Alleging subpar performance, Detroit Medical Center has sued to dissolve a 10-year, $300 million contract with a Dallas-based contractor that was supposed to improve the performance and lower the cost of managing medical records within the seven-hospital system.
The contractor, Provider HealthNet Services, said its inability to meet performance expectations is related to uncooperative and obstructive actions taken by Detroit Medical officials. If the dispute cannot be resolved, the provider of health information management services said in a recent statement of grievances that it would attempt to collect a $60 million penalty for early contract termination.
In the agreement to outsource its records management, the medical center sold the assets of the department to Provider HealthNet for $13 million and also purchased a $2 million stake in the company. More than 200 employees of the center became Provider HealthNet employees.
The center has paid the outsourcing contractor $22 million since the beginning of 2002 to operate the medical records transcription, coding, retrieval, completion and storage functions, said Donald Ragan, chief information officer of the healthcare system.
During that time, Ragan said, the outsourced operation has failed to achieve timely completion of medical records and still has not delivered on a plan to train employees and organize the department for a computerized health record system in time for the automated process to begin its first phase by April as scheduled.
But in a formal request for dispute resolution in December 2002, Provider HealthNet accused Ragan and other top Detroit Medical officials of continually "thwarting" the cooperative relationship needed to get the records projects on track. "There was contention from the start," said Richard Kniepper, chief administrative officer of Provider HealthNet.
The center's lawsuit to rescind the relationship was filed Feb. 11 in U.S. District Court in Wilmington, Del. Provider HealthNet is incorporated in Delaware.