Loading...
HomeMy WebLinkAbout1984 I n~ _ MEDICAL CONSULTANT ASSOCIATES, INC. 14180 Dallas Parkway, Suite 400 L i Da es, Texa< 75240 lr ` ` t ik'4) 788 1962 D ) aX 6 July 1, 1984 III Honorable Chris Hartung City I,4anacler, City of Denton 215 East McKinney Street Denton, Texas 76201 Derv Chris; 'phis Ietcer is to formally propose two protects for the City: A brief review of operations at Plow Memorial hospital and a more comprehensive opinion survey and needs analysis targeted at the physician staff and potential physician staff at the Hospital. During the past year, the Hospital has experienced a severe cash shortfall, due primarily to an unfavorable reconciliation with Medicare over the Hospital's cost reimbursement It is perceived that the city needs an independent analysis of this shortfall to assure that there are no fundamental ongoing operational problems at the Hospital. In addition, this year Medicare has converted to a prospective payment system of reimbursement which our exper.icnce has shown to be potentially devastating to Hospital cash flow. It is perceived that the city needs certain assurances that the i?osp.ital is properly couche to survive this new reimbursement method. The proposed analysis will address these two areas, specifically. It is estimated that the project will require 2 - 3 man days onsite and apr)rox.imate.ly 2 days off-site. our b.ilIinq rate is Seventy-Five Dollars {$75,00) per hour for consultation with travol time billed at half-time, the total cost of the analysis should he less than $3,000.00. Honorahle. Chr s Hartunq July 3, 1984 Page Two The proposed opinion survey would serve the purpos" of objectively defining the needs in terms of capital improvements and staffing necessary to encourage community physicians to Utilize ['low memorial to its capacity. Additionally, the results of. the survey will provide the Council ivith viable alternatives as to its direction in planninci for the future of the Ho So i.taI Finally, the survev should serve as a positive statement of the City's ongoing interest in the Hospital's future. I would propose to conduct the survey and follow-up, personally, and I would estimate that the entire project would require eight to ten weeks to complete. The total cost to the City should not exceed Ten Thousand noll,,es ($l0,OD0.0O) Chris, I feel that '_,oth of t:h-?se prof-cts would be most beneficial to you, the Council, and ultimately to the Hospital, We look forward to serving the City and I will be available if any of clie points in this proposal need further clarification. Yours very truly, Stephen G. Clayton President SGC.cgt STATEMENT OF CORPORATE QUALIFICATIONS MEDICAL CONSULTANT ASSOCIATES OR I It takes nearly as much abih'y to know how to pro it by good advice as to know how to act for oneself." Francoi,; de la Roc Iefocauld - French Epigrammatist - 1613-1680 "They that wi'I not be counseled cannot be helped. if you do not hear reason, she will rap you on the knuckles." Benjamin Franklin - American Philosopher and Statesman - 1706-1790 "He gains wisdom in a happy way, who gains it by another's experience," Titus Maccius Plautus - Roman Dramatist - 254-184 13,C. Medical Consultant Associates was formed in 1978 by a group of Principals well experienced in the management consulting field. The objective of the firm was, and remains, the provision of management THE FIRM consulting sarvices to health care related organizations. The firm is owned by its employees and has no ties to other organizations, thereby fostering complete objectivity, The Company is dedicated to the health care industry and performs services in every part of the country. Each client is assigned to a partner who is responsible for the overall project, as well as other consultants who are retained, if necessary, for - the assignment. As an organization, we are committed to pragmatic, results-oriented solutions, Our staff is sensitive to the singularity of each client and recommendations must fall within the capabilities of the client for implementation. Analysis and subsequent recommendations which cannot be implemented are a sterile exercise in report preparation. We stress the practical and flexible application of sound management Practices. Project continuity is nurtured by participation in the irplementation as well is the planning phase. I h The health .are industry is a dynamic field, Now, and in the foreseeable future, there will be an atmosphere of unrest uI This environment often puffs an or and high impact change. PHLOSOPHY once. 9anization in several directions at The industry must constantly implement new ways to achieve results and sometimes action must be based on sketchy and incomplete knowledge. For this reason, our staff has been chosen for lne experience and creativity as well as consulting expertise, Our recolmmenda(ions must be able to work in the real world. The