Like university officials and their teaching hospitals, public officials and county healthcare systems are re-examining their role in providing community healthcare services.
In Kansas City, Kan., that road could lead to a new public hospital authority (See related story, p. 44). But in Phoenix the route to clarity and renewal is proving more circuitous than expected.
On Jan. 16 the Maricopa County Board of Supervisors announced that Quorum Health Resources would take over managing 334-bed Maricopa Medical Center for the next year while the county decides what to do with the institution. Included in the mix are 13 primary-care clinics and centers of excellence in burn, trauma, perinatal and neonatal care. On Jan. 20 Quorum took charge.
The county has asked Quorum to tackle two issues: assess the situation and operate the hospital more efficiently, and look at the strategic options for the future.
Maricopa County has 2.7 million people and a budget of approximately $1 billion.
The county provides about $26 million a year in direct operating subsidies for the health system, which has an operating budget of about $200 million. The county's managed-care operating company, which handles a Medicaid HMO, long-term care, employee healthcare and a Medicare plan, has another $300 million in annual revenues.
The health system has been running losses for years, said David Smith, county administrator. In May 1995, shortly after Smith was hired, the county prepared a request for proposals to bring in a not-for-profit operator to run the entire system. Ten organizations made preliminary responses. Of those, three prepared more detailed proposals: Nashville-based OrNda HealthCorp; S.K. Ching & Associates, Calabasas, Calif.; and a joint venture of Phoenix-based Samaritan Health System and Mercy Healthcare Arizona.
The county supervisors did not buy Samaritan-Mercy's program to "mainstream" the indigent patient base into other facilities and close down the county hospital. Nor did they want the county system run on a profit motive, so they turned down OrNda, too. That left the proposal by S.K. Ching, which along the way changed its name to Healthcare Providers Inc.
During 1996 the county negotiated details of a lease to HPI. The county expected it to take over operations between July 1 and Oct. 1, 1996. Unhappily, one key element did not fall into place: "We were ready to go, except they never produced their capital loan to provide their own cash flow," Smith said. "We required $30 million. They came up with a complicated formula loan that was short of that quite a bit. We were not going to be the banker for the operation."
Last Dec. 19, the supervisors tossed out the HPI contract and started over. They decreed an immediate infusion of $5 million in capital to the health system, and wrote an emergency RFP.
Quorum won that contest against Hunter Group, International Health Management and Frank Alvarez Associates. Quorum then named Alvarez to be chief executive officer of Maricopa Integrated Health System.
"We want their opinion as to how this entity fits into the greater Phoenix marketplace for healthcare services," Smith said. "Then we'll make some decisions based on the success of what they're able to achieve."
The county will pay salaries for six Quorum executives on site, plus a fee to Quorum of $97,500 per month for the first six months, and $79,500 per month for the second six months. Quorum also will be eligible for performance incentives of as much as $1 million.
Quorum has "three top priorities," said Tom Singleton, senior vice president for the Intensive Resource division: retaining the Medicaid contract, implementing a timely and accurate management reporting system, and getting key personnel in place. "After that we'll be looking at every area of the hospital," he said.
Arizona has had Medicaid managed care for some time, and Maricopa Managed Care serves 25,000 capitated lives. That contract is up for renewal in June.
"It's an immediate priority for us," Singleton said. "We'd be worried about the revenue not the census. It's probably about 12% of total system revenue. That's revenue you can't afford to lose."
Quorum respects the county supervisors' wish to provide indigent care, Singleton said. "We're committed to seeing that it's provided in a cost-effective way but also in a way that is more customer-oriented."
The county appears ready to bite the bullet on layoffs. "We're going to turn the operation over to Quorum. Whatever that takes is the intention of the board of supervisors," Smith said.