Auburn Memorial Hospital is disputing the amount it owes the turnaround consulting firm hired to complete a comprehensive overhaul of hospital operations because, according to the hospital, the firm's work did not net as much savings as promised.

John Baran, AMH's interim chief financial officer since January, said the hospital was able to trim costs worth $5.5 million - but that was still $1.5 million short of the $7 million in savings or new revenues Wellspring Partners Ltd., of Chicago, said its team of consultants, working along with hospital staff, could achieve.

“Overall the whole Wellspring project went well but they guaranteed $7 million worth of savings,” Baran said. “As part of that, the hospitals needed to validate those savings. Of that $7 million, we were able to validate $5.5 million. We just couldn't close that gap before we filed bankruptcy.”

AMH's Board of Trustees also learned at its meeting Wednesday that the hospital had a net income of $75,000 from its core operations in May. The hospital is reporting a net income of $505,000 so far this year. The hospital has been in the black every month of 2007, except February, and expects to be in the black for June.

According to court documents in AMH's Chapter 11 bankruptcy filing, AMH owes $1,540,890 to Wellspring Partners Ltd., of Chicago. AMH filed for bankruptcy in April.

Stephen L. Furry, the Wellspring principal who worked most closely with AMH, said in an e-mail that Wellspring disputes the $1.5 million “shortfall” AMH is citing as the reason it owes less to Wellspring. Furry said the firm has no further comment.

“I think they overpromised, to be honest,” Baran said. “There was a gap of $1.5 million that couldn't be closed.”

The hospital hired Wellspring in mid-2006 to stanch its monetary losses by completing a grassroots examination of AMH's operational practices for cost-effectiveness. AMH lost $13 million in 2004, 2005 and 2006.

The biggest gap in Wellspring's promise came in the area of improving AMH's revenue cycle, Baran said. Between June 2006 and January, Wellspring staff worked alongside AMH employees on task forces to review operational practices and find cost-saving possibilities.

“The hospital absolutely needed a turnaround firm. ... the other thing a group like that can bring they're totally objective. They can come in with a cold eye,” Baran said. “It's just that much harder for someone who's been here for 20 to 30 years. That's what an outside firm can do: make those appropriate recommendations to turn around the operations.”

Despite the gap between what Wellspring promised and actual savings, the experience with Wellspring was very positive and was essential to the hospital's future, Baran said.

Wellspring concluded its work in January, and the hospital's financial staff also concluded its validation of actual savings garnered from operational changes in January.

“Overall it was a positive experience,” Baran added. “They were very expensive. We didn't get a full $7 million but we did get a substantial savings.”

Published reports put Wellsprings' price tag at $3.9 million. A total of $250,000 in grants helped pay for the Wellspring cost. The hospital reported in 2006 receiving $700,000 in community donations to fund the project.

Besides Wellspring, AMH only owes more to the Pension Benefit Guaranty Corporation, a government entity which protects the retirement incomes of workers, and Excellus BlueCross/BlueShield of Central New York. At the time of the filing, AMH owed PBGC $15,866,500 and Excellus $1,594,303.35.

AMH owes a total of $7,811,269.80 to its unsecured creditors besides the PBGC. As part of the bankruptcy filing, the hospital is negotiating a reduced payment to its creditors. The bankruptcy will not be finalized for several months.

Staff writer Amaris Elliott-Engel can be reached at 253-5311 ext. 282 or at amaris.elliot-engel@lee.net