members of our firm are accustomed to functioning as a team and have a wide range of training and experience in the functional relationships of health care organizations. ical nsulta Associ as the ates project owes hroutgh these phases, which are r tailored to o the individual client: " Data Gathering • Analysis ' Recommendation ' implementation • Maintenance The members of our staff are active in industry organizations and pate in pro essi nneedsrof each cliefnt receive t he industry programs attention of ~ a principal in the firm. the Most client organizations find that management consulting services offer several advant2gE s: USE O F • Objectivity Impartial and fresh viewpoint, free of CONSULTANTS personal ir,erest, internal loyalties, organizational tradition or preconception. • Analytical Skills - Objective analysis of the situation resulting in the isolation of the real problem(s) and its underlying causes, • Broad Experience - While no two organizations are exactly alike, few situations are entirely without precedent. Our staff has learned what to anticipate, which action to take, reactions to expect and what ingredients are necessary for success. • Concentrated Attention - The external consultant is free from distracting day-to-day responsibilities The client organization may neglect situations because of insufficient time. The consultant's expertise may only be needed for a short period to help in translating recommendations into positive action without adding to permanent overhead. Innovation - The consultant introduces new concepts 2nd helps point out new directions. He often acts as a catalyst drawing out and articulating worthy ideas + which may have been lying dormant within the organization. Our staff has been chosen for their abilities in innovation and teamwork as well as competency and experience. Other prerequisites include: STAFF • Theoretical and practical background in consulting • Personal commitment to management consulting as a career • Familiarity with the lines of communication in the industry • Experience in line management • Technical expertise in an,;illary fields The academic disciplines represented by our associates are listed below, When coupled with perception and experience these disciplines constitute a powerful tool in the resolution of complex and diverse problems. • Organizational Management • Personnel Management • Information Services • industrial Engineering Economics • Mathematics 0 Systems Accounting • Psychology 0 Finance • Marketing 4 Aud",'.ig and Accounting 0 Data Processing The staff of Medical Consultant Associates has completed over eighty ENGAGEMENT consulting engagements on behalf of our ndustry clients. This experience has con' ibuted to the 're.,ervoir of knowledge' available for EXPERIENCE other projects. ThF staff has also vmpleted related engagements at over 200 sites i, thirty-seven states. • Economic and financial analysis • Organization development • Evaluation of programs, policies and projects • Definition of functions • Development of economic and financial models • Manpower planning/recruitment • i Management and support services • Systems/procedures/methods development • Management information systems, design-and evaluation • Leadership development I • Management operations and organizational analysis II • Health care administration • Regulatory analysis • New ventures • Staffing and facility utilization • Management information systems vendor selection • Management information systems-implernentalion • Doc~jmentation support/ retrieval • Cost/benefit analysis • Personnel training • Evaluation of competition j • fler:ormance appraisal l • Planning assistance • Communications • Implementation assistance • Economic stablization All of the clients of Medical Consultant Associates are in the health care CLIENT industry and fall into the following groupings; • Private Single-Specialty Medical Groups AREAS • Private Multi-Specialty Medical Groups • Hospitals • Hospital Management Companies • Medical Schools • Computer Service Bureaus specializing in Health Care • Computer Firms offering Turnkey Systems in Health Care • Third Party Carriers and Intermediaries • Public Agencies • Other Consulting Firms. 