HCM460 CSU Global APA The Condition of the CMC’s Emergency Department

timer Asked: Feb 22nd, 2019
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Scenario: The CEO was very satisfied with the presentation that you provided to the ED Steering Committee about the ED throughout and your SWOT recommendations. Following systems theory thinking, the CEO feels that correcting the ED throughput is essential in assuring a positive flow for patients once they are admitted through the ED. ED throughput will assist in diminishing lag time for admissions, assure timely surgical interventions, and improve patient satisfaction scores. These items are crucial since they are the essence of the financial viability of the hospital.

Thus, the CEO requested that you provide a presentation to the governing board and medical directors about the ED throughout. He would like you to develop a motivating statement that will generate support among the governing board members as your first slide. Also, the CEO would like you to create a more effective presentation that communicates the most crucial points of your SWOT analysis to the governing board members.


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COASTAL MEDICAL CENTER COMPREHENSIVE CASE STUDY I nt r o duc t i o n This comprehensive case study serves as a basis for the exercises included throughout the book. Coastal Medical Center (CMC) is a licensed, 450-bed regional referral hospital providing a full range of services. The primary service area is a coastal city and three counties, with a total population greater than 995,000, located in the Sunbelt. This tricounty area has had one of the fastest population growth rates in the country for the past five years. According to the local health planning council, the tricounty population is projected to increase by 15 percent from 2015 to 2020. Appendix A, at the end of this case study, provides detailed population statistics for the city and tricounty area. The population growth rate for households (families) has been 1 to 2 percentage points higher than the overall population growth. The growth rate of the population under age 44 shows a young and growing community. Per capita (i.e., per person) income in the tricounty area is high and increasing. As the population of the tricounty area increases, the need for healthcare services is anticipated to increase. The area’s economy is largely supported by manufacturing, with service companies and agriculture accounting for another 35 percent. Unemployment is typically 6 percent. The overall poverty rate is 12.4 percent. A recent study revealed that 40,000 city residents are below 125 percent of the established federal poverty level. H e a lt h c a r e C o s t s Healthcare costs in the region are high in comparison to healthcare costs in most other areas in the state. In response to what they feel are excessively high healthcare costs, county 1 00_Harrison (2302).indb 1 2/18/16 4:12 PM 10/12/2018 - RS0000000000000000000000574903 (Baylee Soper) - Essentials of Strategic Planning in Healthcare 2 Essentials of Strategic Planning in Healthcare businesses recently formed a business coalition, hired a full-time executive, and publicly stated their intent to achieve reduction in healthcare costs. The local press has expressed its concern about the high cost of healthcare in the local community and consistently bashes the area’s hospitals and physicians. The coalition refused to allow the three major medical centers in the area to join, despite the fact that each is a major employer. The Competition Full-time equivalent (FTE) Total number of fulltime and part-time employees, which is expressed as an equivalent number of full-time employees. Adjusted occupied bed Number of inpatient occupied beds, adjusted (increased) to account for the bed occupancy attributed to outpatient services, partial hospitalization, and home services. Profit margin Difference between how much money the hospital brings in and how much it spends. 00_Harrison (2302).indb 2 CMC has two major competitors. Johnson Medical Center (JMC) is the larger of a twohospital for-profit healthcare system, and Lutheran Medical Center (LMC) is the larger of a two-hospital, faith-based not-for-profit healthcare system. JMC is located less than two miles from CMC and is a 430-bed tertiary care facility. JMC owns four nursing homes, two assisted living facilities, a durable medical equipment company, a wellness center, an ambulance service, and an industrial medicine business. These facilities are located in the tricounty area and are within a 30-minute drive of the main CMC facility. JMC’s parent company, Johnson Health System, also owns one small hospital in the region. JMC has 1,920 full-time equivalents (FTEs), which translates to 5.2 FTEs per adjusted occupied bed. JMC recently used a consultant to reduce its FTEs, flatten its structure, broaden its control, and improve its operations in general. JMC has been averaging an occupancy rate of 74 percent. Outpatient revenues are 40 percent of total revenues and have grown about 6 percent per year for the past two years. JMC had a bottom line (i.e., net income) of $15 million last year. Bottom lines for the two