Before Adam Head started as CARTI’s president and CEO seven months ago, he knew the cancer treatment organization needed a transfusion.
“We needed to change,” Head told Arkansas Business. “It was not on a sustainable trajectory.”
On Sept. 5, Head stepped into a nonprofit that had an operating loss of $12.8 million for the fiscal year that had ended on June 30, although that was a significant improvement from the loss of $13.8 million the previous year.
CARTI also had failed in 2016 to maintain its required coverage ratio on the $49 million bond issue it used to build its four-story cancer center, which opened in November 2015.
As a result of missing its bond covenant, CARTI was forced to hire a management consulting company, which finished its job several months ago.
“This is not about trying to get back on course, because back on course was going to have the same result,” Head said. “This is about getting on a new course with a new vision.”
The turnaround plan involved a massive restructuring and culture change. Earlier this month, CARTI announced it had eliminated 22 positions, with 17 of the positions occupied. The move is expected to save CARTI $1.4 million annually.
Six of the employees who lost their job had worked directly with Dr. Brad Baltz, who was fired last month and who was CARTI’s highest-paid employee. CARTI now has about 400 full-time-equivalent employees.
The turnaround appears to be working. Head said he expects CARTI to meet its bond covenant for the fiscal year than ends June 30.
In addition, CARTI has had positive cash flow in five of the last six months, Head said. While the numbers still indicate red ink, Head said, the financial performance for the first three quarters of the current fiscal year is about $2 million ahead of the same period last fiscal year, when CARTI reported an operating loss before depreciation of $3.3 million.
CARTI is seeing more patients. Total patient visits through the first three quarters of its fiscal year were up by more than 5 percent compared with the same period a year ago. (Baltz was on staff until March 14, less than three weeks before the end of the fiscal quarter. It is not clear what his departure will mean for patient visits. He has announced plans to open a solo practice, initially in the Doctors Building at 500 S. University Ave. in Little Rock, but an opening date was not firm as of last week.)
“Adam is absolutely the right person at the right time to lead CARTI forward,” Harry Hamlin, CARTI’s board chairman, said in an email to Arkansas Business. “Since stepping into the CEO position last September, he has met and exceeded all of the Board’s expectations.”
Kevin Holloran, senior director at Fitch Ratings Inc. of Chicago, said he’s had no new information on CARTI since Head became CEO. Fitch cut CARTI’s rating in September to BB+ from BBB-. A BB+ rating put the bonds at an “elevated vulnerability to default risk … however, business or financial flexibility exists that supports the servicing of financial commitments,” according to Fitch’s website.
Holloran said last week that he was pleased to hear CARTI’s financial summary from Arkansas Business. “We had downgraded them and hoped for a turnaround, and it sounds like that turnaround is sticking,” he said.
Along with Head, CARTI’s senior management team also has changed, leaving only one member who has been at CARTI more than a year. “It’s a new team, a new day,” Head said.
Dinner Plans
Part of Head’s turnaround plan was to get all of CARTI’s divisions working together. CARTI opened in 1976 to provide radiation therapy treatments; it has since expanded to include other cancer treatments. Little Rock Hematology/Oncology became part of CARTI in 2011, and Hematology Oncology Services of Arkansas joined CARTI in 2013.
The groups, though, didn’t come together. The management consultant hired as a result of CARTI missing its bond covenant described CARTI as like being a multi-unit apartment complex, said Dr. Scott Stern, an oncologist who joined CARTI in 2011. “Everybody is sort of a renter in the building, but it’s not like we’re all on the same team,” he said.
He said that Head and his management team have “brought to the table … the concept that we are one team and we have so many advantages going forward.”
Head initiated a monthly dinner meeting at the cancer center for the management team and physicians, which will number 25 when interventionist radiologist Dr. Edgar St. Amour joins the medical staff in July.
“We talk about what the plans are for the next month and for years down the road,” said Dr. Balagopalan Nair, an oncologist. “This is something we’ve really not done but was very needed.”
Head, who had been the chief operating officer of the Arkansas Heart Hospital in Little Rock, said that when he arrived he wanted to build a “strong cultural foundation” and hear the doctors’ opinions.
Nair said the reaction from doctors was, “surprised, shocked … disbelief.”
Stern said that forum was a change from the way CARTI operated in the past.
“That doesn’t mean that everybody’s going to like every decision,” he said. “But if your voice is heard and there’s a forum for that, that really drives a culture that’s different.”
Stern said those discussions had allowed the doctors to weigh in on things like new therapies and new technology.
“I’ll just speak for myself,” Stern said of CARTI’s culture before Head arrived. “It seemed like when we would talk to the leadership, … it just sort of fell on deaf ears. Now there really is a collaborative relationship. We’re talking to them. They’re talking to us.”
Dr. Rhonda Gentry, an oncologist who joined CARTI in 2008, has seen other changes with the staff. Before Head arrived, CARTI seemed to operate as individual units, but now employees are collaborating, with improved efficiency.
“So if my volume is down today in the clinic and Dr. Nair’s is up, my nurses are trained now to cross-cover,” she said. “They can go right over and can work in his clinic.”
Before Head arrived, she said, “I had my own nurses that did it my way, and you had his that did it his way.”
Destination Care
Head said he wants CARTI to provide destination cancer care.
“Our vision is that someone who gets cancer, … they don’t need to drive outside the borders of our state,” he said.
The destination plan involves “many components,” and specific details will be released later, he said. “We are setting up CARTI to be able to do things that have never been done before for cancer care in Arkansas,” he said.
This week, CARTI will start a $1 million renovation project in Conway to combine its medical oncology and radiation oncology services in one building. The services are now offered in separate buildings about a mile and a half apart.
CARTI Foundation Inc. will pay to renovate the 13,000-SF space. The contractor is Nabholz Construction Corp. of Conway, and the project is expected to be completed in mid-September.
“We’re looking at that in other locations as well,” Head said. “We want to be able to provide this kind of experience as much as possible in a patient’s hometown.” CARTI has clinics in 10 cities outside Little Rock.
Head’s plans also include improving the screening for cancer, one of the most undiagnosed diseases in the United States. “There are a lot of people that are walking around with cancer that don’t have a clue,” Head said.
About 16,000 Arkansans are diagnosed with cancer annually, with about 7,000 Arkansans dying each year from cancer. “We believe the opportunity is huge to be able to make a significant impact on that,” Head said.
CARTI also has a new marketing slogan: “Cancer Hates Coming Here.” It was created by CARTI’s new ad firm, Eric Rob & Isaac of Little Rock, Head said.
The root of CARTI’s financial problems can be traced to the opening in late 2015 of its $88 million, 175,000-SF cancer center in west Little Rock.
Jan Burford, who was CARTI president and CEO at the time of the opening, said the center was necessary to locate several of its services under one roof.
Head declined to say if CARTI built too much building. “I’ll answer it this way … it’s an unbelievable place to be able to take care of patients,” he said. “So we intend to use it for what it was designed for.”
And it’s sitting on 37.5 acres, giving CARTI room to grow, he said.
Head said he plans to make announcements in the coming months. “There are greater things to come for cancer care in Arkansas,” he said.
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