5 page paper
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
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