1 In resl)onsa• to the increasing demands of our client industry, Medical Consultant Associates offers the following range of sophisticated, SERVICE inter-related services. Our approach is results-oriented and post- AREAS effective working with and through the client staff developing proficiency, self reliance, qualitative and quantitative improvements. • Program planning and eosiuation f • Goal setting and priorities • Management services • Health care information systems • Financiai management • Technical assistance • Long range planning and forecasting } • Organizational planning and development • Multi-institutional operations • Marketing studies • Ambulatory care administration • Project feasibility studies ; • runctional planning • Operational and productivity analysis • Organizational structure • Compensation programs • Economic stablization f • Leadership development • Third-party relations • Job evaluation • Work measurement • Supervisory and management development • Professional scheduling • Accounts recejvable analysis • Staffing studies i • Work flow analysis • Credit and collection !r • Cost containment • Fee analysis • Reasonable charge analysis for Medicare profiles • Management audit c! Medical Consultant Associates will be pleased to furnish detailed ! information regarding its services while working close,y wish clients to SUMMARY tailor a specific approach to fit the reeds. E Upon inquiry a complete disclosure of personnel resources and arEis of particular expertise will be furnished to the prospective client. Medical Consultant Associates will be happy to provide references W no can give you an account of our performance in client settings thac are f similar to your own, i i TO DISCUSS YOUR NEEDS WfTH ONE OF OUR PARTNERS, WE MAY BE CONTACTED AT OUR CORPORATE HEADQUARTERS. I MEDICAL CONSULTANT ASSOCIATES E 725 SOUTH CENTRAL EXPRESSWAY SUITE A-12 RICHARDSON, TEXAS 75081 (214) 235-1365 BRANCH Of:FICE 5545 FREDERICKSBUP0 ROAD, SUITE 200 SAN ANTONIO, FEXAS 78229 (5) 2) 340-2228 1981 'b Hospital Corporation Of America Philosophy We believe the following principles to be true and timeless: 1. We will continue to develop an organization that will deliver quality health care at a reasonable cost in accordance with each community's needs while generating a reasonable raturn on investment, 2. We attribute our success to, and recognize that our future success is dependent upon, developing and utilizing our greatest asset - people. 3. We have rea; confidence i , 9 in our employees and will relate to and build upon their strengths. 4. We will maintain a compensation policy which closely relates perfor- mance and rewards. 5. We will make sure that employees clearly understand their duties and responsibilities and their authority to discharge them. 6. We are committed to an effective communication system that will pro- vide appropriate and timely interchange of information. 7. We believe in decentralized management whereby professional leader- ship will provide a climate of high expectation, trust and integrity. 8. Management will be encouraged to work with physicians to effectively deliver health care without conflict of interest. 9. We are committed to participate in personal and corporate activities benefiting the community, state and nation. 10, We are committed to a thorough and thoughtful planning process which will guide the destiny of HCA. 1. We will maintain a strong, viable financial position which will continue to deserve the respect of and give confidence to the financial an..i in- vestment communities. 12. We are committed to conducting our business with integrity and render. ing uur services always on a high, ethical level. i I H At Hospital Corporation of Arnerica Goals 1. Tv demonstrate that the free enterprise system can provide a high quality of health care at a reasonable cost. 2. To achieve international leadership and to maintain a reputation for ex- cellence in the health care field. 3. To develop an organizational climate of productivity that provides each individual the opportunity to make an increasingly significant contribu- tion to the organization with appropriate personal rewards. 4. To maintain a position of trust, confidence, respect and compassion to i our patients, employees, and the communities we serve. 5. To further develop a flexible, responsive, professional organization capable o` meeting the needs of and realizing the opportunities within the health care field. 6. To develop sufficient profit to support the growth of the company and compensate investors for their risk and use of their money. 7. To maintain a strong, viable financial position which will continue to deserve the respect of and give confidence to the financial and invest. ment communities. 8. To continually examine the health care industry for appropriate oppor• tunities for growth, growing according to definitive plans based upon pragmatic research. 9. To attract to Hk A intelligent, enthusiastic, loyal, trustworthy employees who can identify ciosely with HCA's philosophy and goals, and be capable of making a significant contribution to the achievement of HCA objectives. 10. To provide a climate, facilities and services in which physicians can practice medicine in a manner which contributes to superior health care, Hospital. Corporation He% A of America Our Mission To attain international leadership in the health care field. To p _ je excellence in health care. To improve the standards of health care in communities in which we operate. f To provide superior fa,.