County officials were slow to spot troubles

By Marshall Allen (contact)

Sunday, Jan. 21, 2007 | 7:20 a.m.

If Clark County's elected officials had looked and listened more carefully, they may have flagged major problems at University Medical Center more than two years ago.

Now the hospital's administration has collapsed in a financial boondoggle that includes a criminal investigation. UMC lost $34.3 million last fiscal year, not $18.8 million as had previously been reported by fired Chief Executive Lacy Thomas. He is now being investigated on suspicion of giving millions of dollars to friends and fraternity brothers through phony contracts.

The current mess leaves Thomas' supervisors asking what they can do better in the future.

Clark County taxpayers fund UMC and rely on the County Commission and county manager to ensure their money is spent wisely.

On one hand, county officials congratulate themselves, saying their system of checks and balances caught Thomas' mismanagement - or perhaps illegal activity - before additional money was lost.

"I think the system worked," County Commission Chairman Rory Reid said.

But others wonder what took so long and why Thomas got so much leeway. The overseers missed some obvious signs of trouble during his tenure. For example:

Reid said he never heard complaints about the foundation until a month ago. And because the commission approves hundreds of items a month, he never looked at the Frasier Systems contract.

"That's obviously a mistake we made," Reid said of the Frasier contract. "Somebody should have pointed that out."

Reid said he reads the background on contracts, but that information is prepared by the chief executive.

"I don't know what more I could've done," Reid said. "The reason this broke down is because people didn't tell the truth."

Reid said the county is always trying to improve its oversight of UMC. In January 2003 the commission put the county manager in charge of the hospital chief executive. Previously, it had provided immediate oversight, which Reid said was difficult.

"We're a board of seven laypeople," Reid said. "There's not one accountant on the board. There's not one hospital administrator on the board. We don't have experience in those areas."

Larry Matheis, executive director of the Nevada State Medical Association, said it's hard to hold the commissioners responsible for the day-to-day oversight of a hospital. But they also can't be let off the hook.

"I think busy people with busy agendas may just not have had the time to focus, or they would have caught the issues sooner," Matheis said. "It really was a lot of months of nonreporting of financial information."

An oversight board must trust a hospital chief executive, but fiduciary responsibility dictates it verifies information, Matheis said. "You can't simply take the word of anyone and be able to say: 'Well, I simply wasn't informed properly.' You have a personal responsibility."

Reid said he thinks the oversight system worked. The checks and balances provided by the change in 2003, which put the hospital chief executive under the county manager, he said, led to the audit of an allegedly illegal contract. Reid said he can understand criticism of the commission, but said it's better to examine the situation and find how the system can be improved.

Thomas' delays in financial reporting led to a new initiative to improve oversight at UMC, Reid said.

In February, a consulting group will deliver a report on the governance of public hospitals around the nation, Valentine said. The goal is to compare best practices elsewhere to the system at UMC and see whether changes are necessary, she said.

There are several changes that might improve the current system. Matheis said some public hospitals have elected or appointed community boards that provide direct oversight. The board may include health professionals or people with special interest in medicine, such as business leaders or the elderly. It may be made up of individuals chosen by hospital stakeholders, similar to the Southern Nevada Health District board. Or it could be specially elected like a school board, he said.

The key is to make sure the oversight board is held responsible for the effective use of money and reporting at the hospital, Matheis said.

Additionally, Reid said he wants the hospital's finance department to also report to the county's chief financial officer. Employees in the finance department reported they were afraid to speak out internally under Thomas' regime, Reid said. They did, however, speak freely to the Metro detective investigating the allegations of cronyism.