Southeast Medical Center case study

Southeast Medical Center case study ORDER NOW FOR CUSTOMIZED AND ORIGINAL ESSAY PAPERS ON Southeast Medical Center case study I need an explanation for this Algebra question to help me study. Review the Southeast Medical Center case study. The following recommendations selected below are considered to be the highest priority/most important to the case. Justify your reasoning. Southeast Medical Center case study Governance at the corporate level should be strategic in nature, whereas governance at the Each system should develop an organizational structure that is simple, lean, flat, responsive, customer-driven, risk-taking, and focused. Systems should align physician incentives and achieve clinical integration. The paper must be three to five double-spaced pages. Utilize a minimum of three scholarly and/or peer-reviewed sources that were published within the last five years. southeast_medical_center.do In-depth case Study: SoutheastMedicalCenter The following case study involving a large organized delivery system exemplifies many of the issues described earlier in this chapter. History and Evolution SoutheastMedicalCenter (SMC; a pseudonym) was established as a public hospital in the 1920s, just bef ore the Depression. Located in the southeast, a $1 million bond financed the 250bed facility. Major expansion projects in the 1950s increased the hospital’s size to 600 beds. Formal affiliation with the local university’s College of Medicine residency program in the 1970s further expanded capacity. Thus, SMC became a public academic health center and subsequently assumed multiple missions of patient care, teaching, and research. Capital improvement programs were conducted during the 1970s, and in 1982, a massive renovation and constr uction project ($160 million) added550 beds to the facility. In the 1980s, a 59bed freestanding rehabilitation center was opened adjacent to the hospital, and a physicians’ office building was constructed next to the hospital. Medical helicopters were also acquired in 1989, expanding SMC’s trauma services. In addition to serving as a regional provider for trauma, SMC also furnishes burn, neonatal, and transplant care for t he region. Responsibility for the governance of SMC has shifted over the years. In the early years of operation, a hospital board ran SMC. In the 1940s, the city was given direct control over the hospital. In the 1980s, the state legislature created a public hospita l authority (to be appointed by the county commission) to govern the hospital. In the 1990s, the hospital’s board of trustees voted to turn o perations of the hospital over to a private, not-for-profit corporation (501c3), the SMC Corporation. However, oversight for charity care remained with the county’s hospital authority. The SMC Corporation is directed by a 15member board of directors and essentially manages the organized delivery system through a lease arrangement with the county hospital authority. Today, SMC is a private, not-for-profit academic health center that is accredited by JCAHO. It also serves as the primary teaching hospital for the local university. Approximately 1100 private and universityaffiliated attending physicians and more than 400 resident physicians in the university’s College of Medicine residency program serve the community medical needs. SMC also serves as the clinical site for associate, baccalaureate, and graduate nursing programs for the university and community colleges. SMC serves as a regional and international referral service with more than 800 acute care beds. SMC has established community centers in a variety of locations, which has created increased access. In addition to specialized medical services, SMC is committed to providing community resources for education, information, and programs aimed at helping residents stay fit and h ealthy. Four out of ten patients that passed through the SMC’s door came from outside the county. SMC also operates an HMO health plan for charity care patients. In 1991, the County Commission establi shed the SMC Health Plan to operate as a Medicaid HMO or insurance healthcare plan for the poor.Southeast Medical Center case study The plan reimburses SMC on a case-by-case basis for medical services, but it also negotiates discounted rates and costs with the hospital. During the early 1990s, SMC’s payment from the health plan dropped substantially. In 1996, the program was under a freeze by the state and could not enroll participants for more than a year. Thus, SMC is not just the hospital— it is a comprehensive organized delivery system that also includes facilities distinct from the hospital(i.e., SMC Health Plan). In addition, SMC ambulatory care centers are located throughout the county. SMC w as the only public hospital in a metropolitan area with a population of one million or more that received no public subsidy. Most citizen s believe that SMC was subsidized by their taxes. In 1971, the County Commission agreed to supplement hospital revenues with property taxe s. In 1985, the county commissioners passed a quarterpercent sales tax to fund indigent care. The tax was repealed in 1987. In 1991, the county instituted a on e-half percent sales tax to fund indigent care at all