previous years were $11 million and $14 million. Profit margins have exceeded 5 percent for the past three years. In essence, JMC is a major strong competitor for CMC. The organization is reported to have a “war chest” of reserves exceeding $70 million. LMC is a 310-bed acute care hospital located outside the city limits but within the tricounty area. It does not offer tertiary, intensive services to the extent that CMC and JMC do, but it is a highly regarded general hospital that enjoys an occupancy rate of 75 percent. It is especially strong in obstetrics, pediatrics, general medicine, and ambulatory care. It attracts well-insured patients from the affluent suburban area. LMC has 1,180 FTEs and typically operates at 6.1 FTEs per adjusted occupied bed. LMC provides a great deal of indigent care and, in accordance with the philosophy of the church, its budgets are set to generate only a 2 percent annual profit margin. Highlights of C oastal M edi cal C enter As a referral center, CMC offers almost every level of care, including a number of tertiary care services, with the exception of neonatology and severe burn–unit services. Many of its patients require high-intensity services. For this reason, its costs are the second highest 2/18/16 4:12 PM 10/12/2018 - RS0000000000000000000000574903 (Baylee Soper) - Essentials of Strategic Planning in Healthcare Coastal Medical Center Comprehensive Case Study 3 in the entire state. The average length of stay of a patient at CMC is 9.2 days, compared to a statewide average of 6.4 days at hospitals of similar size and services. This difference is probably attributable to the intensity of services CMC offers. CMC’s expenses per patient day are also the highest in the state, with the exception of two large university-affiliated teaching medical centers. Its FTEs per adjusted occupied bed (7.5), paid hours per adjusted patient day (35.2), and paid hours per patient discharge (238.5) all greatly exceed those of competitors and the norms of comparable facilities. CMC is currently authorized for 2,240 positions but actually employs 2,259 FTEs. Salary expenses per adjusted discharge and adjusted patient day are $2,760 and $491, respectively. A recent one-year market share analysis for the broader eight-county region revealed the data presented in Exhibit Case.1. CMC has market advantage in substance abuse, psychiatrics, pediatrics, and obstetrics. JMC has market advantage in adult medical and surgical care. At a recent administrative meeting, the following CMC utilization figures for the year were reviewed: ◆◆ Admissions are down 14 percent. ◆◆ Medicaid admissions are up 11 percent. ◆◆ Ambulatory care visits are down 10 percent. ◆◆ Surgical admissions are down 6.7 percent. A recent auditor’s report included the following notes: ◆◆ A significant adjustment was required at year-end to correctly reflect contractual allowance expense (i.e., the amount of money spent in hiring Facility 00_Harrison (2302).indb 3 Discharges Percentage of Total CMC 7,819 18 JMC 8,989 21 LMC 6,820 16 All others 19,546 45 Total 43,174 100 Exhibit Case.1 One-Year Market Share Analysis 2/18/16 4:12 PM 10/12/2018 - RS0000000000000000000000574903 (Baylee Soper) - Essentials of Strategic Planning in Healthcare 4 Essentials of Strategic Planning in Healthcare outside contractors). The data used at the beginning of the year to estimate contractual allowance expense were grossly inaccurate. ◆◆ Insurers were not billed for services by certain hospital-based employed specialists ($7 million for the past year) as a result of neglect on the part of the hospital billing staff. ◆◆ A total of $1.7 million in Medicaid reimbursement was not authorized. No follow-ups were done, and no claims were resubmitted. H i s t o r i c a l P e r s pe c t i ve CMC was founded just after World War II using a Hill-Burton grant (see Highlight Case.1) and funds raised locally. From a modest beginning with 100 beds and a limited range of acute care service offerings, the medical center has grown to its present size of 450 beds and now offers a full range of services. Credit for the major growth and past success of CMC has been given to Don Wilson, who served as chief executive officer (CEO) from 1990 until his retirement in early 2012. Mr. Wilson was a visionary and successfully transformed the medical center to its present status as a tertiary care facility offering high-intensity care, including open-heart surgery and liver and kidney transplantation. * HIGHLIGHT CASE.1 Hill-Burton Act In the mid-1940s, many hospitals in the United States were becoming obsolete because they did not have money to invest in their facilities after the Great Depression and World War II. To combat this lack of capital and help states meet the healthcare needs of their populations, Senators Lister Hill and Harold Burton proposed the Hospital Survey and Construction Act, also known as the Hill-Burton Act. This act provided federal grant money to build or modernize healthcare facilities. In exchange, hospitals receiving the grant were obligated to provide uncompensated (free) care to those who needed care but could not pay for it. The Hill-Burton Act expired in 1974, but in 1975 Congress passed Title XVI of the Public Health Service Act. Title XVI continues the Hill-Burton program by providing federal grant money for healthcare facility construction and renovation but more clearly defines the requirements for the facilities. For example, facilities receiving grant money must prove they are providing a certain amount of uncompensated care to populations that meet particular eligibility requirements. 