DRMC paying off old debts, eyes end of bankruptcy

DOWNEY - It's taking a while to emerge from the abyss of bankruptcy, but Downey Regional Medical Center has reason to expect its day of deliverance will come this September.Indeed, it was on September 14, 2009 that DRMC filed for Chapter 11 bankruptcy to, it explained, "secure immediate protection from lawsuits and creditors' actions," while it sought to reorganize and streamline hospital operations to better serve its 'customers' and better position itself, with its 199-bed facility, in the competitive health care market. The reasons given then for making the decision were annual financial losses, despite full beds, attributed to the previous administration, due to lawsuits, unfunded patient care and a poor payor mix; and, more recently, annual losses of some $15 to $20 million due to a "system-wide breakdown of internal financial computer systems and related processes (charge capture, data compilation, billing, and collection)", leading to poor cash collection results and to unreliable financial data; and to the unfavorable terms of capitation contracts involving HMOs and medical groups, and bumbling through with a decade-long negative cash flow of about $1 million a month. Said executive vice president and chief operations officer Rob Fuller this week: "We've continued to pay a lot of debt the past two years through financial arrangements with banks, obtained invariably with difficulty, but successfully nevertheless. At this point in time, although the hospital's dysfunctional financial process has had an overhaul, we're still faced with a tough payment schedule." Fuller, who along with president and chief executive officer Ken Strople as well as chief financial officer Galen Gorman formed the executive team that forged the decision to file for reorganization protection two years ago, said DRMC has just borrowed an additional $56.5 million, $45 million of which is earmarked for paying off "most of very, very old debts," with the balance going to be used for working capital. He estimates DRMC's working capital needs right now range from $5 million to $10 million a year. However, all is not gloom and doom. Said Fuller: "Two weeks ago, we just completed our annual [weeklong] inspection with Det Norske Veritas (DNV) for our licensing and CMS accreditation and we passed with flying colors." (CMS stands for Centers for Medicare and Medicaid Services which approves reimbursements). Translated into English, three inspectors from the prestigious medical accreditation group made an exhaustive audit of DRMC facilities and operations, and came away impressed not only with the process improvements the hospital had instituted following its crafted reorganization plan but also, Fuller added, "with our people, noting that we do more with half the resources of other organizations." One of the conditions mandated by the U.S. Bankruptcy Court was the preparation of a viable reorganization plan. At the same time, a pre-inspection for DRMC's ISO 9001 certification, a highly coveted industry recognition, was also performed. ISO (which stands for the International Organization for Standardization) sets the "general industry standard [around the world] of a quality process-oriented enterprise. Fuller says "It's kind of like the industrial version of the Good Housekeeping seal of approval or the UL certification." According to Fuller, the inspector said if it were up to him, he would recommend certification at this point. "This means," said Fuller, "that they found substantial evidence that we have adopted and integrated total quality management (TQM) processes throughout our organization, including basic process improvement (patient flow, clinical procedures, tests, medicines, floor/bed assignments, etc.), process audit (work/function sequence, setting proper procedures, accountability, etc.), document control (forms, department policies and procedures, nursing diagnostics manual, etc.), calibration control (work flow, timing of instrumentation, etc.), management process validation (control procedures, organization charts, department functions, communication network (s), and customer-oriented service delivery." "We have of course replaced DRMC's old business model with a new one," said Fuller, a Dartmouth and Stanford Law School graduate with 30 years' legal experience (in addition, he has a medical management license or degree). He is also a devotee of the late W. Edwards Deming, who is of similar, or even greater, stature in the management field relative to Peter Drucker's: between them, perhaps more than any management gurus, they were probably in recent times responsible for revolutionizing management thinking around the globe. It was Deming whose management philosophy greatly influenced many of the heads of Japan's manufacturing giants, e.g., Toyota, Honda, Mitsubishi, Nissan, etc., Fuller said. One of his most thought-provoking questions was based on the ads of Toyota and Ford at the height of the 'car wars'. Ford crowed "Quality is Number One!", while Toyota emphasized "I want my MPG." "Who do you suppose won the most customers?" Deming was supposed to have asked his listener. "Ford was talking about themselves whereas Toyota focused on the customer. No wonder Toyota became the number one car manufacturer in the world," Deming supposedly said. "That is not all," Fuller continued. "Insistence on excellent quality control procedures, making sure that every Toyota car was built to (engineering) perfection every time (and therefore eliminating costly repairs, etc., made the customer very happy, and left the other car manufacturers perplexed." This was replicated in the making of electronic products (TVs and cameras by Sony, Panasonic, Toshiba, etc., etc.) Thus DRMC's new business model, while emphasizing 'quality patient care' most of all, follows the tested management principles above. Fuller said. "Our revenues have risen forty percent, and cash flow has greatly improved, and we now can say we enjoy cash reserves of $3 million. This is not much, but it's a solid development. Before long, we'll enjoy millions in reserve." This is due of course to the conversion specifically from capitation to 'fee-for-service' arrangements negotiated with the six providers: United HealthCare, Health Net, Blue Cross, Blue Shield, Aetna, and (back in the fold again) CareMore. "None of this happened overnight," Fuller pointed out. "This is the result of years of (my own) teaching and pursuing TQM doctrines and inculcating them into healthcare systems-something that is not routinely done at hospitals, but we think the long-term benefits will be enormous." He went on to pay tribute to his co-employees: "There is a core of nursing and other managers here who take the quality improvement imperative and customer service orientation very seriously, and they have worked tirelessly to get everything headed in the right direction. It is the result of the efforts of this core group of managers that has led us through these financial hard times with excellent clinical results, which has been repeatedly validated by outside inspectors of all types. We all have reason to be proud of these hardworking health care professionals who have done so much for this hospital in a thousand different ways."

********** Published: July 21, 2011 - Volume 10 - Issue 14