Mountain States Healthcare (MSH) is a regional system of hospitals located in several large metropolitan areas of Colorado, Idaho, Utah, and Wyoming.

THE MG371 CASE

Growth Pains at Mountain States Healthcare

Background

MHS started as a single hospital in Salt Lake City, Utah, and, due to the business acumen and experience of its officers and Board of Directors, was quite successful and profitable. Over the years, Salt Lake Hospital began purchasing other hospitals and clinics in the state that were not as profitably operated, and eventually changed its name to Utah Health Group (UHG). Each facility continued to operate as an independent entity, except that its name was changed to include “Utah Health Group” and UHG instilled its own successful management style in the newly purchased facilities. When a hospital was bought in Denver, Colorado, the firm created a medical facility holding company in Salt Lake City, named Mountain States Healthcare. MHS treated each facility as a separate subsidiary, except for the clinics, which were associated with a larger hospital in the area. MSH continued to grow, adding facilities from the four states it declared as its strategic area.

MSH was a profitable venture, but began to realize that some of its administrative costs were, collectively, much higher than other medical holding companies, and reducing the profits that could be used for the benefit of shareholders. A consulting firm pointed out several areas of administration which could be consolidated, using the latest technology, to realize a tremendous reduction in costs. The new VP of Technology, Aaron Nelson, newly promoted from the state billing office manager’s position, suggested that medical billing should be the first to consolidate. He reasoned that as each of the four states’ facilities had consolidated the billing operations for all facilities within the state a few years ago, they should be able to completely consolidate all billing with the latest database technology in a fairly short time, and realize a substantial cost reduction. This would look very good to the shareholders.

An executive committee was established to set up the new consolidated office, and it was decided to keep the plan confidential until the new director of the unit was selected, and allow the new director to plan and announce the new unit when it was time. A new directorate, Medical Billing, was created at MSH to accomplish the operation. Each of the four state billing managers was considered for the director position; the leading contenders were Kyle Christiansen, the Utah manager, and Colleen Kennedy, from the Denver office.

Kyle had an accounting degree and an MBA, both from BYU, a well regarded university in Utah, and had elected to take an accounting position with MSH when it was first formed, rather than go into public accounting with a CPA firm. He was an aggressive go-getter, and was promoted to manage the state billing office when Aaron Nelson was promoted to VP following the successful consolidation of the Utah facilities billing into one entity.

Colleen had a management degree from the U.S. Air Force Academy, and spent six years in the Air Force creating, installing, and managing computer-based operations throughout the western states area. She managed, during the six years, to get an MBA from Colorado State University. She, also, started with MSH shortly after it was formed; her computer background got her the position to manage the development of the state billing office, after which she became the manager of the office.

The executive committee charged with selection of the new Director of Medical Billing included Kyle’s old boss, Aaron Nelson, who was a strong advocate of Kyle. When it appeared that there was a strong possibility that Colleen might be selected, Aaron suggested that a woman director, in the very conservative state of Utah, might bring a lot of problems and resentment among the mostly male employees in the current state billing office which would become the nucleus of the new directorate. This probably was the primary consideration which resulted in Kyle’s selection.

Current situation

Colleen walked with calm determination into Kyle’s office, without an appointment; in fact, without waiting for the secretary to announce her. Once inside, she seated herself in front of Kyle and started talking before he could regain his composure and open his mouth. Her calm, measured manner of speech began deteriorating as the words started flowing, letting her rage begin to take control.

“Kyle, you promised that the only changes you would make would be to unimportant matters, strictly to improve efficiency. You promised that I could continue to manage my staff as I had been doing; only we would be here in Salt Lake City instead of Denver. You cut back on their work roles and changed their jobs. You eliminated their flex time because you insisted that they work only when a supervisor could observe them. They felt that we don’t trust them, that their capabilities are impugned, and that you lied to them about your promises. Their morale sunk to the bottom; they moved here from a comfortable existence in Denver to be betrayed; and most of my old staff have quit.

“You insisted that we move and begin merging the operations before the new system gets installed and tested. You had us cancel our contract with our software vendor, arguing that we could come here and use your software until the new system is up and running, but we ran medical billing and other financial services for our state facilities; your software can’t handle the load of our added billing, much less do the other financial services, and it just broke down. We don’t have any working system!

“You told the offices in Idaho and Wyoming that we are consolidating their services here, and would be shutting their offices down; all their employees scrambled to get new positions elsewhere. We now have all four states without a billing system! To top that off, not only are we not able to do the billing, but the Colorado facilities now have to send their accounting to MSH corporate accounting for consolidation, which is slowing their operations down.

“I have been asking for a meeting with you, but you are always unavailable. I sent you complete documentation to show that we are headed for a disaster, hoping to get you to change your thinking; however, you can’t seem to be able to change your thinking, and now we are sinking. No one is billing; our cash position is on life support; most of our best and experienced people are gone; we have no functioning billing software; and those of us who are left are spending our time trying to put out the fires which are springing up every hour.

“You reduced my role and my effectiveness; every suggestion I made to you was either rebuffed or ignored. I have really tried over the past six months to help you to pull this together, but it has always been ‘your way or no way.’ Consider this my ’30-day notice.’

If you don’t shape this up by then, you will have your way, and I’ll have the highway.”

Kyle, still speechless, sat quietly, with the sound of the slamming door ringing in his ears. “How did this happen?” he asked himself.

Kyle

Kyle was very pleased upon hearing the news that he had been promoted to be the director of the new department. “I’ve faced all these problems with billing operations management before, managing the methods and systems of digital billing, staff work flow, coordinating different functions, creating new processes, and keeping internal customers happy,” he thought to himself, reflecting on the fact that he had been managing the Utah consolidated billing office for over two months.

