(Kyle Gillis/NPRI) – As long-standing revenue and management problems at the University Medical Center of Southern Nevada approached crisis levels last year, Clark County commissioners hired expensive national experts to tell them what to do.
But when the experts identified the commission itself as a major source of UMC’s problems, commissioners blinked — and balked.
Representatives of FTI Healthcare officially presented the report to commissioners, sitting as the hospital’s board of trustees, on Feb. 2, 2011. That same day, however, the Las Vegas Review-Journal reported that most commissioners were reluctant to part with power over the massive, but always-struggling, county hospital.
Yet the consultants appear to have considered their recommendations modest. They focused primarily on stopping commissioners from micromanaging hospital operations.
“Given the UMC situation,” says the FTI PowerPoint presentation, “we recommend the County consider most carefully the 501(c)(3) ‘public benefit corporation’ model.
“In this model, the County government transfers direct management of the public hospital to an independent, self-perpetuating Board. But the County also retains specific powers to ensure the public service mission is met.”
“Without significant changes in governance structure …UMC will be forced to significantly reduce clinical scope or close within 3 years,” FTI’s consultants concluded.
According to a UMC representative, the cost of the FTI assessment and eventual report — $589,500 — was split between UMC and the Nevada System of Higher Education.
As trustees governing UMC, county commissioners control payroll for roughly 3,500 employees, nearly all of them members of Local 1107 of the politically powerful Service Employees International Union. The local frequently brags of its political clout, citing its influence getting federal moneys promised to UMC, and boasting of its ability to install members of the county commission.
Corruption scandals — some of them political — have long dogged Clark County’s public hospital. Just one day before FTI’s official report to commissioners, a law-firm manager pled guilty to “participating in a conspiracy to receive and disclose University Medical Center hospital patient records in order to solicit business and clients for personal injury attorneys.”
In 2008, NPRI reported on audit warnings as far back as 2001, which warned commissioners that UMC’s expenses were increasing faster than revenues. From 2007 through 2009, UMC’s operating losses were $56.3 million, $55 million and $82.5 million, respectively. According to the Clark County Auditor’s office, 2010 numbers will be released later this year.
As recently as 2007, then-UMC CEO Lacy Thomas was fired after Las Vegas Metro Police raided his office and later indicted him on 10 felony charges, the largest of which accused Thomas of funneling millions of dollars to ACS Consulting, a firm run by one of his friends, for a no-bid contract.
Political-corruption issues at UMC go far back into the county commission’s history. According to FBI files recently obtained by Nevada Journal, the late former county commissioner and convention-authority head Manny Cortez was the subject of a federal grand jury investigation in the 1980s, when the county hospital was still named Southern Nevada Memorial Hospital.
Despite the hospital’s history of scandals, commissioners express reluctance to end their control. Nevertheless, most acknowledge UMC would suffer “substantial losses” if they stay with the “status quo” option.
“We’re not against any one proposal but one of the extremes of a 501(c)(3) would be transparency,” argued Commissioner Chris Giunchigliani. “If [Clark County] has control, we can be more transparent with hospital decisions than a 501(c)(3) would be, and I’d always err on the side of transparency.”
RTI, however, told commissioners that they could require — as a condition of the non-profit takeover — that the hospital publicly report each quarter on the level of services, costs, quality and patient satisfaction.
UMC’s current level of transparency has not prevented its accelerating financial slide. According to county audits, since 2001 UMC expenses have outpaced revenue, and since 2006, UMC has suffered operating losses of at least $30 million.
If business as usual continues, FTI projected an operating deficit exceeding $100 million by Fiscal Year 2014.
While Giunchigliani cited the recession and the large number of uninsured patients as reasons for UMC’s shortcomings, auditors have sounded alarms over UMC’s finances for the past 10 years.
The privatization option, an option UMC CEO Kathy Silver said UMC and the commission viewed as “not palatable,” is restricted by NRS 450.490, which states a hospital may be sold to a corporation at an appraised value if it’s the only hospital in the county.
Even if the commission were on board with privatizing, UMC’s high debt load would not make it appealing to many corporate buyers, according to Christopher Cochran, associate professor of Health Care Administration at the University of Nevada, Las Vegas.
“Teaching hospitals are expensive to run and any change would have to examine that relationship,” said Cochran.
Along with an independent board, Public Employee Retirement System (PERS) costs are another factor in the proposed transitions. According to Clark County, 3,472 UMC employees are in PERS and 56 percent of employees are vested in the system.
While a not-for-profit transition is not a cure-all, said Cochran, getting UMC out from under the commission’s thumb would be the biggest advantage for the hospital.
“Commissioners have to look out for too many things — the bottom line, their interests, the hospital, their constituents,” Cochran said.
“The hospital’s board should have the hospital’s best interest” as its priority.
(Kyle Gillis is an investigative reporter at the Nevada Policy Research Institute. For more information visit http://npri.org/.)
(This article was edited for length. You may read the entire article here. – Ed.)