THE MG371 CASE Growth Pains at Mountain States Healthcare Background Mountain States Healthcare (MSH) is a regional system of hospitals located in several large metropolitan areas of New Mexico, Arizona, Utah, Colorado, and in Acapulco, Mexico. MHS started as a single hospital in Salt Lake City, Utah, and, due to the business acumen and experience of its officers and Board of Directors, was quite successful and profitable. Over the years, Salt Lake Hospital began purchasing other hospitals and clinics in the state that were not as profitably operated, and eventually changed its name to Utah Health Group (UHG). Each facility continued to operate as an independent entity, except that its name was changed to include “Utah Health Group” and UHG instilled its own successful management style in the newly purchased facilities. When a hospital was bought in Denver, Colorado, the firm created a medical facility holding company in Salt Lake City, named Mountain States Healthcare. MHS treated each facility as a separate subsidiary, except for the clinics, which were associated with a larger hospital in the area. MSH continued to grow, adding facilities from the states it declared as its strategic area. Later, they added a new division of several clinics, an assisted living facility, and a hospital in the resort city of Acapulco, Mexico, to take advantage of medical needs of the large tourist and American retirement population there. The Mexico venture was the most profitable and fastest growing of the MHS family. MSH was a profitable venture, but began to realize that some of its administrative costs were, collectively, much higher than other medical holding companies, and reducing the profits that could be used for the benefit of shareholders. Additionally, the higher overhead costs were affecting the advantage of some hospitals to compete within their districts. The divisions had historically set themselves apart from other medical facilities by offering a full line of specialties within their service packages. The corporate holding company supported this by sharing resources, technology, and even personnel between the divisions when needed. This allowed each of the hospitals to position themselves as medical technology competent full service providers. A consulting firm pointed out several areas of administration which could be consolidated, using the latest technology, to realize a tremendous reduction in costs. The new VP of Finance, Aaron Nelson, newly promoted from the state billing office manager’s position, suggested that medical billing should be the first to consolidate. He reasoned that as each of the facilities had consolidated the billing operations for all facilities within their five geographic areas a few years ago, they should be able to completely consolidate all billing with the latest database technology in a fairly short time, and.

1. THE MG371 CASE
Growth Pains at Mountain States Healthcare
Background
Mountain States Healthcare (MSH) is a regional system of
hospitals located
in several large metropolitan areas of New Mexico, Arizona,
Utah, Colorado,
and in Acapulco, Mexico. MHS started as a single hospital in
Salt Lake City,
Utah, and, due to the business acumen and experience of its
officers and
Board of Directors, was quite successful and profitable.
Over the years, Salt Lake Hospital began purchasing other
hospitals and
clinics in the state that were not as profitably operated, and
eventually
changed its name to Utah Health Group (UHG). Each facility
continued to
operate as an independent entity, except that its name was
changed to

2. include “Utah Health Group” and UHG instilled its own
successful
management style in the newly purchased facilities. When a
hospital was
bought in Denver, Colorado, the firm created a medical facility
holding
company in Salt Lake City, named Mountain States Healthcare.
MHS treated
each facility as a separate subsidiary, except for the clinics,
which were
associated with a larger hospital in the area. MSH continued to
grow, adding
facilities from the states it declared as its strategic area.
Later, they added a new division of several clinics, an assisted
living facility,
and a hospital in the resort city of Acapulco, Mexico, to take
advantage of
medical needs of the large tourist and American retirement
population there.
The Mexico venture was the most profitable and fastest growing
of the MHS
family.
MSH was a profitable venture, but began to realize that some of
its

3. administrative costs were, collectively, much higher than other
medical
holding companies, and reducing the profits that could be used
for the
benefit of shareholders. Additionally, the higher overhead costs
were
affecting the advantage of some hospitals to compete within
their districts.
The divisions had historically set themselves apart from other
medical
facilities by offering a full line of specialties within their
service packages.
The corporate holding company supported this by sharing
resources,
technology, and even personnel between the divisions when
needed. This
allowed each of the hospitals to position themselves as medical
technology
competent full service providers.
A consulting firm pointed out several areas of administration
which could be
consolidated, using the latest technology, to realize a

