How would you have dealt with the system president who was lying to the board
The CEO of our two-hospital system wanted to build a third hospital within our market. The health system was financially sound, so there was never a question as to whether we could afford to pay for a new hospital. However, this market already had eight other hospitals, so it was questionable whether an additional new hospital was needed. I was not in favor of building this third hospital. However, the CEO insisted, and she proceeded to develop plans to build this new hospital. She brought in nationally known consultants and coached them to find a way to justify building a new hospital.
At a very important board of trustees meeting, the system CEO and the outside consultants presented their case for building a third hospital that included data I knew was incorrect. At the end of this 3-hour presentation, one of the leading board members, who knew me well and trusted me, asked for my frank opinion. He asked me whether the information they had presented was correct and whether I recommended that the board approve this new hospital. Well, my whole career flashed before my eyes as I considered my response. All the board member wanted was a yes or a no. If I said yes, the new hospital would go forward, and I eventually would become president of the entire system. If I said no, then my tenure with this system would probably come to an end. This was a big decision for me, and I had a lot to lose. My family and I had a very comfortable house on the ocean, and my children were happily attending private schools.
I replied to the board member that no, the consultants’ information was not correct, primarily because they misunderstood (or misrepresented) the soon-to-be-implemented prospective payment system (PPS). The consultants tried to justify building a new hospital by arguing that, under PPS, the length of stays in all our hospitals would increase, and currently there wasn’t enough bed capacity in this market area to handle the increased volume. However, that information was absolutely incorrect. Anybody who understood the PPS knew that the length of stays were going to decrease, and that our hospital’s occupancy would decrease, which is exactly what eventually happened. Before PPS, we were running at about 93% occupancy. After PPS, our occupancy decreased to about 57%. Therefore, my statement to the board was absolutely correct.
When I told that board member “No, this information is not correct, and we do not need a new hospital,” the whole board meeting blew up. They went absolutely bananas, and voted not to build this new hospital. After the board meeting, the system president brought me aside and wanted to know what I was doing. And I replied, “I wasn’t going to lie to the board. If you want to lie to the board, that’s up to you.” I knew that my future there, particularly the prospect of becoming system president, was over from that meeting. Within 18 months I had left that system and taken over the presidency of another system. Two years later, the board member who had asked my opinion at this board meeting died in a plane crash. After his death, the system CEO again proposed building a third hospital. This time, the board approved, and they actually built that hospital. It was a major mistake. The hospital was not really needed, and the debt became a big drag on the balance sheet. Fortunately, I went on with my career and became president of another system, where I was very happy. That was probably the most explosive board meeting I’ve ever been a factor in a major decision, and I’ve had some very interesting ones.
D1. Case Study Questions
If you were the COO, how would you have handled the question from the board member about whether the new hospital was justified?
How would you have dealt with the system president who was lying to the board and was about to change your career path?
Would you have said yes to the board member’s question of whether the hospital was justified in order to protect your career and your family?
Solution preview
When facing any situation telling the truth is always the best option. On the other hand, if one chooses to lie then his conscious will never be clear. For this case, if I were the chief operating officer (COO), I would have said no to the building to the new hospital. When looking at the facts, the market in the area was………………………….
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