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Beaufort County Medical Center: A score card
Handing out bonuses to top employees of a business that is losing a lot of money is alarming. The report in the Sunday July 4th Washington Daily News sounds just that way.
Once the facts and business reasoning's are applied, the situation is not so exciting. I chaired the "Cost Containment Committee" that made the recommendation to the full hospital board. This is not a bonus in the way most bonuses are given. It is a performance bonus. The four individuals have to complete one full year of service to earn the bonus. The bonus is 20 percent of their base salary. They will not get the money unless they are employed by the hospital continuously until March 2011.
The hospital is facing some tough times financially. Whether or not we keep the hospital or lease it to someone else, the loss of the CEO, the Director of Nursing, the Chief Financial Officer and the person running the outside operations are critical to the success of our efforts. When faced with uncertain futures people tend to seek security by finding stable and secure employment. Why stay in a job knowing you stand a high probability of being replaced when the new management arrives?
Replacing any one of these people while juggling a merger or trying to save the hospital can be expensive. A case in point is the controversy that developed over the past week. It is simply a difference in opinion as to how to proceed now that the CEO has resigned. Simply put the Chairman of the Board is trying to force the board to hire an interim CEO. The estimated annual cost of an interim CEO is a little less than $500,000. Short term people cost more money than hiring permanent people. So in addition to paying a high wage we also have to pay for transportation, lodging, possibly employment agencies, etc. The short term of employment of any employee makes temporary help very ineffective in solving the problems of the hospital.
One easy solution in the case of the CEO is to not replace him and on a short term basis to use the person designated to succeed him to fill the job until we decide whether to lease or continue to operate the Hospital. Why spend the money for something that will not benefit the Hospital?
This easy solution will probably only work for this one job. You, as a rule of thumb, can figure the minimum cost of replacing any one of the other three will be at least twice their annual salary which in each case is more than $100,000. It looked to the Cost Containment Committee like good business to pay a 20 percent salary adjustment to guarantee the savings of at least $100,000. If they leave they do not get the salary adjustment. That money is used as part of the cost of replacing them.
I am greatly dismayed by the article purchased by the Committee of 100 in the Sunday July 4th edition of the Washington Daily News. For one thing the Committee of 100 says their purpose is to keep jobs in Beaufort County. It is against the fiduciary responsibility of the Hospital Board and the Board of County Commissioners to select any one to merge with without a public bid process. And then the hospital Board and the County Commissioners will have great difficulty in allowing any one to take over the assets to the hospital who is not the high bidder. This is in the best interest of the owners of the hospital who are you…the public. No person can, at this time, tell you who the hospital will be merged with, if even merged at all.
The article's answers to the Questions "…why is Beaufort County Medical Center having financial difficulties?" And "Why are they more vulnerable?" are incomplete and designed to lead the reader to accept a political conclusion that there is no hope. The answer given about cutting expenses presumes that the Beaufort Hospital is the perfection of efficiency and nothing can be changed or reduced even temporarily to make our situation better. This is another no hope answer. And it is not true. But you must remember, the "answers" are coming from one who has a vested interested in one of the potential partners.
Do not get trapped by the presumption, threaded throughout this article that profit is evil. If the past boards of directors had looked at making a profit we would not be in the present situation. All hospitals have to make a profit in order to survive. The so called nonprofit hospitals simply do not pay taxes and do not pay dividends to investors. So, if we do not pay taxes and do not pay dividends, where is all that money? Something must be wrong. There are plenty of hospitals our size that are not having to merge with anyone. What is wrong?
It is absurd to believe we will merge with anyone and not see substantial changes. Are you telling me that the new owner will not make changes and continue to lose money? For-profit hospitals may or may not but will probably offer a better deal than the only non-profit that is now in the mix. There are at least ten for-profits. What are the odds of the non-profit getting this hospital by offering the people of Beaufort County the best deal?