hospitals in the county, including SMC. In sum, while SMC receives no public subsidy, it does receive a portion of the halfcent sales tax which depends on the preferences of the county commissioners each year. Unlike a direct subsidy, no public money is ever guaranteed. As an academic health center (AHC) SMC has multiple, conjoined missions of teaching, research, and patient care. While providi ng patient care for approximately 40% of the nation’s poor, AHCs are struggling to find a competitive position in to day’s rapidly changing healthcare environment. Until recently, they have enjoyed a privileged position atop the healthcare pyramid as a ni che provider of tertiary services. With the growth of managed care and reductions in government funding, the ability of AHCs to compete is be ing drastically undercut. It is widely recognized that multiple missions of teaching, research, and patient care contribute to the pr oduction of costly clinical services that are inconsistent with the demand for less expensive services in today’s healthcare environment. Th e majority of the services that AHCsprovide are now available elsewhere, such as local community hospit als and specialty private medical practices. Furthermore, it is estimated that roughly 70% of their clinical services can be provided elsewhere at a lower cost. It is believed, for ex ample, that AHCs are approximately30% more expensive, on an case-mix-adjusted basis than their nonteaching competitors. As a result, AHCs are losing ground to other hospitals and medical practices. They have become providers of a small number of expensive hightech services involving unique and complex care. However, they continue to be the predominant provid ers of the nation’s charitable care. As an AHC, SMC reflects these trends.Southeast Medical Center case study For example, SMC’s organ transplant center and burn unit are unique high-cost services that account for fewer than 2% of the patients treated at SMC each year. SMC Leadership In October 1994, the CEO of SMC abruptly resigned. A former county administrator assumed manageme nt of SMC on an interim basis. In1996, SMC selected a new CEO and president. The new CEO left his curr ent job as director of one of the largest public hospital systems in theUnited States because he had oppo sed privatization of that city’s hospitals. Nonetheless, shortly after coming to SMC, the new CEO began laying out plans for privatization, and at a forum on the future of public hospitals, he publicly announced that privatization was the best path for many public hospitals, including his own, SMC. Public hospitals deliver a disproportionate share of charity care compared with their private counterpart s. Because the number of public hospitals is decreasing, either by conversion or closure, there is concern about where care to the poor w ill be provided. From 1985 to 1995, the number of public hospitals in SMC’s state dropped from 57 to 29. Eight of these hospitals closed and 20 converted to private institutions. In 1997, the new CEO explained that SMC could only decide its ownership status after it decided who its partners would be and whether it wanted primarily to be a community hospital, a teaching hospital, or a county charity hospital and “we don’t know that yet.” One month later, he would become an advocate for privatization without identifying partners or articulating what it was S MC primarily wanted to be. The following potential benefits of privatization were identified prior to conversion: • Economic freedom—Private, not-forprofit hospitals can borrow and spend money more easily than public ones, which need government approval. Conversion could make SMC more competitive in the local market. • Reduced tax burden— In theory, a more competitive hospital would require less help from state and local taxpayers to stay in t he black. • Reduced regulatory burden— Freedom from state public record laws would assist in strategic planning. • Less political turmoil— Public hospital boards often get bogged down in politics. Private boards, which operate out of the limeli ght, generally can make decisions without such intense political pressure. • Enhanced ability to enter into joint ventures— Essentially, it will become legal for the private institution, SMC, to partner with others, such as a group of doctors, to jointly develop and own ambulatory clinics and other outpatient facilities. • Economic benefits—SMC could receive much lower interest rates from the bond market. • Enhanced ability to raise private funds— SMC would be more appealing to potential donors as a private, not-for-profit hospital than as an arm of local government. Potential disadvantages included the following: • Change in mission— A private SMC might not meet the community’s needs the same way a public one must. The hospital cou ld reduce its commitment to needed services such as its burn center and trauma unit, which lose money. • Reduced charity care— SMC provides millions of dollars in free care to poor and uninsured residents. Some indigent patients mi ght find medical care tougher to get if the hospital went private. • Less public scrutiny— Private hospitals do not necessarily have to comply with the state’s open government laws, making it to ugher for