The troubled public hospital system in Prince George's County has agreed to pay a Tennessee-based firm between $625,000 and $750,000 for each of the next three years to implement management techniques that are expected to save $4.2 million annually, according to documents obtained by The Washington Post.
Those figures were made public for the first time Friday by Community Hospital and Health Care Systems Inc. (CHHCS), the private corporation running the three public facilities, in response to a Freedom of Information Act request.
The contract, which was signed July 10, calls for CHHCS to pay the salaries of five managers that Hospital Corp. of America brought in to reverse a $1 million deficit auditors recorded for CHHCS in February. Payment of those salaries, which could cost another $400,000, is standard in such management contracts and was included in proposals submitted by three other companies, officials familiar with the negotiations said.
CHHCS selected HCA from proposals submitted by National Medical Enterprises of Los Angeles, Republic Health Corp. of Dallas and Geisinger Medical Management of Pennsylvania. Geisinger withdrew its bid before the final selection was made. One former hospital official who was closely involved in the negotiations with HCA said the firm had originally placed a $1.1 million price tag on its management services.
HCA is responsible for improving bill collections, increasing productivity and improving the image of the Prince George's General and Greater Laurel-Beltsville hospitals and the Bowie Health Center.
County officials who have read the contract said in interviews that it is a good deal for Prince George's that will pay for itself in savings generated by streamlined management techniques.
"For the job they are expected to do it is certainly not unreasonable compensation," County Attorney Thomas Smith said of the final contract agreement.
HCA and CHHCS spokesmen had, however, refused to make details of the contract public. CHHCS Chairman Winfield Kelly Jr. maintained that CHHCS is not subject to public information laws, but he said that he agreed to release the terms of the contract "in the interest of being good corporate citizens . . . ."
"In my years of working with contracts and proposals that have been made, this is probably one of the most responsible contracts I have ever seen," said Kelly, who is also a ranking executive with Prime Cable, Prince George's cable television franchisee. "It is a superb contract from the hospital's point of view."
HCA took over the management of a system that its studies found had increased its gross patient revenues by 8.1 percent since 1983 while operating expenses rose by 9.7 percent. In August, 650 hospital employes were fired in an effort to cut costs, prompting the resignation this month of the director of quality assurance, who said that patient care had suffered. Hospital officials said that quality care is still being provided.
Much of the savings HCA proposes to accomplish for the hospital system are to come from group purchasing arrangements of supplies and reduction of bad debt and unpaid patient bills. Corbett Price, the HCA district vice president who is overseeing the Prince George's operation, said yesterday that most of those savings have already been realized for 1985.
"CHHCS may have spent $3 million on consultants [alone]," Price said. "They're getting all of that [from HCA] for a lot less than they had been paying."
Richard Wade, a spokesman for the Maryland Hospital Association, agreed with Smith's assessments when the contract was described to him in a telephone interview.
"That's not out of line," he said of the fees. "When you look at management fees as a percentage of gross revenue, that's small." The HCA fee for the first year of its contract represents less than 1 percent of the $119 million in gross patient service revenues listed in CHHCS' financial statement for the fiscal year that ended in June.
Former CHHCS president Robert J. Brady Jr., who along with 24 other board members resigned in September, said in an interview yesterday that HCA was willing to offer the Prince George's system a competitive price in exchange for establishing a corporate foothold near Washington.
"They will readily admit that they were looking for a flagship system in the shadow of the nation's capital," Brady said. "They've got the attention of all of the nation's health care policy makers within 20 miles."
Price played down that scenario. HCA, he said, is committed to aiding public hospitals.