00_Harrison (2302).indb 4 2/18/16 4:12 PM 10/12/2018 - RS0000000000000000000000574903 (Baylee Soper) - Essentials of Strategic Planning in Healthcare Coastal Medical Center Comprehensive Case Study 5 Mr. Wilson’s successor was Ron Henderson. For three years, Mr. Henderson practiced a loose, informal style of management. He seemed to sit back and enjoy himself while others ran the medical center. He was often characterized as a caretaker. The medical center made $52.5 million in 2012 following Mr. Wilson’s retirement (the result of an excellent revenue stream and a strong balance sheet), so Mr. Henderson was not pressed to make major changes. He encouraged the board of trustees, the medical staff, and his administrative staff to submit new ideas for improving community healthcare services using CMC as the focal point for delivery. An avalanche of ideas was submitted during the first two years of Mr. Henderson’s tenure. He moved quickly on these ideas and established himself as a person who made swift decisions on new ventures and kept things rolling. He simply let other executives “do their thing” and neither discouraged nor evaluated their work. His strategy was apparently rapid growth and diversity in new businesses. He made major fund commitments to new ideas but did little to evaluate the compatibility of those ideas with CMC’s mission and its strategic direction, and he usually did not consider the financial implications of these ventures. His approach was simply “let’s do it.” Before 2012, CMC was in excellent financial shape and faced few financial problems. By 2015, expenses began to skyrocket while utilization and revenues failed to keep pace. In addition, a hospital census indicated that, on average, 58 percent of CMC’s patients were Medicare patients and 18 percent were Medicaid patients. As a result, the medical center suffered from reductions in reimbursement. Notable among CMC’s excessive costs were labor, material, and purchased services. The chief financial officer (CFO) was convinced that a major part of this problem was the presence of three unions, including unionized employees in support services and unionized nursing services. Added to this cost burden was the more than $5 million being transferred to subsidize other CMC subsidiary companies. During the second year of his tenure, Mr. Henderson began to receive criticism from the board of trustees. He had added 127 new positions despite solid evidence that utilization was experiencing a steep decline. His reasoning was that the declines were temporary and that business would soon be back to normal. In 2015, the medical center suffered a net loss of $16 million (see Appendix B). Surprised by this major loss, the board of trustees fired Mr. Henderson. They contended that he should have informed them of these serious problems. They felt that a better strategic planning process should have been in place for the selection of projects, on which millions of dollars had been spent. The board of trustees could not understand how overall corporate net income could drop to a loss of $16 million when $7.3 million in profit had been made the previous year. Board of T r u s t ee s CMC’s governing board has 27 members. All of its trustees are prominent, influential, and generally wealthy members of the community. The board is self-perpetuating, meaning its members have continued their positions beyond the normal limits without any external intervention. The same chair has served for ten years. Average tenure on the board is 17 years. Committees of the board are detailed in Exhibit Case.2. 00_Harrison (2302).indb 5 2/18/16 4:12 PM 10/12/2018 - RS0000000000000000000000574903 (Baylee Soper) - Essentials of Strategic Planning in Healthcare 6 Essentials of Strategic Planning in Healthcare Exhibit Case.2 Committees of the Coastal Medical Center Board Committee Size Meeting Frequency Ambulatory care 11 Monthly Audit 9 Quarterly Budget 18 Quarterly Construction 13 Monthly Executive 16 Monthly 9 Annually Finance 13 Monthly Joint conference 24 Monthly Material and equipment 11 Monthly Patient care 11 Monthly Personnel 11 Monthly Public relations 9 Monthly Quality assurance 9 Monthly Strategic planning 16 Monthly Executive compensation One physician-at-large is included on the board. The chief of staff and the CEO attend all board meetings but are not allowed to vote on board decisions. There are no minority members despite the fact that racial minorities account for 12 percent of the service area population. Only one of the 27 members of the board is a woman. The average age of the trustees is 66. P a r e nt C o r p o rat i on The parent corporation of CMC is Coastal Healthcare Incorporated. A parent board was created through corporate restructuring several years ago, but its role has never been clear. This