What were the financial problems facing Phelps and its medical staff in 2010?
Following the passing of the national health reform by Congress, the hospital would have a $3.5 million deficit annually for the next ten years. Cutting Medicaid reimbursements reduces the revenues for hospitals and healthcare providers (Brown, 2018). Also, the net profit margin for the hospital was lower than the average increase in operational costs. Phelps’ profit margin was 1.8%, while the annual average increase in costs between 2007 and 2009 was 10.3%. The profits, therefore, could not cater for the increasing costs. The low profit to costs ratio constrained the operations of the medical staff because the hospital could not effectively meet the demands of their physicians. Specialists demanded to pay for every instance they attended to referred patients or attended to Medicaid patients. According to Cunningham et al. (2016), this significantly constrains the financial status and operations of a hospital.
What were the options for hospital initiatives, and what do physicians recommend?
The hospital was considering discounting some of the services, particularly the outpatient mental services. This option was contingent on if Medicaid cuts were effected. Phelps aimed to increase the mental services visits from the annual 50,000 visits. Discounting hospital services is imperative in ensuring high hospital visits and occupancy ratio, especially in the wake of Medicaid cuts and possible increased costs of healthcare access (Cubro et al., 2017).
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Phelps may also collaborate with voluntary specialists to increase the number of care providers while terminating some contracts with salaried physicians to reduce the operational costs. Voluntary cardiologist has offered to perform some procedures at the hospital, pointing out that this increases the chances of reimbursements. Dr. Robert Seebacher recommended that the hospital had to do away with wasteful physician and be innovative in fostering positive relationships with the physicians. At the same time, the hospital should value the efficient and highly-performing caregivers it has, instead of retrenching or replacing them (Scott, Orav, Cutler, & Jha, 2017). In this regard, the hospital’s plan of discontinuing some of the positions and physicians would have to be based on performance and quality of care. Job cuts based on payment would sever the relationship between physicians and the hospital.
How should the CEO proceed? Give a rationale for your recommendations.
The CEO should strive to ensure a positive working relationship between the hospital and the physicians. This is by reaching an amicable solution with the physicians regarding their compensation, especially in situations such as ED call in. The hospital-physician relationship is paramount in determining the quality of care provided (Scott, Orav, Cutler, & Jha, 2017). It is important to understand that physicians will not be willing to offer their services without compensation, especially outside their working hours. While the hospital is facing financial constraints, the physician compensation can be discussed and set at a minimum value to avoid further constraining the hospital. Given that Phelps is considering discounting some care services, it would not be prudent to lay off some physicians, as the number of patients would be projected to increase. Thus, the CEO’s primary move should be to create cohesion between the hospital and its caregivers.
What are the unresolved questions in the situation facing the CEO and board?
The unresolved question is how the hospital would be able to cater for the deficit amount if they decide not to lay off some physicians. Maintaining their physician workforce and compensating them for working outside their scheduled hours will incur the hospital some cost, even if the compensation is lowered. Given the significant cuts from Medicaid, the hospital will find itself in a difficult financial position.
What do you recommend the CEO and the CMO do to improve the situation?
The primary way of curtailing the care costs is limiting the number of specialized care visits and diagnostic procedures (Brown, 2018). The CMO should ensure that the physicians provide specialized care and diagnostic tests for only the appropriate cases, based on their evaluation and judgement. Another approach is that the CEO and CMO reach an amicable solution with the caregivers on designing a compensation plan that will work effectively for both parties. This will require involvement of representatives from both the hospital administration and the physician welfare.
Approaches from the perspective of a younger physician.
As a younger physician, it is imperative to build my profession around my lifestyle. Younger physicians need to be inculcated into the culture of emergency calls and impromptu ED visits as part of their profession. It is important to understand that one cannot build a specialized practice without taking calls. Although compensation issues may arise, they should not impede care delivery. It is the responsibility of the hospital to encourage younger physicians to develop a culture of responding to calls, as that is the basis of the medical profession (DeCamp, Lehmann, & Horwitch, 2018).
References
Brown, E. C. F. (2018). Health Reform and Theories of Cost Control. The Journal of Law, Medicine & Ethics , 46 (4), 846-856.
Cubro, H., Somun-Kapetanovic, R., Thiery, G., Talmor, D., & Gajic, O. (2016). Cost effectiveness of intensive care in a low resource setting: a prospective cohort of medical critically ill patients. World journal of critical care medicine , 5 (2), 150.
Cunningham, P., Rudowitz, R., Young, K., Garfield, R., & Foutz, J. (2016). Understanding Medicaid hospital payments and the impact of recent policy changes. Kaiser Family Foundation .
DeCamp, M., Lehmann, L. S., Jaeel, P., & Horwitch, C. (2018). Ethical obligations regarding short-term global health clinical experiences: an American College of Physicians position paper. Annals of internal medicine , 168 (9), 651-657.
Scott, K. W., Orav, E. J., Cutler, D. M., & Jha, A. K. (2017). Changes in hospital–physician affiliations in US hospitals and their effect on quality of care. Annals of internal medicine , 166 (1), 1-8.
