The Advisory Board to restructure its healthcare business: 10 things to know

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The Advisory Board Company plans to restructure its healthcare business to focus on improving three specific problem areas for hospitals and health systems.

Here are 10 things to know about the restructuring plan.

1. The restructuring plan is designed to focus the company's healthcare technology and consulting capabilities on driving health system growth, reducing care variation and optimizing the revenue cycle, according to a news release.

2. The company plans to help hospitals and health systems achieve these goals by retaining and engaging patients; improving care quality and reducing cost by eliminating unnecessary care variation; and improving the efficiency and effectiveness of revenue management, among other improvement initiatives.

3. The Advisory Board, as part of the restructuring plan, will exit certain products and services "which do not fully align with its long-term strategy," the release states. This includes care management workflow, nursing workforce and infection control analytics, as well as two niche consulting practices.

4. Additionally, the company plans to reduce its workforce by approximately 220 employees, or 5.7 percent of its total workforce, and close four office locations by the end of this year. The restructuring plan will not impact the company's education business.

5. The Advisory Board Company said it expects to incur approximately $20 million to $25 million of cash expenses and $25 million to $30 million in non-cash charges in 2017 related to the restructuring.

6. The workforce reduction and office closures alone are expected to result in more than $25 million in reduced annualized operating expenses once the plan is fully implemented, according to the release.  

7. Robert Musslewhite, chairman and CEO of The Advisory Board Company, spoke positively of the restructuring plan.

"Certainly this involves difficult decisions, particularly having to say goodbye to colleagues and friends who have made many contributions to our firm and our members, and we are being as supportive as we can in this environment. However, we believe a tighter focus on the core, perennial industry challenges will make our organization stronger, enable us to deliver even more value to our members, allow us to invest in opportunities to enhance our capabilities and competitiveness, and position our company for future growth," he said in the release.

8. Given its restructuring plan announcement, the company also provided a financial update. The Advisory Board Company said contract renewal rates remained high in 2016, but the company experienced a difficult healthcare sales environment in the second half of 2016. Consulting and risk collection revenue was also lower than expected in the fourth quarter of 2016.

9. Specifically, the release states, The Advisory Board Company expects full-year 2016 revenue to be approximately $805 million to $807 million, or approximately $10 million to $12 million below the company's previous guidance range, with adjusted EBITDA expected to be $187 million to $188 million, or approximately $2 million to $3 million below the company's previous guidance range, exclusive of any restructuring charges.

10. The company said it will provide updated 2017 financial guidance late next month.

 

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