None of the players who support getting rid of this hospital have enough factual information to back up their opinion. They all state they are giving you their opinion. The article purchased by the Committee of 100 is divisive, political and not backed up by facts unless Buster Humphries has more factual information than the Board of Commissioners of the Beaufort County Health System. The Committee of 100 should act more responsibly toward the citizens of Beaufort County. How do they know now where the losses are coming from? What if those losses come from only parts of the operation? Would that cause them to view the situation differently?
The Hospital Board of Trustees has asked for any interested party to offer a proposal for running the Health System in Beaufort County. Those proposals are not yet in. It is irresponsible for a board member or a County Commissioner to try to short circuit the process and pick a partner without knowing what the proposals contain. And the Committee of 100 should refrain from lobbying for one provider until all the information is in, the proposals are "scored" and all stakeholders given an opportunity to comment on the proposals and offer suggestions for the best way forward.
Finally, all interested observers of this situation should consider the motives of each player. This is a political year and this has become a political event. Examine the players who want to merge and their relationships with each other. One potential partner has reportedly offered to provide an interim CEO team at a "very reasonable price" or "for free." Ask yourself why they would offer to do such a thing. Above all keep an open mind. This is an emotional event for everyone. Do not rush to judgment. The Chairman of the Beaufort County Commissioners, Jerry Langley, said it best: "Let the process work."
Studies have shown, and all businesses work this way, that hospital consumer costs go up as much as 20 percent when mergers create one medical provider is an area. This is common because there would be no competition. But that may in fact be the way for Beaufort County to go. The question really comes down to this: Do we have all of the information we need to make that decision now?
As an elected official I am committed to keeping this hospital for your benefit if at all possible. I will not vote to dispose of the hospital until I am convinced all alternatives have been examined and there is no way to provide quality medical services to you except to merge. We may reach that point and University Health Systems may indeed offer the best proposal. But we don't know that at this point and until we reach that point we all should let the process run its course.
Beaufort County Commissioner Hood Richardson is a 4 term county commissioner, who is running for higher office: N.C. Senate, 1st District. Visit Commissioner Richardson's website to gain further insight into the man, the candidate.
Go Back
Once the facts and business reasoning's are applied, the situation is not so exciting. I chaired the "Cost Containment Committee" that made the recommendation to the full hospital board. This is not a bonus in the way most bonuses are given. It is a performance bonus. The four individuals have to complete one full year of service to earn the bonus. The bonus is 20 percent of their base salary. They will not get the money unless they are employed by the hospital continuously until March 2011.
The hospital is facing some tough times financially. Whether or not we keep the hospital or lease it to someone else, the loss of the CEO, the Director of Nursing, the Chief Financial Officer and the person running the outside operations are critical to the success of our efforts. When faced with uncertain futures people tend to seek security by finding stable and secure employment. Why stay in a job knowing you stand a high probability of being replaced when the new management arrives?
Replacing any one of these people while juggling a merger or trying to save the hospital can be expensive. A case in point is the controversy that developed over the past week. It is simply a difference in opinion as to how to proceed now that the CEO has resigned. Simply put the Chairman of the Board is trying to force the board to hire an interim CEO. The estimated annual cost of an interim CEO is a little less than $500,000. Short term people cost more money than hiring permanent people. So in addition to paying a high wage we also have to pay for transportation, lodging, possibly employment agencies, etc. The short term of employment of any employee makes temporary help very ineffective in solving the problems of the hospital.
One easy solution in the case of the CEO is to not replace him and on a short term basis to use the person designated to succeed him to fill the job until we decide whether to lease or continue to operate the Hospital. Why spend the money for something that will not benefit the Hospital?
This easy solution will probably only work for this one job. You, as a rule of thumb, can figure the minimum cost of replacing any one of the other three will be at least twice their annual salary which in each case is more than $100,000. It looked to the Cost Containment Committee like good business to pay a 20 percent salary adjustment to guarantee the savings of at least $100,000. If they leave they do not get the salary adjustment. That money is used as part of the cost of replacing them.
