Read the case "The Struggle of a Safety Net Hospital" in the cases section at the end of this book. What could Wishard have done to ensure that its changes fulfilled its mission? How might the use of a balanced scorecard impacted Wishard's decisions?

The struggle of a safety net Hospital In recent years, the number of uninsured and underinsured patients has grown across the United States. The costs of caring for these patients are shouldered by both public and private organizations but often fall primarily on older, publicly owned facilities. The cost pressures and demands for care often far exceed the budgets and resources of many public providers. Wishard Health Services, located in Indianapolis, Indiana, is an exam- ple of a public provider that has struggled to strategically position itself to achieve its mission to care for the poor of Marion County. Its mission, vision, and values are as follows (Wishard Health Services 2013):

our Mission The mission of Wishard Health Services is to: Advocate Care Teach Serve with special emphasis on the vulnerable populations of Marion County. our Vision Wishard Health Services will enhance continuously our ability to meet the needs of the underserved and all people of Marion County, will be sound economically, and will lead innovatively in clinical care, research, education, and service excellence.

our Values Professionalism Respect Innovation Development Excellence In 2003, Wishard was under tremendous pressure. The hospital was owned and operated by the county and, as noted, had a mission to care for the vulnerable and underserved population of the county. Although there were almost a dozen other hospitals in its service area that provided some care to the indigent, the county hospital was seen as the main provider for this segment of the population. Although the other hospitals did not refuse to provide emergency care for the poor, most elective Medicaid and indigent patients were routinely sent to Wishard's facilities. Almost 90 percent of its patients were covered by a government program or had no insurance cover- age. As a result, revenues were always short, operating losses had to be sub- sidized by tax revenues, and capital projects were constantly deferred. With no funds to expand or refurbish its facilities, Wishard Hospital and Wishard's clinics were extremely crowded and looked old and worn. The facilities' con- dition, coupled with their location in a poor part of Indianapolis, Indiana, discouraged the patronage of insured patients. In 2003 the situation seemed to be worsening further. Wishard was in deep financial trouble, and its executives discussed ways to reduce the system's losses. Wishard's CEO publicly stated a deep concern about the 144-year-old institution's future. Wishard Health Services included its 492-bed hospital, six community health clinics, and Midtown Community Mental Health Center, which together served about 800,000 patients per year. According to Dr. Robert B. Jones, the hospital's medical director, 50 percent of those patients were insured by Medicaid or Medicare, and 40 percent had no insurance. City officials also were worried about the financial health of Wishard and talked about a potential budget shortfall of between $20 million and $80 million out of a $385 million budget. The best estimate was that Wishard was on track to end the year with spending at $35 million, but it could turn out to be much worse. The hospital did have cash reserves that could cover this deficit in 2003, according to Wishard's president Matthew Gutwein. But if the deficit continued and worsened in 2004 as expected, this reserve would be completely empty and Wishard essentially would be broke by the end of 2004 with even worse years to come. Wishard's ability to survive and fulfill its mission was seriously being challenged. The primary factors contributing to the deep losses included the following:

Declining reimbursements from the Medicare and Medicaid programs for the elderly and poor (For every $1 in hospital bills submitted to the two federal programs, Medicare paid just 82 cents, compared to 89 cents four years earlier. Medicaid paid 70 cents for every dollar of service, down from 90 cents.) Increasing numbers of patients without insurance to pay their bills (Nationwide, the number of uninsured had reached 43 million residents, 700,000 of which were in Indiana.) Continual hikes in the prices of drugs and new equipment and in wages for nurses and specialists, who were in constant short supply Stiff competition from specialty hospitals and surgery centers that appealed to well-off, paying patients, whom mainline hospitals depended on to earn their profits A weak stock market that sent hospital endowment investment income plummeting Something had to be done, and Wishard was seriously considering almost all of its options, including closing Wishard's heavily used and highly respected emergency department; merging Wishard and Clarian Health, which operates Indiana University, Riley Children's, and Methodist hospitals, or entering joint ventures, potentially involving construction projects; building a hospital to replace Wishard facilities, some of which had been built in 1914; and increasing copayments for outpatients to reduce unnecessary outpatient visits

