"Historically, driving change within Grady has been a laborious process. The culture has evolved to one where the status quo is not only accepted, it is often vigorously maintained by strong, sustained resistance to change."

—- Alvarez & Marsal report to the Fulton-DeKalb County Hospital Authority, April 2007

Grady CEO Otis Story and a paralyzed Fulton-DeKalb Hospital Authority have settled on the worst strategy for the hospital's long-term health: reducing some services and cutting more staff.

Trying to calm fears that the financially troubled Atlanta hospital might close its doors by the end of the year, Story said last week that he will "keep tweaking" operations at Grady, a woefully inadequate course of treatment. Grady "can continue to limp on," he told Atlanta Journal-Constitution reporter Craig Schneider, declaring that the state's largest public hospital is not in danger of closing anytime soon.

His comments follow declarations by the hospital authority's ten members that they deserve more time to find their own solutions to Grady's problems. They can't seem to find the courage or the will to make the one change that could save the hospital —- changing its governing structure. The hospital authority can't bring itself to follow the advice presented by its own consultants.

Earlier this year, the hospital paid $2 million for outside consultants to review its operations and finances. And it invited a task force of the Metro Atlanta Chamber of Commerce to do the same thing. Both recommended fundamental changes in the hospital's governing structure.

The chamber was most specific, recommending that the hospital be turned over to a nonprofit management corporation, which is the structure that oversees virtually every other large public hospital in the state. Grady's hospital authority is composed of political appointees. Without such a change, public confidence in the hospital —- from local taxpayers, as well as state officials whose funding decisions affect Grady's survival —- will continue to erode, and the hospital will be left with no other choice than to close, the chamber said.

The chamber's warning is all-the-more chilling because a Los Angeles hospital, very similar to Grady, was shut down earlier this year. It, too, labored under a governing authority that refused to see the urgency of its condition.

Yet, Story and the Grady board insist on pressing their case that taxpayers from Fulton and DeKalb counties should authorize an emergency $20 million appropriation, as well as guarantee a $100 million line of credit. That would be on top of the $100 million taxpayers from both counties put up each year to subsidize Grady's operations.

The important question is what would those emergency appropriations buy? If the answer is more time for the hospital administration and trustees to fiddle around and do noting substantive, that's not good enough.

Grady's management has tried "tweaking" before, to little avail. The hospital's recent history serves as a vigorous rebuttal of Story's claims.

The hospital has been steadily accumulating debt since it completed a $325 million renovation in the early 1990s, a rebuilding program overseen by the authority and plagued by charges of contractor cronyism and overspending. Since that time, little of the medical equipment and hospital "infrastructure" —- such as its patient record system, laboratories and information technology —- has been modernized.

Without those improved systems, Grady's finances have deteriorated even further. Patients stay in the hospital longer than they need to; delayed or lost bills are written off as charity care; opportunities to attract more insured patients are squandered. But the authority doesn't have the money for modern systems; it needs the cash to pay its vendors and staff.

In 1999, Gov. Roy Barnes, responding to a similar financial crisis at Grady, found a way to manipulate Medicaid money to get it a one-time $52 million infusion. Barnes and the state Legislature warned Grady then to get its act together: No more bailouts would be forthcoming. But the following year Grady was back in the red.

The hospital CEO and the trustees started cutting back on administrative expenses and took other steps to reign in Grady's operating costs, not unlike the kind Story suggests might be available now.

One of the "tweaks" involved two of Grady's most loyal partners —- Emory University and the Morehouse School of Medicine, both of which provide doctors to staff the hospital. The authority simply stopped paying them on time, effectively using debts to both schools as no-interest loans. The authority decided it was acceptable for the hospital, in violation of its contract with both schools, to pay them back on its own schedule. Last year, the authority borrowed $25 million to pay off some of the debt, but it still owes both about $50 million. Some of the money it wants to borrow now is earmarked for Emory and Morehouse.

Meanwhile, the infrastructure at the hospital continues to deteriorate. The consultants estimated that even if Grady came out from under its current debts —- mounting at about $8 million a month —- it would still need to spend $250 million to bring its equipment and services up to date.

Still, Story and the Grady board seem content to let the hospital limp on, borrowing more money, begging Fulton and DeKalb taxpayers to bail them out and delaying the fundamental management changes needed to secure the hospital's future.

That's essentially the same scenario that took place at the Martin Luther King Jr.-Drew Medical Center in Los Angeles over the last few years, dragging the inner-city hospital down to the point where patient care was seriously compromised. It got so bad that Medicare withdrew its certification for the county-owned-and-operated hospital over the summer, forcing King-Drew to close its doors to new patients last month.

When Grady's leadership gets to the point of preferring to "limp on," rather than do what it knows it must, the prognosis for the hospital —- and the patients its serves —- is bleak.

—- Mike King, for the editorial board (mking@ajc.com)