4. tremendous reduction
in costs. The new VP of Finance, Aaron Nelson, newly
promoted from the
state billing office manager’s position, suggested that medical
billing should
be the first to consolidate. He reasoned that as each of the
facilities had
consolidated the billing operations for all facilities within their
five geographic
areas a few years ago, they should be able to completely
consolidate all
billing with the latest database technology in a fairly short time,
and realize
a substantial cost reduction. This would look very good to the
shareholders.
An executive committee of vice presidents was established to
set up the new
consolidated office, and it was decided to keep the plan
confidential until the
new director of the unit was selected, and to allow the new
director to plan
and announce the new unit themselves when it was time. A new
directorate, Medical Billing, was created at MSH to accomplish
the operation.

5. Each of the divisional billing managers was considered for the
director
position. The Mexico, Arizona, and New Mexico managers were
dropped for
consideration primarily due to their experience and education
levels, except
for the Mexico manager who was quietly dropped due to the
cultural
differences between Mexico and Utah. This left the leading
contenders Kyle
Christiansen, the Utah manager, and Colleen Kennedy, from the
Denver,
Colorado, office.
Kyle had an accounting degree and an MBA, both from BYU, a
well regarded
university in Utah, and had elected to take an accounting
position with MSH
when it was first formed, rather than go into public accounting
with a CPA
firm. He was an aggressive go-getter, and was promoted to
manage the
state billing office when Aaron Nelson was promoted to VP
following the

6. successful consolidation of the Utah facilities billing into one
entity.
Colleen had a management degree from the U.S. Air Force
Academy, and
spent six years in the Air Force creating, installing, and
managing computer-
based operations throughout the western states area. She
managed, during
the six years, to get an MBA from Colorado State University.
She, also,
started with MSH shortly after it was formed; her computer
background got
her the position to manage the development of the state billing
office, after
which she became the manager of the office.
The executive committee charged with selection of the new
Director of
Medical Billing included Kyle’s old boss, Aaron Nelson, who
was a strong
advocate of Kyle. When it appeared that there was a strong
possibility that
Colleen might be selected, Aaron suggested that a woman
director, in the

7. very conservative state of Utah, might bring a lot of problems
and
resentment among the mostly male employees in the current
state billing
office which would become the nucleus of the new directorate.
This probably
was the primary consideration which resulted in Kyle’s
selection.
Current situation
Colleen walked with calm determination into Kyle’s office,
without an
appointment; in fact, without waiting for the secretary to
announce her.
Once inside, she seated herself in front of Kyle and started
talking before he
could regain his composure and open his mouth. Her calm,
measured
manner of speech began deteriorating as the words started
flowing, letting
her rage begin to take control.
“Kyle, you promised that the only changes you would make
would be to
unimportant matters, strictly to improve efficiency. You

8. promised that I
could continue to manage my staff as I had been doing; only we
would be
here in Salt Lake City instead of Denver. You cut back on their
work roles
and changed their jobs. You eliminated their flex time because
you insisted
that they work only when a supervisor could observe them.
They felt that
we don’t trust them, that their capabilities are impugned, and
that you lied
to them about your promises. Their morale sunk to the bottom;
they moved
here from a comfortable existence in Denver to be betrayed; and
most of my
old staff have quit.
“You insisted that we move and begin merging the operations
before the
new system gets installed and tested. You had us cancel our
contract with
our software vendor, arguing that we could come here and use
your
software until the new system is up and running, but we ran
medical billing

