Please answer for each question just 2-3 SHORT SENTENCES.The case is;The CEO of our two-hospital system wanted to build a third hospital within our market. The health system was financially
sound, so there was never a question as to whether we could afford to pay for a new hospital. However, this market already
had eight other hospitals, so it was questionable whether an additional new hospital was needed. I was not in favor of building
this third hospital. However, the CEO insisted, and she proceeded to develop plans to build this new hospital. She brought
in nationally known consultants and coached them to find a way to justify building a new hospital.
At a very important board of trustees meeting, the system CEO and the outside consultants presented their case for build-
ing a third hospital that included data I knew was incorrect. At the end of this 3-hour presentation, one of the leading board
members, who knew me well and trusted me, asked for my frank opinion. He asked me whether the information they had
presented was correct and whether I recommended that the board approve this new hospital. Well, my whole career flashed
before my eyes as I considered my response. All the board member wanted was a yes or a no. If I said yes, the new hospital
would go forward, and I eventually would become president of the entire system. If I said no, then my tenure with this system
would probably come to an end. This was a big decision for me, and I had a lot to lose. My family and I had a very comfortable
house on the ocean, and my children were happily attending private schools.
I replied to the board member that no, the consultants information was not correct, primarily because they misunder-
stood (or misrepresented) the soon-to-be-implemented prospective payment system (PPS). The consultants tried to justify
building a new hospital by arguing that, under PPS, the length of stays in all our hospitals would increase, and currently
there wasnt enough bed capacity in this market area to handle the increased volume. However, that information was
absolutely incorrect. Anybody who understood the PPS knew that the length of stays were going to decrease, and that our
hospitals occupancy would decrease, which is exactly what eventually happened. Before PPS, we were running at about 93%
occupancy. After PPS, our occupancy decreased to about 57%. Therefore, my statement to the board was absolutely correct.
When I told that board member No, this information is not correct, and we do not need a new hospital, the whole board
meeting blew up. They went absolutely bananas, and voted not to build this new hospital. After the board meeting, the
system president brought me aside and wanted to know what I was doing. And I replied, I wasnt going to lie to the board.
If you want to lie to the board, thats up to you. I knew that my future there, particularly the prospect of becoming system
president, was over from that meeting. Within 18 months I had left that system and taken over the presidency of another
system. Two years later, the board member who had asked my opinion at this board meeting died in a plane crash. After his
death, the system CEO again proposed building a third hospital. This time, the board approved, and they actually built that
hospital. It was a major mistake. The hospital was not really needed, and the debt became a big drag on the balance sheet.
Fortunately, I went on with my career and became president of another system, where I was very happy. That was probably
the most explosive board meeting Ive ever been a factor in a major decision, and Ive had some very interesting ones.D1. Case Study Questions
If you were the COO, how would you have handled the question from the board member about whether the new hos-
pital was justified?
How would you have dealt with the system president who was lying to the board and was about to change your career
Would you have said yes to the board members question of whether the hospital was justified in order to protect your
career and your family?
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