the community to keep tabs on their successes and failures. Southeast Medical Center case study Table 2.4 contains the results of a public opinion poll regarding the privatization of SMC. Respondents fa vored keeping the hospital publicly owned by a 3 to 1 ratio. However, the poll did not attempt to learn whether respondents under stood the differences between public and private ownership. The Strategic Plan: Move and Rebuild, 1997-2002 The strategic plan for SMC centered on privatization; that is, converting SMC to a private, not-forprofit corporation, Newco Health SciencesCenter, Inc. All other strategic initiatives were based on SMC’s conversion to private ownership. The strategic initiatives of the plan were: • The 1.5 million square foot facility downtown will be demolished. • A new 450-bed hospital and research complex will be built near the university. Approximately $100 million will be raised from private donations to fund the new construction. This wo uld address problems of SMC’s aging physical plant. Also, the location near the university is preferable because downtown is vulnerable to sev ere weather disasters such as storms and hurricanes. • The move near the university will require an estimated $100 million in private funds as well as approv al from state healthcare officials to transfer the Certificate of Need (CON) to the new facility. It should be noted that other growing academi c health centers (Portland, Oregon; Birmingham, Alabama; and the University of Florida) were unable to raise this much money in private funds. Table 2.4 Results of a Local Newspaper Poll, conducted March 23, 1997 Opinion on Going Private Should remain public 74% Favor privatization 13% Don’t know 13% Support for Remaining Public Non-white 88% White 74% African American 96% Concern about Privatization Somewhat concerned 34% Very concerned 28% A little concerned 18% Not concerned 17% • Profits from the sale of the current SMC site downtown will be used to create and/or expand satellite clinics around the county. The new CEO predicted that SMC would go out of business by the year 2005 unless this plan was adopte d. Furthermore, he projected a $14.3million profit by 2005 if the plan were implemented. The former S MC president asked the new CEO to explain what would be a fallback plan in the event things didn’t go as planned. The new CEO responded that none existed. Alternatives to priva tization had been considered, but none were acceptable. The unacceptable alternatives to privatization included: • selling the hospital to a private for-profit corporation • closing the hospital • asking for a public bailout in the form of a tax subsidy In addition, the “Shands Model” was held out as a possible future for SMC as a private hospital. The Sha nds Model refers to Florida’s ShandsHospital, which hit bottom in the late 1970s. As a public academic h ealth center, Shands couldn’t afford to make needed safety improvements to hire enough talented workers. Because lawmakers never provided the money executives believed was n eeded to run a top health center, Shands Hospital converted to a private, not-forprofit corporation in 1980. Shands ran a budget surplus that year and experienced 17consecutive years of “recordbreaking” financial performance. Privatization was credited with turning things around because it freed t he hospital from political and financial constraints. SMC officials and board members who supported conve rting SMC to private status used the hands Model as a reference. However, Shands, unlike SMC, receives a substantial state subsidy of appro ximately $10 million annually. Financial Pressures and Charity Care Much of the impetus for SMC’s conversion was financial. According to the new CEO, SMC was not likely t o survive financially as a public institution. Southeast Medical Center case study He predicted a $31 million loss by 2001 if the hospital’s governing board failed to make the h ospital private. The auditors, who were retained to verify the accuracy of these figures, put the number closer to $44 million. Under a worstcase scenario, the auditors said losses could reach $70 million. Clearly, the new CEO was not exaggerating the precarious financial future facing SMC. SMC lost market share in the county every year since 1992 (dropping from 23.4% to 15.7%). More than half of SMC’s beds were empty each night, and SMC continued to see fewer indigent, Medicare, and Medicaid patients than its competi tors. Although SMC’s revenues grew by$7 million between 1992 and 1996, expenses increased by $31 m illion, and annual net income dropped from $14 million to a loss of $46million. Cash reserves also dropp ed substantially. One of the most contentious issues that surfaced in the debate over privatization was the impact on the indigent care mission. Many worried that SMC, as a private entity, would not retain the same commitment to care for the poor and u ninsured. Similar fears had sunk previous attempts to privatize SMC in 1990. This time, assurances were made by SMC’s president, officia ls, and others that the hospitals mission would not change because of ownership. SMC’s commitment to indigent care would remain a co re mission and top priority. Furthermore, the County Hospital Authority would legally