9. and other financial services for our state facilities; your
software can’t
handle the load of our added billing, much less do the other
financial
services, and it just broke down. We don’t have any working
system!
“You told the offices in Arizona, New Mexico, and Mexico that
we are
consolidating their services here, and would be shutting their
offices down;
all their employees scrambled to get new positions elsewhere.
We now have
all divisions without a billing system! To top that off, not only
are we not
able to do the billing, but the Colorado facilities now must to
send their
accounting to MSH corporate accounting for consolidation,
which is slowing
their operations down. We cannot process the billing from
Mexico because
we don’t have any employees who speak or read Spanish and
none who

10. know their office practices.
“I have been asking for a meeting with you, but you are always
unavailable.
I sent you complete documentation to show that we are headed
for a
disaster, hoping to get you to change your thinking; however,
you can’t
seem to be able to change your thinking, and now we are
sinking. No one is
billing; our cash position is on life support; most of our best
and experienced
people are gone; we have no functioning billing software; and
those of us
who are left are spending our time trying to put out the fires
which are
springing up every hour.
“You reduced my role and my effectiveness; every suggestion I
made to you
was either rebuffed or ignored. I have really tried over the past
six months
to help you to pull this together, but it has always been ‘your
way or no
way.’ Consider this my ’30-day notice.’

11. If you don’t shape this up by then, you will have your way, and
I’ll have the
highway.”
Kyle, still speechless, sat quietly, with the sound of the
slamming door
ringing in his ears. “How did this happen?” he asked himself.
Kyle
Kyle was very pleased upon hearing the news that he had been
promoted to
be the director of the new department. “I’ve faced all these
problems with
billing operations management before, managing the methods
and systems
of digital billing, staff work flow, coordinating different
functions, creating
new processes, and keeping internal customers happy,” he
thought to
himself, reflecting on the fact that he had been managing the
Utah
consolidated billing office for over two months.
“Yes, I’ve done all of this before; now I’ll just have to stay
focused and apply
all the solutions that I’ve learned.” The whole idea was to get

12. the division’s
consolidated operations to coordinate their billing processes for
greater
efficiency. There was a great deal of pressure on him. This was
a test-bed to
be watched by upper management for later application to
consolidate other
processes within WSH. He’d simply have to avoid getting
sidetracked by
differing agendas, inter-department issues, varying work
methods and the
thousand other problems that these kinds of multi-company
collaborations
can experience. He knew he could do this if he stuck to his
agenda and
pushed forward.
Kyle decided that the best strategy would be to retain all of the
Utah
employees and bring in most of the people from the Denver
office (which
was the largest of the five and had the most experience), and
relocate to a

13. new, larger building which was recently completed on the MSH
campus near
the Executive building. At that time he could eliminate most of
the people in
the other three division billing offices and transfer those
activities to the new
building. He could already see a promotion to the executive
staff after they
saw how he could shape up the new directorate into an efficient,
well
disciplined unit, rigidly executing his plan. “Yes,” he thought,
“make a plan,
then follow it without deviation. That’s the road to success”
Colleen
Colleen sat in her office, listening to the software consultant.
“Colleen, I just
don’t know how to proceed. You only have one partly
experienced person
left from your original eight who moved here with you from
Denver; none of
the original staff are left who were here when I started, just
before you
arrived; and five positions are currently vacant. I don’t see how
we can

14. finalize the design and bring the beta system up. We just don’t
have a
sufficient knowledge base to get good design input and certainly
don’t have
the people to conduct a run through period on the beta. We have
no choice
but to push this whole thing back another 6-8 months, or at least
until you
have some staff who’ve had a chance to learn your operations.
Colleen’s mind went numb. She knew it was coming, she could
see it all
along, but still it hit like a bomb. She had almost no staff left
now and in 2
months the support program for the existing billing software
that had been
in use by the Utah office would be terminated by the
manufacturer. The new
system was needed not just to replace the old, but was also
needed to
handle the new operating processes defined by Kyle. Now the
promised new
system wouldn’t be available for 6 months at best, her best
staffers were

