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Phelps is community hospital that consists of 255 beds, operating at 70% occupancy. The hospital is part of the Stellars Alliance and competition with other facilities in the region has been fierce.

The CEO, Mr. Keith Safran, has assessed the current state of the hospital and has come up with some opportunities along with challenges.

Mr. Keith Safran, CEO:
In order to create strategic plan with the administration and the physicians. Mr. Safran has decided to meet with several leaders.

Financial info:
• Recent national healthcare reform has negatively affected the organization.
• The organization is operating at a 1.8% profit margin, with an average cost increase of 10.3%.
• The organization has raised $2-$3 million through philanthropy efforts.

Dr. Arthur Fass:
Dr. Fass, Chief of Cardiology, thinks there is a trend in which physicians want to be employees on staff so they do not have to worry about managing a practice. He thinks the hospital should
Admit patients only when it is in the patient’s best interest, rather than making decisions from an economic perspective. He wants to incorporate a teaching hospital to make Phelps more attractive to providers.

Dr. Robert Seebacher:
Dr. Robert Seebacher provides care to Medicare and worker’s compensation patients. Half of the joint replacements he performs go toward paying for his malpractice insurance.
He feels the United States is wasteful of medical resources and thinks the hospital should eliminate subpar or wasteful doctors.

Dr. Lawrence Faltz:
Dr. Lawrence Faltz, CMO, understands the obligations of the hospital medical staff and knows that physicians are not sufficiently paid, if at all, for emergency department visits. He also notes that the lifestyle/work balance is a hug issue for younger physicians. He feels that the reimbursement system is not conductive to physicians choosing to work at the hospital.

Dr. Richard Peress:
Dr. Richard Peress, Director of Surgery, feels that decisions made by administration must benefit physicians. He also thinks that more emphasis should be place on physicians with unique talents.

  1. What were the financial problems facing Phelps and its medical staff in 2010? What are the options for hospital initiatives and what do the physicians recommend?
  2. How should the CEO proceed? Give a rationale for your recommendations. What are the risks in adopting your recommended strategy?
  3. What are the unresolved questions in the situation facing the CEO and the board?

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