SOS: Public Hospitals

Philip Betbeze and Jim Molpus, for HealthLeaders Magazine , March 12, 2009
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Parkland's independent board is made up of successful businesspeople and community leaders in the Dallas area who consistently press CFO John Dragovits and Anderson about staffing levels, which is a far cry from some members of politically appointed boards who have been known to pressure public hospital administrators to find jobs for favored constituents. "In 26 years of being CEO I've never had a county commissioner call me and ask me to hire somebody or ask us to do business with someone," Anderson says. "They've delegated to our board on those issues."

And the board doesn't tolerate any goldbricking, says Dragovits. "If anything, my board is concerned that we're still heavy on the staffing side and we need to be looking critically at that."

Operational independence
Independence from political influence can't be stressed enough, says Anderson. "The public hospitals I've seen that have not done well usually don't have an independent board of directors."

Gabow echoes Anderson's contentions about board activity.

"When you look at our reasons for success, this one is important: operational independence. When a city's officials run the hospital, you can't do that."

More practically, such complex enterprises as public hospital systems, especially integrated delivery systems like Parkland and Denver Health, can't effectively be run with political interference for a variety of reasons. For example, rules endemic to most government entities requiring a request-for-proposal for even the smallest spending decisions would prevent such hospitals from belonging to group purchasing organizations, a move most hospitals find essential to being able to wrangle volume discounts from suppliers.

"The rules of government at that level don't permit you to do what you need to do," says Gabow. "That is why we became independent in 1997. And I told the mayor that if we had not done that, we'd be in the same difficulties as everyone else."

Operational independence has allowed the "integrated" part of the IDS model to flourish in the case of both Parkland and Denver Health. Over the years, they've been able to cobble together a health plan, community health clinics, and other disparate services into one whole that can take strategic advantage of all economies of scale that result from combining formerly disparate parts.

"I have gone to other cities to tell them how we are organized," says Paul Melinkovich, MD, Denver Health's director of community health services. "What prevents it from happening is the territoriality that prevents them from making the changes to truly integrate."

Profitable ancillary services
The ability to take services that would be profitable on their own and roll them up into the whole helps the process of maintaining financial health, says Dragovits, who credits Parkland's ability to navigate the entire healthcare continuum with effective efforts to streamline and automate care when possible, because efficiencies in one area of service trickle down to other areas.

"We've spent a considerable amount of resources to streamline, automate, and invest in health information management," he says.

Those investments lead to better quality coding and clinical and strategic decision-making so that Parkland gets fair reimbursement. On the supply chain side, Parkland has made investments in workflow, technology, and people to improve processes, contracting, and purchasing methodologies "so we can take advantage of the pricing we should receive," says Dragovits, who adds that each of those areas has strategic plans, beginning metrics, and target metrics over two to three years, and identifies the investments required to get there.

"We bring all that information to the board and report on results quarterly," says Dragovits. That accountability has helped in patient financial services particularly, he says, boasting that Parkland is $36 million ahead of last year in cash collections already.

At Denver Health, Gabow says the ability to pull together fragmented funding sources is key. That way, money-losing services are directly supported by profitable ones—in Denver Health's case, its Rocky Mountain Trauma Center and Rocky Mountain Poison and Drug Center. In Parkland's case, its burn center and trauma center are the only such services in the area, so all patients suffering from such issues come there, at least initially.

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