retain oversight authority for charitable care. Yet questions were raised about the public hospital authority’s ability to carry out the statemandated mission to serve the poor if SMC went bankrupt. The lease arrangement was also questioned because it did not specify how good, accessible, or extensive the charity care must be. Despite these unanswered questions, the county officials approved SMC’s request to become a private, not-for-profit corporation on the strength of the argument of SMC’s CEO that such a move would preserve the hospital’s commitment to charity care. Less than two years after the vote to privatize SMC, the new CEO testified under oath that caring for the poor was no longer SMC’s top priority. County officials now admit that they should have done more than rely on his promise— they should have (1) created an effective method for overseeing the hospital’s contractual obligation to treat the poor, and (2) determined what s anctions or punishment would be used if SMC violated the lease agreement. A private SMC, without a commitment to serving the indigent , would place an additional burden on the county, which is required by state law to provide health care for poor people. The Aftermath of Privatization Ironically, in its final year as a public institution, SMC showed a profit of more than $4 million. As a privat e hospital, its losses have increased dramatically from 1997 to 2000. Unexpected losses were not part of the strategic plan to “move and reb uild.” The CEO predicted a $7.2million profit for SMC in its first year as a private hospital, but the hospita l lost nearly $6 million in the first two months. SMC and its parent company lost $12.7 million that first year— $11.5 million on the hospital and $1.2 million on the health plan. Confronted with these losses, the CEO continued to argue that SMC was on the right course. In addition, he and his staff attributed the los ses to forces outside the hospitals control, including the Federal Balanced Budget Act, which reduced hospital funding, and an increase in t he number of patients served by managed care in the region. Southeast Medical Center case study However, it turns out that the hospital’s most significant losses were the result of the hospital’s inability as a private corporation to retain“lien authority” and essentially be first in line to collect money from the accident victims it treated. Lien authority did not automatically transfer to the hospital when it converted to a private corporation. The county attorney, who now repre sents the public hospital authority, warned that the loss of lien authority could significantly cost SMC in uncollectable revenue— as much as $20 million annually. The line authority matter was raised prior to conversion but had been dismissed by the new CEO, his staff, and consultants as not being a potential problem. SMC was now mired in financial, political, and legal problems. Employee layoffs were anticipated, but m ultimillion-dollar losses were not. Many critical issues remain unresolved following SMC’s conversion. For example, in order to sell the land on which the current hospital stands, the county would have to pay for demolition as well as removal of asbestos and hazardous wast e cleanup. In addition, it has become clear that many important issues had been overlooked in estimating the impact of privatization. The hos pital’s loss of lien authority as a collection tool has led to unexpected poor financial performance and projections of major future losses ( i.e., $20 million annually) for SMC. In addition, because the hospital had used lien money to help cover the cost of emergency care for trauma victims, some worried that SMC would is forced to reduce its trauma services. SMC officials now say the lien authority is crucial to fiscal t urnaround. In addition, when SMC went private it lost the financial protection that government agencies enjoy from lawsuits (litigation damage cap). Although legislative remedies are being pursued in an attempt to restore lien authority for SMC, the res olution of this issue appears elusive for the time being. The County Commission appears unlikely to grant SMC lien authority. Indigent care clearly slipped as a top priority for SMC and became merely one of many priorities. In addit ion, the move near the university on hold. SMC also explored buying other hospitals, the price of which c ould reach $200 million. How the purchase of these hospitals fit with the strategic plan was never explained. Finally, SMC was not able to keep its meetings secret despite conversion. There has been intense media scrutiny, and local newspapers are suing SMC in order to open the hospital’s records. Furthermore, the State Supreme Court recently ruled that (1) privately leased hospitals can not meet in secret and cannot keep records from the public, and (2) it is illegal to transfer authority from a public to a private board in an effort to avoid the sunshine laws—essentially what SMC did. The College of Medicine began to be concerned about how it would train medical students and resident physicians if its main teaching hospital … Get a 10 % discount on an order above $ 100 Use the following coupon code : NURSING10

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