I am greatly dismayed by the article purchased by the Committee of 100 in the Sunday July 4th edition of the Washington Daily News. For one thing the Committee of 100 says their purpose is to keep jobs in Beaufort County. It is against the fiduciary responsibility of the Hospital Board and the Board of County Commissioners to select any one to merge with without a public bid process. And then the hospital Board and the County Commissioners will have great difficulty in allowing any one to take over the assets to the hospital who is not the high bidder. This is in the best interest of the owners of the hospital who are you…the public. No person can, at this time, tell you who the hospital will be merged with, if even merged at all.
The article's answers to the Questions "…why is Beaufort County Medical Center having financial difficulties?" And "Why are they more vulnerable?" are incomplete and designed to lead the reader to accept a political conclusion that there is no hope. The answer given about cutting expenses presumes that the Beaufort Hospital is the perfection of efficiency and nothing can be changed or reduced even temporarily to make our situation better. This is another no hope answer. And it is not true. But you must remember, the "answers" are coming from one who has a vested interested in one of the potential partners.
Do not get trapped by the presumption, threaded throughout this article that profit is evil. If the past boards of directors had looked at making a profit we would not be in the present situation. All hospitals have to make a profit in order to survive. The so called nonprofit hospitals simply do not pay taxes and do not pay dividends to investors. So, if we do not pay taxes and do not pay dividends, where is all that money? Something must be wrong. There are plenty of hospitals our size that are not having to merge with anyone. What is wrong?
It is absurd to believe we will merge with anyone and not see substantial changes. Are you telling me that the new owner will not make changes and continue to lose money? For-profit hospitals may or may not but will probably offer a better deal than the only non-profit that is now in the mix. There are at least ten for-profits. What are the odds of the non-profit getting this hospital by offering the people of Beaufort County the best deal?
None of the players who support getting rid of this hospital have enough factual information to back up their opinion. They all state they are giving you their opinion. The article purchased by the Committee of 100 is divisive, political and not backed up by facts unless Buster Humphries has more factual information than the Board of Commissioners of the Beaufort County Health System. The Committee of 100 should act more responsibly toward the citizens of Beaufort County. How do they know now where the losses are coming from? What if those losses come from only parts of the operation? Would that cause them to view the situation differently?
The Hospital Board of Trustees has asked for any interested party to offer a proposal for running the Health System in Beaufort County. Those proposals are not yet in. It is irresponsible for a board member or a County Commissioner to try to short circuit the process and pick a partner without knowing what the proposals contain. And the Committee of 100 should refrain from lobbying for one provider until all the information is in, the proposals are "scored" and all stakeholders given an opportunity to comment on the proposals and offer suggestions for the best way forward.
Finally, all interested observers of this situation should consider the motives of each player. This is a political year and this has become a political event. Examine the players who want to merge and their relationships with each other. One potential partner has reportedly offered to provide an interim CEO team at a "very reasonable price" or "for free." Ask yourself why they would offer to do such a thing. Above all keep an open mind. This is an emotional event for everyone. Do not rush to judgment. The Chairman of the Beaufort County Commissioners, Jerry Langley, said it best: "Let the process work."
Studies have shown, and all businesses work this way, that hospital consumer costs go up as much as 20 percent when mergers create one medical provider is an area. This is common because there would be no competition. But that may in fact be the way for Beaufort County to go. The question really comes down to this: Do we have all of the information we need to make that decision now?
As an elected official I am committed to keeping this hospital for your benefit if at all possible. I will not vote to dispose of the hospital until I am convinced all alternatives have been examined and there is no way to provide quality medical services to you except to merge. We may reach that point and University Health Systems may indeed offer the best proposal. But we don't know that at this point and until we reach that point we all should let the process run its course.
Beaufort County Commissioner Hood Richardson is a 4 term county commissioner, who is running for higher office: N.C. Senate, 1st District. Visit Commissioner Richardson's website to gain further insight into the man, the candidate.
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