It took less than two months for 45-year-old Dr. Christopher Olivia to offer up some tough medicine at the West Penn Allegheny Health System, employer of 13,000 and the region's second-largest medical provider.

A management shake-up. New turnaround consultants. A temporary hold on new capital spending.

The changes from the new chief executive officer, announced at the end of May, are designed to speed up the long-promised consolidation of services and departments, make West Penn Allegheny more efficient and help it become more competitive with the University of Pittsburgh Medical Center.

Observers expect more changes as Dr. Olivia works his way through an array of challenges that show no sign of abating -- including the question of financial stability.

On Friday, the president of The Western Pennsylvania Hospital in Bloomfield and Forbes Regional in Monroeville told employees in an e-mail that Forbes would cease enrolling patients in its outpatient cardiac rehabilitation program, close its Forbes Life Style Center on June 30 and discontinue its occupational medicine services within 30 days.

The number of employees affected would be "minimal," President Dawn Gideon said in the e-mail. The moves were necessary because "we are not meeting our budget goal and are committed to achieving it by the end of the fiscal year."

The larger West Penn Allegheny Health System turned a $12 million net profit in the first nine months of fiscal 2008, up $2.7 million from the same year-ago period. But strip out investment income and the system's core operations -- its hospitals -- and the company recorded an operating loss of $14.7 million through the first nine months, according to New York-based DEPFA First Albany Securities LLC, vs. a loss of $8.46 million in the same period last year.

"My main concern is operating margins continue to weaken," said Jody Madala, a director with DEPFA First Albany. "Revenues are not growing as fast as expenses."

Among the individual hospitals, Allegheny General Hospital on the North Side is benefiting from increased volumes, particularly in orthopedic surgery, neurosurgery and oncology, according to a recent document distributed to bondholders. Volume also is up at Canonsburg General Hospital and the Forbes Regional. But The Western Pennsylvania Hospital and the Alle-Kiski Medical Center are experiencing a "deterioration," according to the document. West Penn's "decline" can be attributed to a "softening of the cardiac market and primary care and general surgery erosion."

"I understand their surgical volume is way down and that presents real trouble for them," said Highland Park health-care attorney Andy Thurman, a former in-house counsel for West Penn Allegheny.

Beyond volumes, another issue facing Dr. Olivia is impatience with the pace of progress.

Investors who participated last year in a West Penn Allegheny bond refinancing, Ms. Madala said, "are not happy" about the hold on new capital spending, which West Penn Allegheny disclosed recently to bondholders. Dr. Olivia decided on the temporary move so the system could re-evaluate and redesign its approval process, according to the document.

"Investors like to know those bonds were issued with a legitimate plan supporting them," Ms. Madala said. Investors "want to know you have that money [going] to a system that knows what it is doing."

She acknowledged no CEO wants to operate under the mandate of a predecessor, but that those who hold West Penn Allegheny's bonds "have huge losses."

"They have paid for it. "

While West Penn Allegheny continues to operate with a "limited degree of financial flexibility," said Jeff Schaub of Fitch Ratings in New York, there was an "expectation things would start to improve more quickly than they actually have."

Privately, there also is concern within the system about the expense of hiring of new consultants. Dr. Olivia has retained Wellspring Partners, a unit of Chicago-based Huron Consulting Group, to conduct a "performance improvement assessment." The results of that assessment are expected this summer.

He also has placed several Wellspring executives in new positions of authority. Janice James, a Wellspring director, is assuming the interim post of chief integration officer. She will work with the presidents of AGH and West Penn as they try to integrate programs and departments. West Penn's new president, Ms. Gideon, is a former managing director with Wellspring; she started her new job in early May.

Wellspring is one of the country's leading hospital turnaround firms, but it "isn't cheap," said Mr. Thurman, the former in-house counsel at West Penn Allegheny. The company charged Forum Health in Youngstown, Ohio, $850,000 in 2005, after that system hired Wellspring to improve operations and stabilize cash balances. When Auburn Memorial Hospital in upstate New York filed for bankruptcy in 2007, it owed Wellspring $1.5 million.

Dr. Olivia has not said anything publicly about the many changes, beyond statements made in news releases. A spokesman declined comment for this story.

But, "I think [Dr. Olivia] is doing exactly the right thing and doing it exactly the right way," said Mr. Thurman.

"The primary issue is turning this group of hospitals into a system. I think he has identified the primary issue and is approaching it in a perfectly appropriate way."