Garnet Health achieves $91M in cumulative benefit through system transformation

Challenge 

Like many hospitals and health systems throughout the country, the COVID-19 pandemic left Middletown, N.Y.-based Garnet Health in difficult financial straits. Revenue and volume shortfalls, combined with increased supply chain and pharmaceutical costs, capital budget restraints, and cash flow pressures, made it difficult for the health system’s leaders to plan effectively. Higher-than-expected length of stay, suboptimal throughput, and persistent labor shortages challenged the organization’s capacity and led to unsustainable temporary staffing costs and overtime/premium pay.  

Garnet Health aimed to rethink its strategy, optimize workflows and resource utilization, and stabilize finances to continue to serve the health care needs of its regional community. 

Approach 

Garnet initially engaged Guidehouse during the pandemic to assist the health system with managing grants from the Federal Emergency Management Association (FEMA) and improving its revenue cycle management performance. In Q1 2023, due to continued declining performance, Garnet Health’s leaders expanded their relationship with Guidehouse, launching an 18-month systemwide turnaround initiative to prevent further performance issues and improve its financial health, collaborating to implement over 100 improvement initiatives valued at over $90M across the following areas:  

Service line and market strategy: The health system formed a strategic planning group with Guidehouse to review its service line strategy and assess its local and regional markets to identify growth and repositioning opportunities. This helped leaders prioritize investments and reconfiguration opportunities to improve both near- and long-term performance.  

Revenue cycle optimization: To improve revenue yield, Guidehouse automated key revenue cycle processes and assumed responsibility for a number of utilization management (UM) processes. This included implementing a Best in KLAS® utilization review and appeals process to reduce avoidable write-offs, an audit program for UM and clinical documentation improvement teams, and documentation training for providers. Guidehouse also redesigned and automated Garnet Health’s revenue cycle operational processes to improve revenue metrics, reduce costs, and shift staff to higher-value responsibilities.  

Managed care: A managed care benchmarking and market assessment informed payer negotiation strategies and aligned them to the critical rate realignment needs of the organization. This included providing behind-the-scenes negotiation advisory support and payer relations strategies to help Garnet Health achieve critical rate improvements with a key payer. 

Care delivery redesign: A redesign of care delivery roles and processes helped Garnet Health overcome rising costs attributed to inefficiencies and reliance on contracted labor. This included a transformation of the system’s staffing model to align with demand and acuity, implementing strategies to reduce the reliance on temporary labor to nearly zero. To assist Garnet Health in its system-wide capacity management and coordination goals, Guidehouse partnered with physician and nurse leaders to address persistent challenges in emergency department (ED) throughput and high LWBS (left without being seen) rates. Through targeted interventions and analytics-driven strategies, Guidehouse and Garnet Health partnered to support improvements in patient flow, care coordination, and overall capacity management at the Middletown campus. 

Physician enterprise and access: Guidehouse worked with Garnet Health Doctors, the system’s primary care and multispecialty medical group, to enhance provider productivity, access, and availability, ultimately helping the health system increase its enterprise-wide volumes. Improvements were also made to the referral management process to keep patients within Garnet Health for care.  

Corporate services, supply chain, and clinical non-labor expense: The organizations collaborated to reduce these expenses, analyzing contracts to identify operational efficiencies. This included the optimization of group purchasing organization contract tiers and a renegotiation of pricing and contract terms with Garnet Health’s prime medical device manufacturers for physician preference items. Guidehouse subject matter experts also helped Garnet Health focus on improvements within key ancillary departments. For example, a commercial laboratory partner was brought on to reduce spend and standardize reference lab utilization. 

Measuring and financial modeling: The health system refreshed its fiscal year financial model, which was utilized by leaders throughout the engagement to monitor progress, make rapid-cycle decisions, and drive accountability. 

Impact  

This turnaround engagement had a profound impact on Garnet Health’s operational and financial health, demonstrated in both short-term results and long-term forecasts. Over the course of 18 months, the project included over 100 implemented initiatives that generated $91M in cumulative benefit to the health system and resulted in a $57 million year-over-year turnaround between FY23 and FY24 through additional revenue enhancement and cost savings. Together, Garnet Health and Guidehouse accelerated $31 million in cash flow, improving the system’s balance sheet and ultimately allowing it to receive a clean bill of financial health from auditors. 

Guidehouse continues to make a significant impact on Garnet Health’s performance through its ongoing work in overseeing utilization management at the health system, an engagement that continues to reduce costs and help staff work efficiently. James P. Grigg, the health system’s Chief Financial Officer, said nearly all costs continue to be at or below budget in 2025 across business units.  

“We’re pleased to continue to work with Guidehouse to streamline utilization management, as our partnership has resulted in a dramatic reduction in avoidable denials,” Grigg said. “We've developed relationships with individuals at Guidehouse who have turned out to be long term relationships, friendships, and the team has been wonderful to work with."