board is made up of friends of the most powerful trustees of the CMC board. In essence, when corporate restructuring was the “in” thing to do, this holding company was formed. By appointing a few CMC trustees to also sit on the parent board and by appointing friends of present CMC trustees, it was believed the two boards would function as one 00_Harrison (2302).indb 6 2/18/16 4:12 PM 10/12/2018 - RS0000000000000000000000574903 (Baylee Soper) - Essentials of Strategic Planning in Healthcare Coastal Medical Center Comprehensive Case Study 7 happy family. However, there has been constant conflict from the beginning regarding the relative powers and roles of the two boards. The parent board has 19 members, all of whom are white and male. The backgrounds of the parent board trustees mirror those of the CMC trustees in that they are prominent and mostly wealthy. Membership includes bankers, attorneys, business executives, business owners, developers, and prominent retired people. Committees of the Coastal Healthcare Inc. (parent) board are detailed in Exhibit Case.3. The following are some of the conflicts that have occurred between these two boards over the years: ◆◆ The parent board refused to approve the appointment of a new hospital CEO selected by the CMC board. ◆◆ In 2013, the two boards hired separate consultants to develop a long-range strategic plan. Two plans were produced but were never integrated and never really implemented. ◆◆ Committees from the parent board often request information about functions of the medical center, creating conflict because the parent board has a tendency to micromanage CMC’s routine operations. ◆◆ Separate committees of both boards spent more than two years trying to revise CMC’s mission statement. M e di ca l S ta f f The medical staff at CMC has historically had difficulty cooperating with the board and administration. Patient length of stay is excessively high in most specialties, yet the physicians refuse to be educated on reimbursement and the need to reduce length of stay, excessive Committee 00_Harrison (2302).indb 7 Size Meeting Frequency Executive 11 Monthly Finance 11 Monthly Strategic planning 11 Quarterly Exhibit Case.3 Committees of the Coastal Healthcare Inc. (Parent) Board 2/18/16 4:12 PM 10/12/2018 - RS0000000000000000000000574903 (Baylee Soper) - Essentials of Strategic Planning in Healthcare 8 Essentials of Strategic Planning in Healthcare tests, and so on. Approximately 90 percent of the medical staff also has privileges at one or more competing hospitals in town. Further, medical staff members have set up their own diagnostic services, especially the radiologists and neurologists, despite the fact that they were granted exclusive service contracts at CMC. In recent years, the specialists, who represent the majority of the medical staff, have been increasingly dissatisfied. They complain that their referrals are decreasing or remaining flat and that CMC is not doing enough to help them establish and maintain a sufficient number. Hospital admissions for specialty services are declining drastically. To compound the problem, the competing medical centers are courting these specialists aggressively with attractive offers, such as priority scheduling in surgery and other special arrangements, all of which are legal. The medical staff also rated various aspects of medical center operations as unsatisfactory in a recent survey. The subjects of their complaints ran the gamut and included the following: ◆◆ Nursing services, and especially the nurses’ attitudes, are not satisfactory. Nurses have formed themselves into shared governance councils and are taking issue with both physicians and administration regarding their autonomy. ◆◆ Excessive delays exist in every aspect of operations. Surgical procedures start late, supplies or equipment are lacking when needed, and processes for admitting patients take too long. ◆◆ CMC’s recent Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) scores confirm doctors’ perception, with satisfaction with nurses’ communication rated only 74 percent (Appendix C). Patient satisfaction with physicians’ communication was even lower at 72 percent. ◆◆ Medical staff members think they should have more voice in both financial and operational matters, especially in capital budgeting. They believe they are asked to provide free services too frequently (e.g., by committees), and many have refused to serve without compensation to offset the practice income they have lost. There are also quality problems. Two physicians should probably have their privileges revoked, three apparently have substance abuse problems, and several have not kept up with current practices and should be asked to retire. Persuading physicians to hold elected offices and accept committee responsibility has also been difficult. Payment of honoraria has helped, but few are still willing to serve. More than $200,000 has already been paid out to entice doctors to serve on committees. 01_Harrison (2302) FM.indd 8 2/19/16 2:16 PM 10/12/2018 - RS0000000000000000000000574903 (Baylee Soper) - Essentials of Strategic Planning in Healthcare Coastal Medical Cen ...
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