15. gone, internal customers were already grousing, and the cash
flow would
soon begin to dry up because billings weren’t going out. How
did so many
things go wrong through this whole process?
Colleen had managed the physician billing and financial service
office. Her
department was the largest of the four billing departments being
merged
and her numbers indicated that the Colorado office was far more
productive
than the other departments, much better than even Kyle’s old
department.
Over the last 6 months there had been many meetings to agree
on a plan
that would work for all stakeholders, or at least she thought it
was for all
stakeholders. It was clear now that all the problems that kept
cropping up
over the 6 months all pointed to the same problem and one clear
conclusion.
Colleen had built her operation in Colorado from scratch, and
she wasn’t

16. about to let some early bumps knock her down. The crew she
brought to
Utah were her best people, she trained them all and they were a
great team.
Her staff had a certain way of getting things done. They liked
setting their
own work hours; some were in by 6:00 in the morning, to
accommodate
their own personal lives. They particularly liked being
responsible for the full
cycle of activities associated with servicing each account.
Kyle had promised that nothing important would change; the
merger was
intended only to make their work easier. Yet even before a
structure and
date for the merger was set he began to insist that all the staff
start at 8:30
and that each billing clerk would be limited to handling just one
part of the
billing process instead of the prior method of handling the full
life-cycle of
each bill. Regardless of the many objections and countering
ideas and

17. apparent early agreements to avoid changing these things,
Kyle’s mind was
made up. He believed that a well disciplined work force would
be more
efficient.
As the problems mounted and staff unrest built, Colleen and the
staff
suggested many approaches to problems and sought answers and
decisions
from Kyle, but in every instance his answer was that he’d have
to get back
to them. Regardless of the topic, though, he rarely got back to
anyone with
an answer. This drove her people crazy; they worked for doctors
and thrived
on the can-do attitude and quick responsiveness of their
environment. This
is when the rumbling started among her people.
Colleen heard the words of concern, and she called Kyle many
times to
meet. She should have sensed trouble early when, upon winning
the new
Director’s job, Kyle did not call to meet with her for 6 weeks.
Despite this,

18. she set up many meetings to review the operation and plan for
how to best
make things work; however, he cancelled most meetings and for
those when
he did show, he arrived late and left early. When she finally got
Kyle to meet
with the staff, he showed little interest in their daily operating
issues. In
response to the staff concerns, he assured them that changes
would be
minimal and that any changes made would be to make their
work easier.
His vague answers left the staff uneasy, so Colleen kept calling
Kyle to get
their plans and problems ironed out; however, when she brought
up the
continuing staff concerns he told her to simply show a positive
attitude to
them and to be reassuring on all their problems.
The bells started to go off to many people when a couple of
weeks into the
planning phase Colleen’s most experienced billing clerk

19. announced that she
was leaving to take a new job elsewhere. Other staff members
now began
to apply for new jobs elsewhere in the hospital system. This got
Colleen’s
attention and another staff meeting was called where everyone
voiced their
concerns about the new billing system, their roles, hours,
customer relations
and many problems.
The pressure was mounting. Kyle knew his way would work, if
the rest of
the people would just follow him. At the meeting he listened to
all their
points and felt that he comfortably answered them by pointing
out the facts
and benefits of his original plan. They’d heard all this before,
however, and
now people were even more uncomfortable. One staffer,
seeming to speak
for all, expressed her lack of faith in this approach and an
unwillingness to
change a successful operation. In exasperation, Kyle felt the
need to exert

20. authority and told her that his approach had always worked, it
would work
here, and she needed to do something about her bad attitude.
Things just got worse. People began to leave in waves. The
software project
was falling behind schedule and the physicians who were their
internal
customers were getting unnerved. Upper management was
expressing
concern.
Colleen had to act.
Adapted from “A Case Of Lost Influence: The Need For
Flexibility And
Exchanges”, by Prof. Allan Cohen, Babson University