For CFOs across industries, particularly those with an ecosystem of financial sponsors, shareholders and lenders, there are several lessons to be learned from how healthcare providers navigated the sudden financial impact of this crisis.

No business has escaped the impact of COVID-19, but for healthcare—an industry that has been virtually recession-proof in the past—it has been particularly challenging. For CFOs and other finance leaders across industries, particularly those with an ecosystem of financial sponsors, shareholders and lenders, there are several lessons to be learned from how healthcare providers navigated the sudden financial impact of this crisis.

I have been actively involved in supporting Eye Health America (EHA) since LLR first invested in 2018, initially as an investment VP for LLR and now as CFO of EHA. After achieving exceptional organic and acquisition growth in the first two years, everything changed for the vision care company when the pandemic shuttered our network of ophthalmology clinics and surgery centers temporarily.

We had to act quickly and decisively to ensure survival. Fortunately, with new plans in place to protect doctors and patients, EHA was able to reopen after several months of limited emergency services and returned to 95% of its pre-pandemic service volume. These are the steps we took to protect the financial viability of the Company during the initial wave and emerge stronger than ever. Given the resurgence in late 2020, we are currently monitoring the need to react again.

With so much uncertainty, you need leading indicators to anticipate what may be coming next, whether it’s a new threat or an emerging opportunity.

Steps taken to navigate the impact of the pandemic

Track, measure, adapt and adjust

In a situation like the COVID pandemic, things change so quickly that waiting until month-end to make decisions isn’t good enough. With so much uncertainty, you need those leading indicators as soon as possible to anticipate what may be coming next, whether it’s a new threat or an emerging opportunity.

At EHA, forecasting and modeling became crucially important activities, enabling us to get in front of potential cash-flow issues, predict revenue, determine staffing needs and make decisions about when (and how) to reopen. We established new KPIs around patient volumes, cancellation and no-show rates, and developed new processes that allowed us to track performance on a daily basis in near real time.

This became particularly important from a cashflow stand-point. Technology and services companies across LLR’s portfolio followed a similar strategy: any metrics previously tracked quarterly were shifted to monthly; monthly metrics to weekly; weekly to daily.

Tracking and analyzing more data points more frequently is resource-intensive, which meant we needed to adjust the protocols around sharing that data, too. We wanted the management team to focus their energies on analyzing and acting on the data, not refining it, so instead of turning it into polished reports, we shared it with the board and investors in its original, raw format. As a bonus, giving stakeholders access to the source data in this way also enhanced the levels of transparency.

For companies where your volume of data could be overwhelming to sift through, and stakeholders in triage mode may have limited time to digest it, it is critical that your CEO or CFO highlight the most important metrics for those stakeholders to focus on and report on them in 10-15 minutes or less on a regular basis.

Based on the leading indicators and the input from our physicians, Eye Health America reopened clinics at a reduced volume in late April 2020. Within two months, we were at 95% of our pre-pandemic revenue, and we are continuing to see strong performance at the time of writing this post (November 2020).

Many CEOs across LLR’s portfolio reported that scenario planning helped them understand weaknesses and opportunities to address over the longer term.

Plan for every scenario

With data and new processes in hand, we started scenario planning almost immediately. LLR worked alongside our accounting and finance team to develop multiple plans for shutdowns of different lengths and revenue projections. What would it look like if we’re shut down for one month? For three? For nine? How do we rationalize the cost structure of the business and how does it change as the shutdown period lengthens? What changes if we earn 50%, 20%, or 10% of revenue?

We hoped for the best, but planned for the worst, and we consistently looked further out into the future so that we were ready to respond to any scenario that played out. Many CEOs across LLR’s portfolio have similarly shared that this degree of scenario planning helped them understand weaknesses and opportunities across the company to address over the longer term.

Prioritize rapid communication

As soon as the headlines started breaking, we increased our frequency of communication to determine the impact of COVID-19 and a strategy to address it. At times, we met every day to keep the lines of communication open between the management team, the board, the lender group, other shareholders, physicians and employees.

This ensured that everyone was aware of what was going on and what they needed to do, and it fostered better collaboration between stakeholders. Throughout the process, we found that the best solution came from acknowledging different opinions and finding a collective way forward.

We opened the lines of communication with our lenders from the beginning and were honest about our situation and our need for flexibility.

React fast and cut deep

We knew we needed to preserve cash so that we could survive for as long as possible. Initially, we balked at some of the more drastic measures, but we quickly learned that reacting faster and cutting deeper was the only solution for us.

We examined all of the different levers to minimize cash outflows, including making the incredibly hard decision to furlough staff. The measures enacted by Congress to assist workers with additional unemployment benefits helped tremendously in bridging the weeks until we were able to bring our staff back as clinics began to reopen. We also asked the physicians to take significant pay cuts, requested extended payment terms from vendors and asked for rent deferrals from landlords.

Finding alternative cash sources was an equally significant part of the plan. Like many private equity-backed businesses, LLR’s status as investor and control owner disqualified Eye Health America from PPP loans. However, we were able to access grant money from HHS to partially cover our lost revenue and were eligible for advanced Medicare payments, which helped us to survive.

And finally, we looked for ways to manage our debt. While we were not over-levered, servicing debt with no cash inflow presented challenges. We opened the lines of communication with our lenders from the beginning and were honest about our situation and our need for flexibility. Together, we came up with a solution to provide an increased revolver in exchange for reducing long-term debt in the future and also received covenant waivers and reset go-forward covenants to be based on run-rate performance after volumes began to recover.

Explore new revenue sources

While we were primarily focused on conserving cash to ensure survival, we also got creative about finding new sources of revenue. We had planned to launch telehealth services already, so we had a head start, but COVID-19 really forced our hand. In a matter of a couple of weeks, a team of our clinical staff built out capabilities, protocols and outcome measurement and the telehealth solution went live. The Company now has the ability to offer real-time virtual care on a smartphone, tablet or computer. While the regulations around telehealth delivery were relaxed as a result of the pandemic, we chose to build a solution that’s robust and HIPAA-compliant so that it can continue to play a role in service delivery and revenue generation over the long term.

Trust your experts

While LLR was deeply involved in the Company’s crisis management plans, they let the experts lead the way. A physician task force was appointed to determine when—and under what conditions—it was safe to open. This really helped to shift the mindset and create a collaborative environment by showing the doctors that the investors were ready to put safety and comfort ahead of immediate profit.

Similarly, LLR backed the opinions and decisions of the management team. In calmer times, an important driver of LLR’s mindset when partnering with portfolio companies is that they acknowledge the management team is closer to the business, living and breathing it every day. They trust us to make decisions and, in the case of COVID at Eye Health America, to know what was the best plan for reopening. During this stressful period, LLR continued to trust and empower the EHA executive team to manage the situation.

Here’s the bottom line.

Ultimately, the pandemic forced companies to take a fresh look at all aspects of the business. The enhanced communication, optimized cash flow, and accelerated reporting cadence helped us not only to weather the crisis but understand the business better, empower the management team, and reshape Eye Health America into a stronger and more resilient organization.