Financial cure unsure at Grady

Resistance from staff, bad technology, delays and worker shortages are hampering powerhouse consultant PricewaterhouseCoopers’ makeover of Grady Memorial Hospital’s cash flow, a new report shows.

The consultant saved Grady more than $34 million between October and June 30, the report says, but “significant barriers” stand in the way of transforming the public hospital into a profitable enterprise —- or at least one that bleeds money less profusely.

While the hospital has not released any of PricewaterhouseCoopers’ specific plans for saving money, new details emerged in an August presentation Grady provided last week to The Atlanta Journal-Constitution. It lists obstacles such as:

> “Cultural and behavioral barriers regarding accurately charging patients for services rendered.”

> “Inefficient contracting process; Missing sense of urgency and accountability; Lack of aggressiveness with vendors.”

> Resistance from physicians involved in surgery, delays due to time needed to address executives’ concerns and difficulty recruiting and retaining qualified staff.

> A “higher degree of uncertainty than typical,” and delays in starting initiatives.

The report raised questions about whether the hospital can sustain all the savings Pricewaterhouse-Coopers has realized. Grady must attract more patients and grow more efficient, the consultant said.

Tom Bell, chairman of the Grady board’s finance committee, said he is not surprised that some of the consultant’s plans are slow to take hold, given how difficult changing an organization can be —- especially when leadership is in flux.

“People are reluctant to change,” he said. “It’s particularly difficult if you’re being asked to change, and you know a new leader is coming and he may ask you to change yet again.”

Bell said PricewaterhouseCoopers has helped Grady straighten out billing practices, making sure charges are properly coded so claims won’t be rejected as often. But operations-related initiatives are taking longer, he said.

The setbacks come to light as Michael Young prepares to become Grady’s CEO in early September.

Young told the AJC last week that the consultant’s recommendations are on the right track, but he wishes the hospital were farther along in meeting them.

“In the rest of this year, it’s going to be a challenge to hit those targets,” he said.

PricewaterhouseCoopers had hoped to save Grady $65.5 million in 2008, the report said. But the hospital fell $7.7 million short of its mid-year goal overall. By year’s end, Grady could miss out on $10 million to $20 million in savings because of the setbacks, the consultant said.

As of early August, PricewaterhouseCoopers had pocketed $6.2 million in fees through a two-year contract that pays the consultant as much as one-fifth of the amount it saves Grady Health System. The consultant stands to make up to $26 million, but will earn less if it saves less.

Dozens of PricewaterhouseCoopers workers are embedded in Grady’s daily operations, from the emergency room to the supply room. Grady has operated in the red every year since 2000.

PricewaterhouseCoopers partner G. William Luallen said the consultant’s contract did not permit him to speak to a reporter without Grady staff present. Through a spokeswoman, the hospital’s administrators declined an interview request.

The consulting contract was signed in October by board Chairwoman Pam Stephenson, who is now serving as interim CEO.

Young said the need for PricewaterhouseCoopers’ help will decrease as the new management team gears up. The hospital’s current staffing structure is thin on senior managers who have long experience with success, he said. “The learning curve is very steep,” he said.

Asked whether he will seek to renegotiate PricewaterhouseCoopers’ contract, he said: “It would be my hope to renegotiate every contract, because they all cost money.

“And it’s like anything else —- when you don’t need them, you want to wind them down,” he added.

The consultant’s August report to a hospital committee provides little explanation for successes or setbacks. Using the Georgia Open Records Act, the AJC on Aug. 14 requested copies of documents that show exactly what the consultant is recommending.

In response, the hospital said it could take until Sept. 9 to research files to see which information may be released. The AJC asked for the consultant’s “statements of work,” which describe in detail what it is doing to help the hospital realize the savings.

Grady denied the AJC’s July 21 request for a PricewaterhouseCoopers report on the hospital’s purchasing office, saying it is exempt from disclosure because it is a draft containing “commercially valuable plans, proposals and strategies that are of competitive advantage.”

PricewaterhouseCoopers’ contract says that if Grady does not help the consultant meet mutually agreed-on goals, PricewaterhouseCoopers can charge hourly rates —- which top out at $525 an hour.

Progress reports made every two weeks would note such a hitch, if it occurred. The newspaper’s request for those reports is pending.