ESSENTIAL FACILITIES CRISES – THE COST OF INSTITUTIONALIZED INEFFICIENCIES - BAILOUT SITUATIONS

Author Richard Solomon is a conflicts and crisis management lawyer with 50 years of experience in business development, antitrust and franchise law, management counseling and dispute resolution including trials and crisis management.

he exigencies of the marketplace – that euphemism for everything that can go wrong moving in the direction of doing just that – will place many essential facilities institutions in line for going hat in hand for bailout money. This includes hospital systems.

What will they have to say about themselves and how will they have to back that up are present tense questions for all of them. They are used to making reports that deal with operating profile information. Will what they have said about themselves in the past be questioned by what they have to say about themselves now on their “applications”?

Will they find it worth while to clean up their acts in this or that instance to facilitate receiving what is needed without difficulty, or will they, like the USA car manufacturers be able simply to fly down on their company planes and say “Gimme da money!” It seems to be working out that way for the banks and the car companies. Why not the medical services industry? The political situation seems about the same – many people need them to be helped. Why bother with “issues” or preparing for issues?

I will use a large community hospital as the context for this discussion. The issues are not yet resolved at this or at the many other similar hospital systems to which this article is currently relevant. Due to ingrained attitudes of entitlement, the jury is still out on whether or when they will be.

In the course of involvement with medical institutions occasionally over the years, I have come to appreciate that while they may be public resources, their governance is often otherwise.

In what we used to think of as normal times, the symptoms of this mismatch rarely surfaced in any public setting. In times such as the present, there is no visible financial cushion to absorb the substantial inefficiencies that result.

There are several areas in which critical mass crisis can manifest itself quickly. Only two of these are in the business management functions of this particular organization at this moment. The critical relationships permit the approval and acceptance of unfavorable agreements involving insiders. This is not a strange phenomenon in medical economics. Over the years insider opportunism grew to such proportions that not even the power of insurance companies as countervailing resources was insufficient to bring about balance. Legislation and regulations had to be adopted in order to try to eliminate the impact of physician ownership of diagnostic labs and other resources with which diagnosing and prescribing physicians were requiring patients to deal. In one instance that I specifically recollect, the treating psychiatrist’s diagnosis and associated forensic participation depended absolutely upon a family’s consent to the patient being sent to the physician’s facility.

The history is sufficient to have made the problems serious enough to affect the financial viability of medical institutions and of major projects within those institutions.

The current situation involves insider self dealing in the form of facilities rental/leasing by institutions from landlords that are physician controlled. Rents have become so out of balance with comparable rents for similar facilities that the allocation of the expense spotlights the income statement of the project all by itself. It also translates into rent overcharges to physicians with staff privileges who are “urged”/ required to lease these facilities. And that is but one of the issues. These owners are reluctant to revise agreements to accommodate needed relief. It appears that only the immediate public exposure of the facts in public hearings may hold the potential to enable remediation. Negotiation isn’t working as it should, and the beneficiaries seem to have kept track of similar opportunities having been taken advantage of by other insiders who are not now being asked to give back. Think of it as a game of chicken.

Think of it as a situation that is presently rather pervasive. Will medical institutions seeking bail out assistance because of patient loss of insurance coverage with the loss of jobs be required to submit to financial management protocols as a condition of assistance being given? Can Secretary Designate Tom Daschle pass out large checks to hospital systems that are pregnant with insider opportunism without “transparency” being forfeit in the process? Will the relevant trade associations/professional societies be able to lobby successfully for the government not to look too closely at the books before approving bail out money? The countervailing forces are all quite powerful and all quite aggressive. I doubt that insider opportunism will prevent access to bailout funding, as it probably won’t be a regulator agenda item. If internal hospital politics don’t resolve it, it will continue to fester. Far more likely to create bailout funding problems at the “gatekeeper” level will be deficiencies in medical billing management.

Medical billing is part art, part science, a technique for accounting for medical services that are to be paid for by insurance carriers. Decades of back and forth battles amongst doctors, patients, hospitals, clinics and insurance companies have produced a system for itemization of charges that medical residents attend classes to learn and that medical offices have personnel that do nothing else but manage medical billing. Those who do it well are valuable beyond imagination, for they enhance both percentage of receivables collected and the speed of collection.

Statistics are kept that provide benchmarks for medical billings efficiency. What skews these stats includes not only ineptitude at medical billing management, but provider sloth and dishonesty as well as claims for deficient or failed provision of services. Because of politics within provider organizations, the easiest to fix is medical billing management ineptitude itself. To be sure, provider organization politics can make remediation difficult. Managers have mentors who protect them when sloth and ineptitude should really just be weeded out. Organizations become wed to their own in house medical billing management teams and refuse to go out and hire really competent firms that will handle it at highly professional levels of performance. The really good ones tout their statistics.

In the situation in this particular article, the hospital system has its own in house medical billing managers whose performance is rather dismal. There is substantial political investment in a large number of employees who would find it very hard to be hired elsewhere. But they do need to go, and capable outside providers brought in.

Since this is the single most noxious choke point that relates to effective management of possible bailout money, this issue may get resolved if Secretary Designate Daschle is a serious candidate for the effective use of very short resources. There are choices of approaches here, but they should be applied in an aggressive manner to limit plain old wasted funds. Will that be required of hospitals when it is not being required of others receiving bail out assistance? Great argument, that. We just don’t know, and the subject lacks sufficient sex appeal for voters to become militant about it.

If government performs consistent with history rather than with rhetoric, medical billing management improvement may remain a lost opportunity. It is, however, the single most obvious choke point in financial management in hospital systems. It ought to be the pride of every medical organization. Too bad that it isn’t.

The coalition of these and other medical management issues with the loss of patient insurance coverage revenue from job loss will cause a lot of sleep loss and a lot of crisis management counseling opportunities in the near term. Someone will be the test case. Who that is may be determined by a disgruntled former colleague or employee who knows where the “stuff” is buried and decides this is the moment to get even. I bet you could invent a board game with this scenario.