Question

It had been a long week and it was only Tuesday. At 2:30 p.m. on a Tuesday afternoon in Prairie City, a small town located in a rural area in the upper Midwest, all indications were that this was going to be a difficult week. Ann Smith, the new clinic administrator for Prairie Health Services, had just finished taking her third call from a frustrated patient and each of the calls was related to Prairie Health Services’ multiple billings. What the patients did not understand was that Prairie Health Services had four divisions: hospital, clinics, nursing home and nursing service. Although they were housed together, each division functioned independently and had separate billing processes.

Over the years, Prairie Health Services had grown from a small county-owned hospital to an organization that provided a broad range of services, operating a community clinic and a satellite clinic, a nursing home, and a home healthcare agency in addition to the hospital. It was that growth and the comprehensive range of services that had first attracted Ann to the position of clinic administrator.

When Ann accepted her position two months ago, the CEO and chairman of the board had charged her with reducing clinic losses. As a result, when she was not fielding calls from frustrated patients, she spent much of her time working on reducing the time from providing service to receiving payment for service,reducing bad debt and increasing cash flow. She was also beginning to realize that the multiple billing issue was just one aspect of the problems faced by Prairie Health Services and one of many reasons that monthly financial reports continued to show losses.

Ann decided to raise the issue of multiple billing the following day at the monthly administrators’ meeting.At that meeting, she learned that the other division administrators (Nick Hamm, nursing home administrator; Bonnie Little, nursing services director; and Carl Nord, CEO and hospital administrator) had also been receiving patient complaints about multiple bills. During the course of their discussion, Ann learned that Nick, Bonnie, and Carl were also extremely concerned about the continued viability of their Prairie County-owned healthcare facility, which had been bleeding financially for some time.

The division administrators and their staff knew that the information technology environment at Prairie Health Services provided basic system functionality at best, and was outdated at worst. The software packages used by each of the four divisions were entirely separate from the software used by other divisions, and any data transfer from one system to another had to be accomplished manually. Each division was required to enter all the patient demographic and insurance information. This was not only inefficient; it resulted in duplication of effort and in creased the likelihood of inaccurate information due to clerical error. It was also inconvenient for those patients who were seen on the same day by two or more divisions. They were required to repeat their demographic and insurance information two, three, or even four times in a single day. Ultimately, lack of integrated technology was one of the primary reasons that Prairie Health Services was incurring large losses.

Ann, Nick, and Bonnie wanted to integrate and update their information technology with a software package that had the capability to link all four divisions in order to increase efficiency and timeliness, and ultimately to reduce financial losses. Carl agreed to present the administrators’ concerns to the board of directors and propose a capital expenditure for a new software system. The board of directors was supportive of this capital investment because board members had also received complaints from patients regarding the multiple bills.

EGOS AND COUNTY POLITICS COLLIDE

The political nature of the organization’s governance added yet another layer of complexity for administrators. The board of directors of Prairie Health Services was comprised of the five elected Prairie County commissioners and two board-appointed community members — most of them small farmers or small businessmen whose families had lived in the county for generations. Their intentions were good, butt hey had little formal business background and were ill equipped to oversee what had become a complex,comprehensive healthcare system. Although Carl was the CEO, he was not originally from Prairie County,and members of the board often bypassed him to speak with Nick or Bonnie,who had both grown up in local communities.

It had not taken Ann long to see that the relationship between Carl and the division administrators was strained. The fact that board members sidestepped Carl in their efforts to understand the financial issues of their healthcare system left Carl feeling angry and in secure. He perceived this as a subversion of the chain of command and forbade Nick, Bonnie and now Ann from talking with board members unless he was present. In fact, while Nick, Bonnie and Ann were expected to attend all board meetings, they kept their opinions to themselves, allowing Carl to speak about anything related to Prairie Health Services. In spite of his insecurity, Carl was politically astute and skilled at verbal manipulation. This meant that his presentations to the board were not always entirely forthright. It also meant that Ann, Nick and Bonnie faced ethical challenges. By keeping silent, they gave tacit approval to Carl’s questionable behavior, but they were too intimidated by him to speak out.