-Jities and needed services to enable physicians to best serve the needs of their patients. "fo generate measurable benefits for: The Company The Medical Staff The Employee The Investor and, most importantly, The Patient R Position Paper Regarding the Direction of Flow Memorial Hospital E f presented to I Denton City Council and Denton County Commissioners Court by Board of Directors Flow Memorial Hospital Denton, Texas February 4, 1985 I I• Executive Summar For the purpose of concisely stating the basic ore in this position paper, following summation i mi the IS ses contained offered. A• Premise. p?°w ^Iemorial Lospital conti.iuina cannot hope to e Gist by its present course. g. Proms ioith Present Cour s. 1• Operating losses due to decreased reimbu traditional sources rsement from a. Medicare payments down b• decreased patitent admissDonssvstem - 1984) c of lengh of patient stay d. new providers of traditional hospital reducing share of profita7le services services ambulatory surger y (s, e. business' intent centers ur,t, centers, etc.) benefits to reduce cost ')f health i 2. Uncompensated care a. Flow's uncompensated care equals 29%, f approximately three times kne national average cureentsfundi.ng available for uncompensated c• competi ive hospitals referrin cases to Flow g uncompensated d• percentage of uncompensated care is increasing 3 Image of public hospital a• difficait tO recruit physicia b. tendency for patients with adeqs nuate financial resources to shy away from a public hospital c. stigma created by exposure of problems due to open nature of board meetings and meetings of city or county where hospital is discussed 4. Limited access to capital funding a. Flow unable to generate profit sufficient to meet capital needs b. Poor financial condition restrains abilities to borrow funds or to rePay loans which might be approved C. significant needs for capital funding 1) ongoing replacement of equipment 2) renovations per master plan 1 3) redical office building 4) psychiatric facility 3) outpatient services facility G) other possibilities (e.g., hostel, skilled nursing facility, hispice, etc.) f C. Potential Solution 1. No action - unacceptable 2. Strengthen present system - unlikely and less than optimal i I 3. Management contract - does not significantly effect major concerns d. Lease - can be optimal with appropriate cnntrac..ual j arrangement I 5. Sale - could be as effective as lease but more difficult to accomplish and at no noted advantage over lease D. Recomwendation 1. Decide optimal direction among alternatives 2. Pursue information and/or proposals to be considered 3. Develon an action plan for specific steps to occur per decision on direction 2 1I. Introduction The Purpose of pon this position paper is to document the currant state of organization of Flow kemorial Hospital,mand and suggesting he concerns related to that organizational f n array of alternatives for the future. It is the hope of its a-- authors that this paper will in no way be perceived as criticism of individuals or entities involved in the ownership or operation of Flow Memorial Hospital. The authors of this paper believe that Flow has a number of significant areas of concern which need to be addressed for the viability and effectiveness of operatioa the hospital in the t,e>t interest of our Citizenry. To fail to address these issues in a timely manner would seem to indicate that Flow Memorial Hos would most certainly fail fi available citizenry ll;.• and therefore would nottbe to serve our citizen in the future. i Therefore, it is tiee desire of the authors of this paper to inform the parties of the concerns of Flow Memorial Hospital and to explain the alternatives. Those alternatives which seem most appropriate to the authors to redirect the hospital in a wav that could best accomplish the mission of the hospital will also be addressed. The authors of this paper offer its contents as a catalyst for change necessary to optimize the balance of serving the intended mission and dealing with the realities of the current and future environment. 3 -he Current Concerns of r F lcw 4emor4al :?osoitai In summar,., :crm, the concerns relating to the future viability of Flow 'leflOri,11 Hospital can be categorized as follo.as: .a. Poor current financial position 9. LImited capability to access capital C. nabilty to effectively commete D. Chancing patterns of health care delivery while these categorical designations interrelate sign:ficant1,,, let us undertake a discussion of each separately to illustrate the concerns of Flow Nlemoriai Hospital. Financial positicn - ~)nw Memorial Hospital suffered a $1,002,952 loss for the _`iscal year ended September 30, 1983 (which as c£ this writing is the most recent complete fiscal year whit; has been subject to an independent financial audit). The fact that the financial statements are