Healthcare Case Study – Southeast Medical Center

Review the Southeast Medical
Center case study found on page 92 of the course text. Of the
recommendations found on pages 100-101, select the three which you consider
to be the highest priority/most important to the case. Justify your
reasoning. Support your opinion with a minimum of two outside scholarly
resources. Write a three- to five-page paper (excluding title and
reference pages) with your selected recommendations and justifications. The
paper must be in APA format.
Southeast Medical Center Case Study
Review the Southeast Medical Center case study found on page 92 of the course
text. Of the recommendations found on pages 100-101, select the three which
you consider to be the highest priority/most important to the case. Justify
your reasoning. Support your opinion with a minimum of two outside scholarly
In-Depth Case Study: Southeast
Medical Center
The following case study involving
a large organized delivery system exemplifies many of the issues described
earlier in this chapter.
History and Evolution
Southeast Medical Center (SMC; a
pseudonym) was established as a public hospital in the 1920s, just before the
Depression. Located in the Southeast, a $1 million bond financed the 250-bed
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 construction project ($160 million) added 550 beds to the facility. In
the 1980s, a 59-bed 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 the region.
Responsibility for 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 hospital authority (to
be appointed by the county commission) to govern the hospital. In the 1990s,
the hospital s board of trustees voted to turn operations of the hospital
over to a private, not-for-profit corporation (501c-3), the SMC Corporation.
However, oversight for charity care remained with the county s hospital
authority. The SMC Corporation is directed by a 15-member 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 university-affiliated attending physicians and
more than 400 resident physicians in the university s College of Medicine
residency program serve the community s 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 healthy. 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 established
the SMC Health Plan to operate as a Medicaid HMO or insurance healthcare plan
for the poor. 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 was the
only public hospital in a metropolitan area with a population of one million
or more that received no public subsidy. Most citizens believe that SMC was
subsidized by their taxes. In 1971, the County Commission agreed to
supplement hospital revenues with property taxes. In 1985, the county
commissioners passed a quarter-percent sales tax to fund indigent care. The
tax was repealed in 1987. In 1991, the county instituted a one-half percent
sales tax to fund indigent care at all hospitals in the county, including
In sum, while SMC receives no
public subsidy, it does receive a portion of the half-cent 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 providing patient care for approximately 40% of the nation s poor, AHCs
are struggling to find a competitive position in today s rapidly changing
healthcare environment. Until recently, they have enjoyed a privileged
position atop the healthcare pyramid as a niche provider of tertiary
services. With the growth of managed care and reductions in government
funding, the ability of AHCs to compete is being drastically undercut.
It is widely recognized that
multiple missions of teaching, research, and patient care contribute to the
production of costly clinical services that are inconsistent with the demand
for less expensive services in today s healthcare environment. The majority
of the services that AHCs provide are now available elsewhere, such as local
community hospitals 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 example, that AHCs are
approximately 30% more expensive, on a case-mix-adjusted basis, than their
nonteach-ing competitors.
As a result, AHCs are losing
ground to other hospitals and medical practices. They have become providers
of a small number of expensive high-tech services involving unique and
complex care. However, they continue to be the predominant providers of the
nation s charitable care. As an AHC, SMC reflects these trends. 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.
(Wolper pages 92-94)
Wolper, Lawrence F.. HEALTH CARE
ADMINISTRATION 5E VITALBOOKS, 5th Edition. Jones & Bartlett Publishers,
Managerial Implications and
The jury is still out on the
future of organized delivery systems. It is unclear whether the many problems
and issues identified here and elsewhere are due to a flawed strategy, flawed
implementation (leadership), or both. Clearly, multiprovider integration has
not worked well either in American industry or in health care. The point is
not to lay blame when systems struggle or collapse. Rather, we need to
identify managerial processes or methods that will enhance the probability
that systems will survive and prosper. The overriding goal of systems should
be to provide maximum value to the healthcare customer.145
The fundamental question is, What
types of systems, networks, and alliances are best able to compete
effectively and deliver cost-effective care? At this time, however, there is
no definitive answer to this question, because there is almost no evidence
associating different types of organized arrangements with successful
performance or failure.
The future of healthcare systems
is highly speculative, given the volatility of markets and future initiatives
for healthcare reform. As the governments role in health care expands, these
systems become more vulnerable to shifts in government policy.
It seems likely that most
multiprovider healthcare systems will emerge successfully from their growing
pains and continue to solidify their position in the healthcare market as
long as they are virtually integrated rather than vertically integrated.
Health care will be purchased
primarily on a local or regional basis. Quality and value will be
increasingly important to patients who once again have a choice of provider.
Fewer resources will be available to deliver care, and the delivery of health
care will continue to shift from acute care to ambulatory settings. Barry
noted the importance of a system CEO being a change agent in this future
Those who can understand and
embrace change; those who can transform traditional but key values to
tomorrow s environment; those who can educate their boards of trustees,
medical communities, and the community at large; and those who can right
size the production activities of their organizations, and provide both high
quality and cost-effective services will be the winners of tomorrow.146
Healthcare executives in
multiprovider healthcare systems need to allow flexibility for member
institutions to respond to specific local markets while providing a clearly
articulated and well understood vision for the system.
Each system should develop a detailed
mission statement and set of behavioral norms (i.e., culture) shared by each
facility within the system in order to enhance cohesiveness.
Each system should develop a
formal strategic plan for the system with input and a high degree of interaction
among the corporate office and institutions in all geographic regions.
Each system should develop and
implement explicit measures for quality of care, patient satisfaction,
efficiency, and community benefit, and then provide these data to purchasers
and other key stakeholders.
Each system should develop and
organizational structure that is simple, lean, flat, responsive, customer-driven,
risk-taking, and focused.
Governance at the corporate level
should be strategic in nature, whereas governance at the institutional level
should be operational in nature and focused on local community/region needs
and concerns.
Systems should provide formal and
informal education for those responsible for governance at all levels in the
Systems should provide a clear
definition of governance roles, responsibilities, and authority among the
system and institutional boards of its component parts.
Systems should provide the
leadership required for the individual units of a system to think in terms of
overall system performance rather than just in terms of the particular unit s
Only institutions that fit a
particular culture and strategy should be invited to join or remain a member
of the system.
Systems should align physician
incentives and achieve clinical integration.
Systems should develop information
systems to support the integration of clinical and managerial information.
Systems should use their mission
and values as a guide in making difficult trade-off decisions.
Systems should change their incentive
structures to reflect concern for performance of the system as a whole, not
just the individual components.
Systems should own fewer facilities
and contract for most services so that they are virtually integrated rather
that vertically integrated.
Systems should buy or contract for
services only if the additions will add value to the systems customers and
are compatible with the existing mission, values, goals, and culture.
Systems should allow the
individual operating units within the system to have sufficient autonomy to
be responsive to the needs of their local customers.
Systems should focus on core competencies
rather than trying to be all things to all system components.
Systems should not allow success
to breed complacency. Each integrative
step must be evaluated for system wide effects.
Systems should focus on quality
rather than the size of the program or system being integrated.
Systems should focus on quality
rather than quantity of physician integration.
Systems should place
high-performing executives in key positions to implement their integration
Systems should target selected
patient populations and payers.
(Wolper 100-102)
Wolper, L.F. Healthcare
Adminstration 5E Vitalbooks, 5th Edition. Jones & Bartlett

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