CARL’S POWERS OF PERSUASION

The process of searching for potential software vendors was complex, and despite the fact that he was the CEO and hospital administrator, Carl declined to participate in the process. His explanation was that he did not understand information technology. Instead, he asked that Ann, Nick and Bonnie gather all the necessary preliminary data and make recommendations to him. After several months of research, the administrative team determined that five software companies had products with the capabilities to integrate the four Prairie Health Services divisions. Representatives of these software companies each came to Prairie City for two days to demonstrate their software to the administrators and support staff. Carl was absent from the demonstrations, but met privately with representatives from each of the firms. Most of these meetings were held in his office to discuss the costs and implementation process associated with purchasing particular software pack ages. However, the representatives for Southern Healthcare Software also entertained Carl at private dinner meetings at a local upscale dinner club.

Following the interviews and demonstrations, Ann, Nick and Bonnie determined that two vendors (Pine and Prairie Software, headquartered in the same state as Prairie County, and Southern Healthcare Software, headquartered in a Gulf Coast state) had appropriate integrated software packages that were also in line with what the organization could afford to pay. While neither package met all the specifications of Prairie Health Services, Pine and Prairie Software, with a price of $550,000, was more user-friendly, more closely matched Prairie Health Services’ needs, and was Windows-based. Southern Healthcare Software was judged to be more cumbersome and less flexible, seemed to be somewhat outdated as well as a step down from current software, and was not Windows-based. However, Southern Healthcare Software claimed to have the ability to integrate all four divisions, although it appeared to be best suited for hospital use. The cost of Southern Healthcare Software was $750,000.

Ann, Nick and Bonnie spent approximately two months evaluating both software proposals. They talked with administrators of other healthcare organizations that used either Pine and Prairie Software or Southern Healthcare Software and determined that their clear preference was for the adoption of the Pine and Prairie Software product and implementing a gradual integration of the divisions to ensure a successful transition from four unique software systems to one.

At the same time, representatives of Southern Health care Software returned to Prairie City several times and had further private dinner meetings with Carl. Based on these meetings, he determined that Prairie Health Services should adopt Southern Healthcare Software. He was in favor of an immediate integration of all four record-keeping systems, despite the fact that, admittedly, he did not understand information technology, the challenges that an immediate integration could present, nor the resources required to accomplish the task successfully.

Once Carl’s relationship with Southern Healthcare’s salespeople became known to his administrative staff, it was obvious that he was going to recommend purchasing Southern Healthcare’s software regardless of what his administrative staff’s recommendations were, even though the administrative staff had actual expertise. Despite the expressed preferences of the majority of administrators and staff of Prairie Health Services, Carl recommended Southern Healthcare Software to the board of directors. He also made it clear that he expected the unqualified support of the Prairie Health Services administrators.

Carl knew that he had to play his hand carefully in order to ensure that the board would adopt his software preference without question. In his presentation, he highlighted the fact that some of the software packages reviewed had cost well more than $1,000,000. He did not, however, indicate that the Pine and Prairie Software bid came out at $200,000 less than the $750,000 Southern Healthcare Software bid. Further, he neglected to state that the administrators and staff had overwhelmingly preferred the Pine and Prairie Software. On the contrary, he was adamant that the Southern Healthcare Software was the best fit for Prairie Health Services.

CEO Decision Making Questions:

What was the influence tactic that Carl used to convince the Prairie Health Services Board of Directors to approve the software purchase?

Answer 1

From the case, it is very clear that though the company (Prairie Health Services) is not running in financial loss but due to lack of technical updation and high patient data management resulting into multiple billing and hence showing a financial loss. Carl was insecure and has no knowledge of information technology. So just to prove himself, he grabbed the weak point of the company that is a financial loss and manipulated the cost quoted by  Pine and Prairie Software as $200,000 which was actually $550,000. As Southern Healthcare Software quoted $750,000, Carl showed to the board of directors that not only in technology but also in price Southern Healthcare Software is a better solution to the company issue.