audited is significant because or the high potential for reversing entries due to the proportion- ately high ratio of allowed deductions from revenue in our facility's statements. B- adhering to the philosophical stance of accepting all patients regardless of their ability to pay, c'SIH has a ver; high proportion of accounts which are questionable in terms of payment. For fiscal near 1983, the percentage of in the audited %ersion of Flow's financial ostatements yamountedttole 291 or $4,909,366, compared to a figure less than ten percent in cnTparable hospitals. The components of deductions from revenue include: 1) contractual allowances to federal governmental reimbur- sers (i.e., the difference between our established charges incurred in caring for Medicare and ''edicaid patients, and the amount actuall: paid to Flow for t:ie care rendered patients under these federal programs), 2) bad debt allowances, 3) write-offs due to care delivered to the indigent (including Flow's obligation under the Hill-9urton program), and 4) miscellaneous allowances (such as discounts and administrative ,allowances). Due to the relative insi,nificance of item 4), only the first three areas will be furt'hor discussed herein. In regard to contractual allowances to Medicare and +ledicaid, the percentage of deduction to total federal program revenue of 25z 4 is in an acceptable ran concern only i_° la Et ',aige. This item would become a significant thou t analysis. I management decisions regard ing maintenance of preportionrientdof expenses to net revenues :o,-:Id be sheer cl'a'ding FY 1983, the anal;; guesswork. In prior years and in- durincr the vear szs of this contractual allowance ce_ ainty after the conclusion to ascertain and only a certhe cost re h n of the fiscal "ear and completion r_im port. Beginning October, 1983, the new Medicare bursement system allowed for a much more accurate concurrent nalySis of t:-:e actual contractual ospital's ^ercentave or patient „ allowance, Flow '•temoridl icare has consistently r.in at 30's which isu~elltbelow national Navera,es; therefore, contractual allowances, while a significant `actor, are quite managanle and tolerable at current levels. :chile t..",e year ended September 30, 1984 (FY 1984) remains yet unaudited, it appears contractuai allowances under the new Nedi- care reimbursement system (abbreviated DRGs for Diagnostic Related Groups) has not significantly altered the financial position of Flow compared with recent ,years; BE ?TOTED THAT THE NEW SYSTEM HAS THE POTE;ITIALoFOReTHEIFEDEPALJ GOVERN'EENT TO CC`dTROL MEDICARE PROGRAM EXPENSES dECHAi1ISM AND IT IS PROJECTED THAT FUTURE YEARS' THROUGH THEIR `lE;, BURSEMENT TO FLOW AND AL;, HOSPITALS WILL 3E MEDICARE REI:d- F UP.THER DIFrICULT'1 FOR F;IH. LOVER, CAUSING 'CE: The remaining two components of deductions from revenue--had debts and indigent care--are actually not clearly distinguishable from each other, primarily due to lack of definition of indigence, It is not necessarily important for the purposes of this paper that a distinction be mace but note that this care is entirely, uncompensated, It is significant that uncompensated carepro- vided by FIff is extraordinarily high for a ho; at S4,363,040 or fiscal year 1983 and a pital of its size tionate range for , T propor- pparently rS CLEAR in that '.V.T.THCUT S~r,,•,'IF.TCANTca- year 1984. WHAT IS IS THAT SU'H .U F3^P0RTIC2IANT SUBSIDY FOR THIS "FREE" C'-Pr PROVIDED AT 'ZOFITABLE OPERATION A FINASC.IALTLOSERKES AN OTHERiJISE Cur:_n._y there exists no subsidy for uncompensated care, such as a reiably consistent tax-based subsidy where citizenry, thrc.igh respective governmental entities, meet responsibilities for this uncompensated care, The burden of this care should not be borne by a hospital but rather by the public, Other factors having a bearing on the financial status of rMH will be addres_3ed in other sections of this paper, Limited ,accessibility F are significant, while capital Flow's needs or capi al °undi there exists the appropriate level ofannual sfunds rule al t`•: t umb he replacement of equipment and ether capital expensesi131 ofo-heye ooerating budget is often used. This estimate is reinforced by the fact that the average oner.atinq margin for not-°or-profit hospitals has consistently run between 4a and 5 for several 3 f ,.ears and commonly operating margin has been the primary source of capital funding for these hospitals. Given the extraordinarily excessive burdens of uncompensated care, Flow has not had a significant operating margin to fund its capital equipment re- place:nent needs for at least the last several years; thus, FMH has some cumulative needs in excess of the typical 53 projection. The capital budget for the current year is $1,438,785, indicative of the need for some "catch up" in replacement of capital equipment. In addition to needed capital equipment on a catch-up basis and then ongoing into future years, Flow has several structural needs which .rill require capital. Flow's planning consultants have roughly estimated $13 million needed to renovate the existing hospital structure to gain some operating efficiencies, alter an older desiqn for today's delivery patterns, and correct some existing deficiencies. Also, there is need for a medical office building estimated at $3 million, and a psychiatric facility at around 15 million, Other potential capital project needs exist but such discussion would be quite speculative at this point. 