Wishard's CEO stressed that construction of a new hospital would not be likely for another 5, 10, or even 15 years, depending on the pace at which fundraising set aside sufficient monies for construction or on the ability to pass a county bond to fund the construction. The construction would be very expensive; replacement of the whole facility could cost up to $750 million. While Wishard was struggling to decide what to do, a construction boom occurred and competition increased among area hospitals. Hospitals around Indianapolis were spending lavishly, investing more than $700 million in new or updated facilities, most with interior decor and lobbies fit for luxury hotels. These elaborate new facilities made Wishard appear even worse off. This new focus on consumerism and profligate spending in the hos- pital business gave rise to what Daniel Evans, president of Clarian Health, called "mindless competition." For example, the $60 million Heart Center of Indiana in Carmel, which opened in December 2002, offered cooked-to- order meals. City-focused Clarian, the largest healthcare system in the area, expanded its market to the suburbs by building a $150 million hospital in Hendricks County and a $235 million hospital in Carmel. The Hendricks County Medical Center was situated in a park-like setting that included a half-mile of walking trails in a serene environment intended to reduce the stress of a visit or stay in the hospital. To keep patients and attract new ones, both St. Vincent and Community Hospital took on physician groups as equity partners in their heart hospital projects, while Clarian sought to partner with physicians at its two for-profit suburban hospitals. St. Vincent opened a $24 million children's hospital in 2003, becoming the first facility to compete head to head with Clarian's Riley Hospital for Children, previ- ously the only children's hospital in central Indiana. St. Vincent also opened a $15 million cancer center, complete with a serenity garden and an indoor waterfall, while Clarian planned to counter with an even larger cancer center near IU Hospital. Area hospitals' struggle to compete was compounded by the market entry of national for-profit providers. For example, almost all local hospitals offering cancer care lost business to an aggressive for-profit operator, U.S. Oncology, which opened four cancer treatment centers in the Indianapolis area in the previous six years under the name Central Indiana Cancer Centers. These freestanding centers were projected to treat more than 43,000 patients in 2003. The cancer centers could handle patients at a lower cost than hospi- tals could because they lacked the overhead large hospitals have due to their big maintenance staffs, parking garages, and building needs. The hospitals also faced competition from OrthoIndy, a large ortho- pedics practice that was building a $30 million orthopedic hospital, and the 60-room Heart Center of Indiana, which featured a highly trained staff, one of the first all-computerized patient record systems, and furnishings befitting a Fortune 500 firm. Other hospital sites also demonstrated opulence. Clar- ian's futuristic $40 million People Mover was designed to ferry doctors and staff over city streets to its scattered hospitals, and the lobby of Clarian's two- year-old, $30 million cardiovascular center featured a terrazzo stone floor. Amid all of this change, most hospitals were receiving lower reim- bursements from insurers than they had previously, and the growing demand for charity care decreased the profitability of three of Indianapolis's four larg- est hospital networks. The following table shows these three networks' rev- enue, earnings, and full-time equivalents in 2002 and the percentage change in revenue and earnings from 2001. The figures for St. Vincent, the fourth network, are from the first eight months of the 2002-2003 fiscal year and include its hospital in Carmel.

Hospital network revenue earnings full-time equivalent employees Clarian Health Partners $1.66 billion (up 15%) $51 million (down 27%) 9,344, reduced by 100 in 2002 Community Health Network $755 million (up 12.5%) $26.6 mil- lion (down 15.5%) 8,700 St. Francis Hospital & Health Centers $362 million (up 10%) $11.4 million (no change) 3,215, reduced by 337 in 2002 and 2003 St. Vincent India- napolis Hospital $498 million (up 0.7% over budget) $32 million (up 8.3% over budget) 5,455, reduced in 2002 Although their reimbursements and profits decreased, all of the healthcare systems except Wishard still made money in 2002. what should wishard Do? Some believed that the days of a stand-alone Wishard were over. Dr. Brater, dean of the IU Medical School, believed that there were strong reasons to consider bringing Wishard into the Clarian network in a formal way. Few (if any) inner-city, tertiary hospitals providing high-level, specialized care could survive within a one-mile radius of each other. In 1995 Methodist Hospital merged with IU's hospitals, which were located less than one mile from Wis- hard. A merger would potentially eliminate duplication of services and create economies of scale. Would Clarian agree to take on Wishard's massive community burden of indigent care? What effect would this liability have on the competitiveness of Clarian Health Partners, especially after the construction and financial commitments they had recently made? Short of a mergerwhich was not a foregone conclusionClarian and Wishard discussed ways to collaborate and save money. They considered options that would be invisible to patients and the public, such as joint bill- ing and purchasing. Collaboration on medical initiatives, even joint ventures involving construction, also was a possibility. Already some collaboration existed between the two. Wishard did not provide open-heart surgery, so it sent its open-heart surgery patients to Clarian. Wishard operated a burn unit, whereas Clarian's local Methodist Hospital did not, so Clarian sent its burn patients to Wishard. Wishard was recognized as an important part of the area's healthcare system. The other area hospitals and community knew that closing Wishard would have a devastating impact on area healthcare providers in that they would have to absorb the indigent care. Indigent patients would also have a much more difficult time finding care. Indigents' struggle to obtain care was exemplified by Mark Mueller, a patient whose perspective on Wishard had changed with his own fortunes and health problems. He counted on Wishard for almost all of his healthcare. His life actually depended on it. He had been diagnosed with diabetes, and his kidneys had failed. He had been unemployed for six years and lived on disability. He had lost his insurance coverage, so Wishard was the only place he could go for care. "I wouldn't have any options," said Mueller, a widower. "I just don't see how the poor . . . well, a lot of them won't survive if Wishard goes down the tubes." An interim solution Wishard had to do something to stem its losses. Frustrated, Wishard's board realized that most of the options it had considered were too long term or impractical. However, it seriously discussed yet another optionincreasing and enforcing copayments. While the overall purpose of Wishard was to care for the poor, the more poor patients it served, the greater the hospital's losses. In an effort to reduce the number of visits by poor patients, Wishard implemented a new copayment policy on October 1, 2003, that dramati- cally increased copayments for patients visiting physician clinics and using emergency department services. Although revisions of this policy in 2004 decreased the amount of up-front (time of service) copayment required of self-pay patients, copayments still ranged from $35 to $120, a significant amount for most indigent patients. Collection of copayments also became vigorously enforced. In the past, the clinics and the emergency department often overlooked it, under- standing that many of their patients had little or no money. Beginning in late 2003, each clinic, hospital, and emergency department was required to collect copayments from all nonemergency patients up front. Some board members and physicians were concerned that this policy would discourage vulnerable patients from seeking care. They speculated that pregnant women might skip physician visits and wind up rushing to the emergency department at the time of delivery. They also feared that patients with diabetes and hypertension might self-treat and seek care only in emer- gencies, which could increase hospital stays and the overall cost of care. Wishard continued to struggle to find its strategic direction. The only certainty was that the future would become only more difficult for all healthcare providers, especially those like Wishard that primarily served poor and vulnerable populations.