to reinvest in the facility. In the second year, the facility became very profitable and private pay census started to increase. Revenues per service unit were also higher due to the increased volume of rehabilitation and ancillary revenue. In the middle of the second year, the bank debt was almost eliminated and profit distribution resumed.