'chile some funding has been made available from the City and County since October 1, 1984, there is no clear assurance of commitment that such funds will be made available beyond the current fiscal year. Flow's public role would significantly limit its access to the capital market even if its financial position were better. Consistent disagreement between the City and County create an atmosphere that effectively eliminates the possibility of either a successful bond issue or borrowing under- written jointly by the two bodies in a position to do so. Therefore, Flow's access to capital is extremely poor and capi- talization will be necessary for Flow to remain viable in the future. Inability to Cfmfectivel Compete - In addition to the financially re ate 9roo es already noted in this paper, the existing organi- zationai struct,ira czeates encumbrances to effective competition in the marketplace. Entities holding a responsibility to make significant decisions on behalf of the public regarding Flow are a natural encumbrance. Dealing with multiple parties to secure decisions is often counterproductive. Differences cause decisions, which should otherwise objectively be made in the best interest of Flow, to go askew. Dealing with individuals or entities whose responsibilities for Flow are but a minute portion of their other responsibilities of office severely dilutes the interest, commit- ment, and abilities of those who are called upon to make extremely important decisions. In this arena, the competition is leaving Flow far behind. :Many other entities in the environment today are capable of swift, well-educated, business minded, objective, goal-oriented decisions. In addition, these facts are quite visible due to the ?ublic nature of the entities involved and of the hospital itself. 'chile the Onen Meetings Act is conceptually sound for public entities, its impact on an entity in a highly competitive environ- ment can be quite devastating. Our competitors can and do know 5 i of our every significant move quite early in any process, while those oxivate entities in the same marketplace have no responsi- bility to share their plans, objectives, anomalies. or anything other than what they might strategically avant to share with the public to enhance their competitive position. Further, the impact of erroded confidence in a public hospital must certainl,Y be a fact. Physicians, patients, citizens and employees are exposed to many negative {and positive) aspects of the organiza- tion while private competition needs share only t:ie positive. The image created of our hospital is not comparable when comparing - our public hospital with private concerns saho have negative aspects which are never disclosed to the public. The importance of this misperception should not be underestimated and may in fact be the single most important contributing factor to our other problems. Chanaina Patterns of Health Care Del; veryhand Reimbursement - ese nave evo ve quic,< y and continue ramatic c ang e. Our. weak organizational structure and financial position create a marked inability to react and proact again in these environs. ' Health care is definitel shifting to lesser definitely cost patterns of delivery. Increasing outpatient services, man physicians' offices or clinical facilities, are causing shifts in historical patterns of hospital utilization. In-patient census has turned downward in response to consumer trends and pressures through insurers, most significantly Medicare, toward less expensive services. Health maintenance organizations I (H~ios), preferred provider organizations (PPOs), and other muta- tions are gaining ground as insuring mechanisms. Providers need I to think toward affiliation with such entities; however, Flow's position organizationally and financially make it less attractive for such affiliations. Flow's effective response to these 'rends is essential. 