When Sue Perrotty took over as CEO of Tower Health in 2021 the Reading-based health system was hemorrhaging money.
The health system, anchored by Reading Hospital, acquired five regional hospitals in 2017 with the goal of integrating and improving them and building a strong regional health system.
But COVID-19 hit, and Tower was not only unable to continue its work to properly integrate the hospitals into one care system, but it was faced with the same devastating financial woes that plagued health systems around the country.
In fiscal 2020 alone, the hospital lost $400 million dollars.
But Perrotty, who was a board member when she took on the role of interim president and CEO, had come from a 27-year career in the banking and financing industry. If anyone could turn the health system around, it was her and over the past three years she has led a team to make the hospital financially sound.
The effort has been working. In the final quarter of fiscal 2024, which ended June 30, the hospital had its first year of profitability in five years.
But it wasn’t an easy journey, said Perrotty, the work to bring financial stability to the health network included many difficult decisions on the way.
“The pandemic tipped a lot of ships, but it hit Tower hard,” Perrotty said. “We had to cut elective work in February [2020], but the pandemic didn’t really hit us until May or early June. You can’t take out three quarters of your volume and survive that.”
The rebuilding plan was divided into three phases.
“2021 was the year of stopping the bleed,” Perrotty said. Of the five hospitals Tower had acquired it closed two and sold a third. She said the action was needed in part because the pandemic didn’t give the health network the time it needed to recover from the costs of the hospital acquisitions.
In all, more than 900 people were laid off during that period.
The next step was to turnaround operations, bringing in new technology and practices to help the health network’s professionals operate more efficiently, while continuing to provide top care.
But the health network still had a large problem looming over it – debt. With around $240 million in bond redemptions coming due this fiscal year it would have been impossible for the health network to meet all of its financial obligations.
“That’s where I put my head down and focused on what I’ve always done as a banker,” Perrotty said.
In September, the health network was able to work out a restructuring with its bondholders.
The bondholder agreement allowed Tower to secure over $140 million in additional funding and nearly doubled its cash reserves.
“We were burning cash pretty fast,” Perrotty said. “That was the spark that would provide us the means to restructure.”
Now the health network’s third prong of its restructuring is underway, said president and COO Michael Stern, and that’s rebuilding.
He said he’s proud of the resilience staff have shown in adapting to changes, even those who may have temporarily lost their jobs because of it.
“We had a very significant turnover, but now we’re in a position where we’re recruiting talent and providers,” Stern said.
He noted that the health network has been successful in building back its staff and has had many employees return and its overall turnover rate has dropped 10% since 2021.
He said that showed a renewed optimism among those who work for Tower.
“The number of folks that left the organization that are coming back is a testament that people see we have a big future,” Stern said.