Las Vegas Sun

October 22, 2014

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UMC’s contracts under scrutiny

By Tony Cook and Marshall Allen

Las Vegas Sun

The University Medical Center contracts that police suspect were favors for former hospital Chief Executive Lacy Thomas' friends and fraternity brothers from Chicago are not the only ones that have generated controversy.

The cash-strapped hospital - which an independent auditor said Tuesday lost $34 million last fiscal year, not the $18.8 million Thomas had been telling Clark County commissioners - could have saved nearly $5 million a year had it accepted the lowest bid in three different deals with physician groups over the past 19 months.

When the public hospital sought agreements with physician groups for anesthesiology, cardiology and "hospitalist" in-house doctor services, the lowest bids came in, respectively, at $5 million, $4 million and $720,000 annually - a total of $9.72 million.

UMC, however, rejected each, opting instead for higher bids of $7.7 million, $5 million and $1.8 million a year - a total of $14.5 million. In each instance, UMC officials insisted that the higher bids were outweighed by other factors, including the anticipation that some of the companies picked would draw more business to UMC.

The higher bids, along with renewed complaints from local physicians passed up for the contracts, are getting a closer look after police raided UMC this week and filed an affidavit suggesting that Thomas awarded friends and cronies in Chicago seven hospital contracts for which little or no work could be identified.

Thomas, whose contract Clark County Manager Virginia Valentine terminated Tuesday amid the revelation of UMC's much greater than expected financial losses and the police investigation, addressed the allegations for the first time Thursday in a written statement.

"In the past few days I have been the subject of unfounded and malicious accusations from various individuals, causing me both personal grief and professional embarrassment," Thomas said.

"The accusations suggest that I have engaged in unprofessional, and perhaps even criminal, conduct to the detriment of UMC. I categorically deny such accusations."

While the anesthesiology, cardiology and hospitalist contracts do not involve any Chicago-based firms, they did generate controversy - and might get additional scrutiny from county officials.

"I think we have an obligation to go back and look at a lot of their contracts," Valentine said.

Kathy Silver, acting chief executive of the hospital, said she plans to review five of the seven contracts mentioned in the police affidavit. Two of them are no longer active, she said.

But George Stevens, the county's chief financial officer whom Valentine has appointed as UMC's acting chief administrative officer, said he plans to review about a dozen contracts.

Silver defended the three physician group contracts Thursday.

The anesthesiology contract went to Pacific Anesthesia Consultants, a subsidiary of Sierra Health Services, the state's largest health insurance company, even though that group's bid was $2.7 million more than that of a consortium of local doctors.

Silver said that Pacific's plan included a provision in which the group would refund to UMC the amount of money it received from paying patients and their insurers. The contract thus had the potential to be cheaper than the local consortium's proposal, she said.

The hospital is hoping to see a refund of $2.5 million to $3 million this fiscal year, she said. If the refund is the lower amount, however, the contract still would be slightly more than the one that was rejected.

Dr. Scott Young of the local consortium, PBS Consulting, said the current shake-up in the UMC administration should cast its lost contract in a new light.

Young said that PBS held the UMC contract for about 15 years with few complaints until 2002, when it went to another group. When the contract came up again, the selection process was unfair, he said.

The PBS bid was $5 million to provide all anesthesiology services at UMC, Young said.

Typically, the contracts went to the lowest bidder unless there were quality concerns, Young said.

PBS has 55 anesthesiologists with a core team that specializes in trauma. Pacific, in contrast, didn't even have the anesthesiologists to fulfill the contract, Young said.

"Our complaint was why did (Pacific) get it for twice the money without the experience?" Young said.

PBS doctors sent letters, faxes and copies of the contracts to the County Commission, which supervises UMC, but "no one would listen," Young said. "It went on deaf ears."

Dr. Dale Carrison is chairman of UMC's Emergency Medicine Department and sits on the Medical Executive Committee, which looked at and approved the anesthesiology contract. He said there were complaints about PBS' services and that all of the contracts were considered fairly.

"The contract went forward and it's been successful," Carrison said.

UMC also recently signed a $1.8 million contract with Hospitalists Management Group, or HMG, for in-house emergency room doctors.

The hospital received eight proposals, ranging in cost from $720,000 to $3.2 million annually. The Medical Executive Committee, which represents the hospital's medical staff, refused to endorse Thomas' selection of HMG, largely because some staff wanted a local group, Silver said.

The Sun several weeks ago requested minutes of the medical staff meeting but has not received them.

The Clark County district attorney's office later discovered that the contract as proposed by the hospital lacked a termination clause allowing UMC to cancel the contract if HMG breached any of its terms - an omission similar to that in another contract that the county's internal auditor exposed in September.

That other contract, with ACS Consultant Co., which was doing business as Superior Consultant Co., is the one that raised initial questions of criminal wrongdoing. Bob Mills, a friend of Thomas, is a senior vice president at Superior.

Silver argued that only two of the hospitalist groups proposed 24-hour, in-house physicians, while others would have provided doctors on call. And of the two, HMG scored higher and cost less, hospital documents show.

Still, she said she plans to keep a close eye on the contract, which gave HMG 180 days to ramp up its operations.

"If they can't do it, then we will have additional dialogue with them about whether or not that will work with us ," she said.

The most recent contract, with a cardiologist group, also produced grumbling within the medical community.

Nevada Heart Center had been providing cardiology services at UMC for $1 million a year.

Thomas sought a new, $5 million-a-year contract with Nevada Heart & Vascular Center, arguing that its reputation would bring more paying patients to the hospital.

When Nevada Heart Center learned of Thomas' action, it refused to extend its contract temporarily at the hospital's request. Instead, it made its own offer to do the job for $4 million.

For both proposals, the contract payments would be reduced by any amount that physicians collected from patients.

Thomas went with Nevada Heart & Vascular Center anyway.

Silver on Thursday described that as a good decision, arguing that despite its higher bid, Nevada Heart & Vascular Center ultimately was expected to bring more customers to the hospital.

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