1 7 i r7. Alternative to Existing Concerns of Flow tiemorial Hospital in this section ✓e shall suggest alternatives to the many concerns stated in the rrevious section. First, and always an option in any de^ision, could be to do notaing at all and let Flow's fate take its own course. TTiis rec.uire minimum conviction on everyone's part but as seems - obvious b,., Jiscussion creviously in this paper, would cause certain failure of Flota Memorial Hospital. As responsible offi- cials wits respective responsibilities and trust of the public, to do noting seems inconceivable. Secondly, the support base as it exists could be strengthened. This would require renewed commitment, cooperation and under- standin7 on the cart of the hospital officials, City Council, and the Commissioners Court. Dedication to financial stability in operations would have to be agreed upon by all and avenues of capital f,:ndinq would have tc be undertaken. Purpose of the hospital and concise objectives would have to be agreed upon by all. 'dajor undertakings would have to occur on a swift basis. Responsibilities for all parties would have to be clear and agreed upon. Differences of :,i;c,ion that have persisted for f sears would have to be set aside. This option could be quite attractive in many respects but would only partially resolve some problems inherent in a public entity such as ours, spelled out in pre!'ious sections. lode would be moderately competitive in the marketnla-:e. Capital accessibility would be less than optimal. ' Reconciliation on the part of the current entities involved would seem to be most difficult to achieve and then significant com- oromise would exist in the organizational structure. Thirdlv, vie could contract for management of Flow. By doing such, we could introduce a third party perspective in decisions made regarding operation and remove much non-professional involve- ment in the decisions of Flow. This option would broaden the managerial resources of Flow and gain some economies of scale in group purchasing, but capital positioning would not be enhanced and management services would be charged on a fee-for-service basis. The perceived identity ✓ould remain unchanged and the inability to effectively compete would be only partially alleviated. A management contract could be negotiated with an existing pro- prietary or a nonproprietary management service firm, or an ' entity could be formed combining local resources and talents and charging this management entity with the significant decisions regarding Flow and thereby creating increased distance betwee% the existing entities and hospital decisions. Fourth, a lease of Flow could be transacted. Leasing of the facility to an entity with a negotiated contract could shift all financial responsibilities for operation to the lessee. Through 8 proomepepr basesaof Flowdocuments a or contractual documents, maintained. Outcomes could include ocmmuni imization hoofpalllconccould be of Flow. Ownership of the structu pt could and County, and some input could be be maintained lessee would by City re maintained as desired. A Provide necessary capital for upgrading e°uiament and all financial risk would facilities the o-wners', n be the pef operator's, dependent unon the u aess of a lease transaction would be not could be organized ineitherfathe lease documents. highly nature proprietary or a non-A lessee each form with respective advantages and disadvantages. Finally, the sale or Flow could and disadvantages of a sale l be an alternative. The advantages dissolution of the public's coeeestpwoallel a lease might be less acceptable than a lease except that final. A sale . ~ Any variation or combir a viable option and tne3specificrPossibilitiesthen also be considered in number. Of many such options, it would seemmdesirablentonlre socthat theacurc ntract a relatively short term reversion clause re owners would have an Ootuni absolute control of the hospital's operationsrshould the arrange- ment prove i,nsatisfactor Y to regain some balance with the acquirinch a clause must however, be in assurance of long term commitmenpar ties needs for some reasonable a successful arrangement. 9 V. Recommendation Based upon the content of the previous sections of this report, it is the conclusion of the Board of Directors of Clow i,emorial Hospital that specific action is indicated. Given agreement by the City and the County as to the scope and severity of concerns expressed herein, it would seem apparent that viable solutions to these problems should be selected. Once all were in agreement as to those methods which would enhance Flow's position, the parties should undertake an educational phase to pursue information through proposals from and discussions with entities specializing in the respective solutions deemed viable. At that point, it would seem appropriate to develop specific plans For action to accomplish any solutions agreed upon by the parties. The Board members strongly feel that involvement and support of the City and County at this point would be desired so that the Board might logically proceed, jointly to the extent desired by the City and County, to achieve outcomes desired by all. Respectfully submitted, Board of Directors Flow Memorial Hospital i i 10