Grady Memorial Hospital, on the verge of financial collapse about two years ago, has reached financial stability and improved patient care, hospital officials said.

That assessment is remarkable considering that the hospital then owed medical supply companies $40 million. It owed Emory and Morehouse medical schools $60 million. Broken X-ray machines could not be replaced, patient beds were breaking down, and some doctors refused to use the antiquated cardiac catheterization machine.

Worse, the national Joint Commission had just inspected the Atlanta hospital for medical care and issued a critical report that endangered its accreditation.

Now, hospital officials as well as some Fulton County officials and occasional critics, tell The Atlanta Journal-Constitution that a turnaround has occurred. Long emergency room waits are down, the number of in-hospital infections has decreased, and the hospital’s financial bleeding has largely been stanched. Grady is actually starting to attract a few middle-class, paying customers, they say.

This is despite a harsh economy that had Grady caring for 52,000 more uninsured patients last year and providing $60 million to $80 million in free, uncompensated care in 2009, hospital CEO Michael Young said.

“Grady is getting back to being the grand old lady of Atlanta — a critical part of Atlanta,” Young said during an AJC interview. “The hospital is stable now.”

There’s still more improvement needed, hospital officials said. Much equipment needs to be replaced, and the hospital needs to do a better job of billing patients and insurance companies, moving patients through the system and shortening a patient’s length of stay in the hospital.

Several officials attributed the change to a move made in 2007 when a coalition of Atlanta business leaders and community advocates stepped in and decided to save the 118-year-old medical facility. They led an effort that transferred control of Grady to a new corporate board, secured more than $300 million in donations and replaced the hospital chief.

Since then, Grady has significantly reduced its debt, trimmed hundreds of staff positions, obtained major new equipment and revamped operations from its emergency room to its neighborhood clinics to its in-house pharmacy.

Some results expected to be unveiled today at a meeting of the Grady corporate board:

● Grady’s annual operating loss has decreased from $45 million in 2008 to $4.4 million in 2009.

● The hospital increased cash collections for medical services $57 million, or 17 percent, in the past year.

● Grady has reduced its debt to the two medical schools that provide its doctors — Emory and the Morehouse School of Medicine — from $60 million to $20 million.

Even some longtime critics of the hospital’s management see positive change.

The Rev. Tim McDonald, a watchdog over Grady for years, said he sees improvement in both finances and quality of care.

“Yes, the overall care is definitely better than it was,” said McDonald, a leader of the patients’ rights group called the Grady Coalition.

But McDonald said he is concerned about some of Grady’s choices — “the layoffs, cutting back on services, closing some services.”

The hospital administration has eliminated about 700 of its 5,000 full-time positions since 2007. In addition, Grady had planned to close three neighborhood clinics last year but closed only one after community opposition. The hospital has been criticized — and sued — regarding the closure of its outpatient dialysis clinic.

McDonald said that hospital staff view the new Grady leadership with discontent, that “the staff is not being treated with respect” and morale is low.

Still, McDonald said that in general the hospital administration has largely stayed true to its mission to serve the poor and needy.

Pete Correll, the former head of Georgia-Pacific and a major engineer of the Grady revival, said, “We ought to celebrate. ... This is a phenomenal turnaround.”

Correll said the changes are remarkable because they occurred despite a major economic downturn that damaged other safety-net hospitals around the country.

Young said the hospital has made tough choices and gone through some tough battles to save money. Hospital expenses have been cut by millions of dollars by renegotiating with insurers and medical supply companies. Grady dumped some vendors, and the hospital and insurer Peach State Health Plan parted company in January after rough negotiations.

Young’s hard-charging style has drawn criticism. Patient advocates cried foul last year when he increased co-pays and other medical costs to some uninsured patients.

“That is not working,” McDonald said. “People are literally being turned away.”

But hospital officials say Grady continues to provide care for the poor and uninsured, and that no emergency case is turned away. Some patients could afford to pay more, they said.

Fulton County Commissioner Emma Darnell has criticized the new Grady administration for failing to provide the county with adequate documentation of its care of Fulton indigent residents. Fulton provides about $75 million a year to Grady, most of which pays for indigent care for the county’s poor.

Darnell said she questions the hospital’s claims of a major turnaround.

“I do not have confidence in their numbers, for either care or the financial status,” she said.

Grady spokesman Matt Gove said Grady has provided the county with accurate and adequate figures.

The hospital is receiving praise from several other officials, including the head of the Fulton Commission and the leaders of Emory and Morehouse medical schools.

“Mr. Young has instituted processes that have substantially improved Grady hospital operations and transformed its financial position,” said Jeffrey Molter, associate vice president for health sciences communications at Emory University.

Historic changes have occurred. Under pressure from political and business leaders, the politically appointed Grady board handed over hospital management to a nonprofit board in the spring of 2008. In response to the shift in control, the Atlanta-based Woodruff Foundation pledged $200 million in philanthropic aid, which was followed by other major pledges from the Atlanta business community.

Young came on as CEO in September 2008, and sat down with a stack of the hospital’s payment checks to vendors and others to examine the finances.

Before he arrived, some 400 hospital positions had been eliminated through a voluntary employee buyout. Young has eliminated about 275 more himself, some through attrition and about 150 through layoffs. Young said he has largely steered clear of removing staff who work directly with patients. But he acknowledged that some of the layoffs included several top managers who, he said, tolerated mediocrity.

Young told the AJC he was remaking a work culture at Grady that accepted inefficiency. He also separated nonemergency cases from the emergency room, reducing the long waits there. He trimmed delays between surgeries.

Grady has improved from having among the highest rates of hospital-acquired infections to being in the lowest 10 percent in the country, Young said. Waits for medicine at the pharmacy have been reduced, in some cases, by hours. Waits for an MRI, which could be six months for an outpatient, are now typically less than a week.

In the meantime, the hospital has used the millions in charity to buy 600 new hospital beds and a second MRI machine, and it has started a $40 million project to move paper medical records to an electronic system.

Young said the hospital’s level of care is operating at “slightly above average.” Grady has cleared its debt to vendors and is in good standing with the Joint Commission.

In three weeks, Grady will open a new stroke center, funded with a $20 million donation from Atlanta philanthropist Bernie Marcus. After that, Grady will install a new robotic pharmacy machine.

“It’s a sunny day,” Young said.