Becker's Hospital Review

9 CFO / FINANCE CEO rebuilds Pennsylvania system after $440M loss By Alan Condon W est Reading, Pa.-based Tower Health's new-look leadership team, organizational structure and culture have helped the health system improve its financial performance by more than $160 million year over year while a debt refinancing deal has secured a longer runway to return to profitability. Sue Perrotty spent nearly three decades in the banking industry, including leading Wells Fargo's global operations, before stepping in as CEO of Tower in February 2021. She was tasked with leading the financial turnaround of an organization that reported a loss of more than $440 million the previous year. "I became Tower CEO at a time when it was in a crisis of care due to the pandemic, a crisis of capital and a crisis of confidence," Ms. Perrotty told Becker's. "We were bleeding money and we weren't confident in our leadership any longer." Tower implemented a holistic turnaround strategy focused on exceptional clinical care, operational efficiency, new leadership and partnerships across lab, pharmacy and IT. New leaders, new culture Tower tackled each issue individually and appointed several new leaders over the last three years, including Michael Stern, president and COO; Mike Eesley, CFO; Pamela Hernandez, senior vice president of human resources and chief people officer; Suzanne Wenderoth, MD, CMO; Bernard Boulanger, MD, CEO of the provider enterprise; and Tom Bartiromo, CIO. "We replaced several top leadership positions and restructured various parts of the health system. Now we've got leaders in place who can take this organization forward for the next decade," Ms. Perrotty said. "We continue to focus on leadership development and human capital growth." e difference between good companies and great companies is how they manage human capital, and Tower managed to restructure its financial capital to ensure it is equipped to execute on its strategic plan, according to Ms. Perrotty. "It's not just about the top down; we rebuilt culture from the bottom up," she said. "We educated everyone throughout the organization about how our financials actually work and how they impact them." One initiative that had a significant effect on Tower's culture shi and financial turnaround was a program called WIGs (wildly important goals). "It was a department level initiative in which staff could recommend changes they believe would make their jobs easier. You could implement them in 90 days. It created a new energy within the organization," Ms. Perrotty said. "Many times at the lowest level of an organization, employees think they can't change anything. We wanted our team to help us make positive changes." Engaging employees at all levels of the health system and seeking feedback on change is crucial for decision-makers during a financial turnaround and is a key part of Tower's new culture. "Ask your people. ey will know a heck of a lot more about what your organization may not be doing well; they just may not feel like they can actually make a difference," Ms. Perrotty said. "Many leaders think you fix things from the top down, but if you don't start from the bottom up at the same time, it takes twice as long. at's how we were able to execute our turnaround. Everybody bought in across the organization and we engaged our employees in the solutions we were working on. ey could touch them, feel them and understand them." Last year, the WIGs program resulted in more than $5 million in improvements to Tower's bottom line, according to the health system. Another top priority for Tower is communication. "Our employees needed to know everything we were doing," Ms. Perrotty said. "Every Friday I email a summary of the week's work to everyone in the health system. It's probably our most-read document and our people look forward to it. It's about making sure everyone is informed about everything we're doing. at creates a culture shi." at culture shi helped Tower reduce its staff turnover rate to about 10%, down from a high of around 20% during the height of the pandemic. e system has also hired more than 2,000 new people, including 600 rehires and more than 100 physicians. Tower's refinancing deal will nearly double its cash on hand and strengthen its liquidity so it can continue to invest in the health system and its people. Once it secures the bond settlement at the end of September, Tower will have five years of no change to its cash flow out for bond and debt servicing, stabilizing it on a go-forward basis through 2029. Partnerships are a key component of Tower's future growth. "Our focus is to be the best healthcare provider in the markets in which we operate and partner with the best providers that bring new technologies, knowledge and skill sets to provide world-class operations and solutions," Ms. Perrotty said. Overcoming revenue cycle challenges One such partnership involved Tower transitioning its revenue cycle operations to Ensemble Health Partners, which took effect July 1. About 675 Tower employees moved to Ensemble, which manages more than $32 billion in annual net patient revenue. "Hospitals' biggest challenge in the revenue cycle is that we provide services to anyone who walks through our front door. I don't know of any other industry that has a business model in which they don't know when, if or how much they will get paid, and the customer is not the person paying," Ms. Perrotty said. "It's one of the hardest business models to try to figure out, and we're subject to a whole other industry, the insurance industry, and all of the shis a consumer might go through throughout their lifetime." "We are never going to be the best in class at doing that because we want to invest in our clinical infrastructure," she said. "For revenue cycle, we wanted to partner with an organization where that's all they do, and Ensemble is the best in class at that." Tower previously went through a failed transition of its revenue cycle operations, taking a significant financial hit and forcing it to bring these operations back in house. Ms. Perrotty believes Tower has a winning partner in Ensemble, which was named the best company for end-to-end revenue cycle outsourcing in 2024 by KLAS Research, a healthcare IT data and insights company. "If you have great people skills, you can be a great partner, and Ensemble certainly has that," Ms. Perrotty said. "at's impressive to me as a fairly young company. ey are aggressive with their payers, consistently investing in new technologies and scaling

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