Since taking over as ProMedica CFO in May 2023, Terry Metzger has led the health system through a notable financial recovery, most recently transforming a $31 million loss (-4.2% margin) in the third quarter of 2023 into a $32.4 million operating gain (4% margin) in Q3 2024.
Leveraging nearly two decades of healthcare finance expertise, including executive leadership experience with both providers and payers, Mr. Metzger is helping chart a strategic path to strengthen ProMedica's operations across all lines of business during a pivotal period of transformation.
The Toledo, Ohio-based health system recently underwent a significant restructuring that included the sale of its insurance subsidiary, Paramount Health, to Medical Mutual of Ohio. The health system also sold its senior care business to Gentiva Health Services and sold one of its hospitals to Flint, Mich.-based Insight Health.
Now, after completing that restructuring, 91% of ProMedica's revenue comes from its health system, which includes 10 hospitals and various physician groups, Mr. Metzger said during a Becker's Healthcare Podcast episode. Looking ahead, he and his financial team are focusing on three key trends:
- Volume shifts: "In 2024, we saw significant volume increases, marking a strong bounce back for our system," Mr. Metzger said. However, the nature of these volumes is changing, with a clear migration from inpatient to outpatient care. ProMedica is analyzing these shifts by service line, comparing performance to competitors, and aligning with industry benchmarks to shape its outlook for 2025.
- Labor costs: Addressing labor challenges remains a top priority. Mr. Metzger highlighted the importance of reallocating resources to the bedside and improving efficiency to manage rising costs.
- Reimbursement: Mr. Metzger emphasized the importance of understanding changes in the political landscape and their implications for reimbursement. "Medicare Advantage versus traditional Medicare, as well as the growth in Medicare managed care, are key areas of focus," he said, while also stressing the lag in commercial reimbursements. "While we've seen inflation come down quite a bit for us, we are seeing a big lag in reimbursement from payers. It's an area we're very focused on to optimize in 2025."
Tackling Financial Pressures
Health systems nationwide face the dual challenge of rising costs and declining reimbursements. ProMedica has taken decisive steps to combat this dynamic.
"Our first step was to focus on the shared services side," Mr. Metzger said, noting that ProMedica's restructuring eliminated $75 million in annualized costs from shared services over 18 months. "While much of that aligns with divestitures, it also makes our core operations far more efficient."
Vendor relationships have also come under scrutiny. ProMedica has issued numerous requests for proposals to optimize value and improve supply chain efficiency. "By homing in on fundamentals and aligning capital expenditures with strategic initiatives, we've reduced operating costs and strengthened cash management," Mr. Metzger said.
Service Line Focus for 2025
ProMedica plans to channel its post-restructuring momentum into service line-specific growth.
"In 2024, our EBITDA doubled from +5% to +10% as a percentage, driven by volume growth and cost management," Mr. Metzger said. "Now, we're focusing on cardiovascular, neurology, oncology, orthopedics, and surgical services, refining tactics to meet physician needs and community demands."
Higher acuity lines including oncology and orthopedics are key areas of growth, benefiting from strong alignment with ProMedica's employed physicians in the ProMedica Physicians Group. "This alignment enables us to execute specific strategies to build further volume," he said.
Leveraging AI for Efficiency
Innovation is also playing a role in ProMedica's strategy.
"We're focusing on surgical services and improving efficiency, particularly in areas like sterile processing and turnover times," Mr. Metzger said. ProMedica is testing an AI tool to manage operating room supplies, aiming to reduce waste and improve resource utilization. "We've already seen promising success in reducing waste, and we plan to expand these efforts further in 2025," he said.
Looking Ahead
As ProMedica continues to align its financial and operational strategies, Mr. Metzger is optimistic about the future.
"The restructuring has allowed us to focus more on service lines and community needs," he said. By integrating physician groups, aligning capital expenditures and adopting innovative AI approaches, Mr. Metzger believes ProMedica is well-positioned to meet the evolving demands of its communities in northwest Ohio and southeast Michigan.