“Yes, I’ve done all of this before; now I’ll just have to stay focused and apply all the solutions that I’ve learned.” The whole idea was to get the 4 state consolidated operations to coordinate their billing processes for greater efficiency. There was a great deal of pressure on him. This was a test-bed to be watched by upper management for later application to consolidate other processes within WSH. He’d simply have to avoid getting sidetracked by differing agendas, inter-department issues, varying work methods and the thousand other problems that these kinds of multi-company collaborations can experience. He knew he could do this if he stuck to his agenda and pushed forward. Kyle decided that the best strategy would be to retain all of the Utah employees and bring in most of the people from the Denver office (which was the largest of the four and had the most experience), and relocate to a new, larger building which was recently completed on the MSH campus near the Executive building. He could already see a promotion to the executive staff after they saw how he could shape up the new directorate into an efficient, well disciplined unit, rigidly executing his plan. “Yes,” he thought, “make a plan, then follow it without deviation. That’s the road to success”

Colleen

Colleen sat in her office, listening to the software consultant. “Colleen, I just don’t know how to proceed. You only have one partly experienced person left from your original eight who moved here with you from Denver; none of the original staff are left who were here when I started, just before you arrived; and five positions are currently vacant. I don’t see how we can finalize the design and bring the beta system up. We just don’t have a sufficient knowledge base to get good design input and certainly don’t have the people to conduct a run through period on the beta. We have no choice but to push this whole thing back another 6-8 months, or at least until you have some staff who’ve had a chance to learn your operations.

Colleen’s mind went numb. She knew it was coming, she could see it all along, but still it hit like a bomb. She had almost no staff left now and in 2 months the support program for the existing billing software that had been in use by the Utah office would be terminated by the manufacturer. The new system was needed not just to replace the old, but was also needed to handle the new operating processes defined by Kyle. Now the promised new system wouldn’t be available for 6 months at best, her best staffers were gone, internal customers were already grousing, and the cash flow would soon begin to dry up because billings weren’t going out. How did so many things go wrong through this whole process?

Colleen had managed the physician billing and financial service office. Her department was the largest of the four billing departments being merged and her numbers indicated that the Colorado office was far more productive than the other departments, much better than even Kyle’s old department. Over the last 6 months there had been many meetings to agree on a plan that would work for all stakeholders, or at least she thought it was for all stakeholders. It was clear now that all the problems that kept cropping up over the 6 months all pointed to the same problem and one clear conclusion.

Colleen had built her operation in Colorado from scratch, and she wasn’t about to let some early bumps knock her down. The crew she brought to Utah were her best people, she trained them all and they were a great team. Her staff had a certain way of getting things done. They liked setting their own work hours; some were in by 6:00 in the morning, to accommodate their own personal lives. They particularly liked being responsible for the full cycle of activities associated with servicing each account.

Kyle had promised that nothing important would change; the merger was intended only to make their work easier. Yet even before a structure and date for the merger was set he began to insist that all the staff start at 8:30 and that each billing clerk would be limited to handling just one part of the billing process instead of the prior method of handling the full life-cycle of each bill. Regardless of the many objections and countering ideas and apparent early agreements to avoid changing these things, Kyle’s mind was made up. He believed that a well disciplined work force would be more efficient.

As the problems mounted and staff unrest built, Colleen and the staff suggested many approaches to problems and sought answers and decisions from Kyle, but in every instance his answer was that he’d have to get back to them. Regardless of the topic, though, he rarely got back to anyone with an answer. This drove her people crazy; they worked for doctors and thrived on the can-do attitude and quick responsiveness of their environment. This is when the rumbling started among her people.

Colleen heard the words of concern, and she called Kyle many times to meet. She should have sensed trouble early when, upon winning the new Director’s job, Kyle did not call to meet with her for 6 weeks. Despite this, she set up many meetings to review the operation and plan for how to best make things work; however, he cancelled most meetings and for those when he did show, he arrived late and left early. When she finally got Kyle to meet with the staff, he showed little interest in their daily operating issues. In response to the staff concerns, he assured them that changes would be minimal and that any changes made would be to make their work easier.

His vague answers left the staff uneasy, so Colleen kept calling Kyle to get their plans and problems ironed out; however, when she brought up the continuing staff concerns he told her to simply show a positive attitude to them and to be reassuring on all their problems.

The bells started to go off to many people when a couple of weeks into the planning phase Colleen’s most experienced billing clerk announced that she was leaving to take a new job elsewhere. Other staff members now began to apply for new jobs elsewhere in the hospital system. This got Louis’s attention and another staff meeting was called where everyone voiced their concerns about the new billing system, their roles, hours, customer relations and many problems.

The pressure was mounting. Kyle knew his way would work, if the rest of the people would just follow him. At the meeting he listened to all their points and felt that he comfortably answered them by pointing out the facts and benefits of his original plan. They’d heard all this before, however, and now people were even more uncomfortable. One staffer, seeming to speak for all, expressed her lack of faith in this approach and an unwillingness to change a successful operation. In exasperation, Kyle felt the need to exert authority and told her that his approach had always worked, it would work here, and she needed to do something about her bad attitude.

Things just got worse. People began to leave in waves. The software project was falling behind schedule and the physicians who were their internal customers were getting unnerved. Upper management was expressing concern.

Colleen had to act.

Adapted from “A Case Of Lost Influence: The Need For Flexibility And Exchanges”, by Prof. Allan Cohen, Babson University

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