Friday, Dec. 8, 2006 | 7:10 a.m.
Only two months after being faulted for not having an adequate termination clause in a major hospital contract, University Medical Center administrators were prepared to move ahead last month with a $1.8 million contract that also lacked such standard business deal language.
Absent a sufficient termination clause, the hospital might not have been able to cancel the contract even if the firm it hired did not live up to its end of the deal.
Hospital Chief Executive Lacy Thomas brought the most recent contract - a three-year agreement with Hospitalist Medicine Physicians (HMP) to provide eight in-house physicians and two physician assistants for UMC - to county commissioners for approval Nov. 8.
But because of previous concerns - including a September audit in which County Auditor Jerry Carroll criticized the earlier contract for, among other things, problems with the termination clause - Clark County commissioners, who sit as the hospital's board of trustees, asked the district attorney's office to review the contract before they signed off on it.
The missing termination clause came to light during that review, was inserted into the contract and approved by commissioners Tuesday.
Still, the fact that the termination clause was missing in the first place - so soon after the issue was highlighted - disturbs some top county officials.
"This is a real standard provision," county attorney Mary-Anne Miller said. "I thought that was unusual."
County Commissioner Tom Collins said he also had concerns about the contract.
"There needs to be some more light shining on the hospital," he said.
Thomas could not be reached for comment.
Don Haight, UMC's executive director of contract management, said Thursday the omission was simply an oversight when he prepared the 36-page document.
"It should have been in there," he said.
The omission in the HMP contract also raises questions about how hospital contracts are reviewed.
Other county contracts are reviewed and signed by the district attorney's office. Haight said the district attorney's office reviews all hospital contracts, but does not sign them.
"Whether or not the DA signed the contract, it wouldn't have changed anything," he said. "We will continue with our procedure of having the DA review everything."
Asked why hospital contracts should not require the district attorney's office approval, Haight said: "Maybe it's a matter of pride, but I've been an attorney since 1977 and I am supposed to have my stuff approved by someone who has been in the DA's office for four years? Sometimes that frustrates me."
The earlier hospital contract, though, shows why it might be a good idea.
Three months ago, Carroll released an audit of the hospital's contract with ACS Consulting, which outsourced revenue-generating functions such as admitting, billing and debt collection.
Although the deal was supposed to be a pay-for-performance contract, several flaws resulted in a $6 million drop in revenue collection during its first year even while the company collected more than $1 million in fees.
Carroll also found that contract did not contain an adequate termination clause.
Hospital officials argue that a strong termination clause would have been unfair to ACS, because it would take the company two to three years to recover its significant costs in setting up the operation and begin to make a profit.
After the audit, though, the hospital amended the termination clause.
The contracts are not the only financial matters on which county commissioners have had questions for hospital officials recently.
Until last month, the hospital also had failed to provide commissioners with monthly financial statements for six months.
Thomas attributed the delay to problems with a new financial management system implemented by the county in fall 2005, even though the hospital had submitted, in May, a statement for January.
Thomas also revealed last month that the hospital lost more than $6 million beyond the $12.7 million shortfall that it had budgeted for the fiscal year ending June 30.
A complete financial audit of the hospital is due later this month.
The new HMP contract was controversial even before the missing clause was discovered.
Several local physicians called commissioners before the Nov. 8 meeting to object to the contract. Among their objections was that HMP is an out-of-state firm that will have to recruit doctors, a process that could take several months. Eight other groups sought the contract, some of which had doctors who already worked at UMC.
Moreover, the hospital's Medical Executive Committee, a group of medical staff at UMC, refused at two separate meetings to endorse Thomas' selection of HMP.
The Sun requested the minutes of those meetings and a list of the committee's members. The Sun also asked to view the scoring of the bids and Thomas' recommendation to the committee. The hospital has refused to grant any of those requests.
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