Nonexistent firm given UMC job

Marshall Allen and Tony Cook

Saturday, Jan. 27, 2007 | 7:11 a.m.

Ousted University Medical Center boss Lacy Thomas awarded a $1.8 million physician contract to a company that had no local doctors and - seven weeks after the agreement - still does not exist.

The controversial deal with Hospitalist Medicine Physicians of Clark County LLC was to staff UMC round-the-clock with in-house doctors, known as hospitalists. Currently, doctors are on call at the hospital, but UMC wanted to bring in a single group.

As of Friday, however, the company that won the contract had not been created, according to state and county records. Instead, it's being formed by Ohio-based Hospitalist Management Group to comply with the contract.

Lawyer Maria Nutile, a health care law specialist who reviewed the agreement at the Sun's request, said having no legal record of the company and no doctors listed to provide services are glaring weaknesses. Technically, UMC should not have a contract with an entity that doesn't exist, Nutile said.

"If you're the hospital, don't you want to know who you're doing business with?" she said.

Thomas was fired Jan. 16 for financial mismanagement and misrepresenting UMC's losses over the past fiscal year. He also is under criminal investigation for allegedly giving to his friends in Chicago lucrative hospital contracts that produced little or no work - and often at a cost higher than that of other firms that had sought the contracts.

The hospitalist contract, approved Dec. 5, was one of several that created controversy in the local medical community, although those agreements are not among the deals mentioned to date in the criminal investigation.

Parts of the contract appear problematic. For example, Hospitalist Management Group promised to recruit doctors but did not say who would provide services at UMC.

Quality of care is an important factor in awarding contracts to medical providers, Nutile said, but it's impossible to gauge with the hospitalist contract.

"I can't recall that I've seen a contract awarded for providing professional services without knowing who the providers are," Nutile said.

Furthermore, the signed contract is with an LLC that will be managed from Ohio. But the law states that physician groups in Nevada must be professional services companies, not LLCs, Nutile said.

Kathy Silver, interim chief executive at UMC and one of the people involved in awarding the hospitalist contract, said she will closely monitor the situation to ensure that the company is incorporated.

"If they haven't in fact done it, they need to get on the stick," Silver said.

Dr. Stephen Houff, HMG's chief executive, said the local hospitalist group needs a licensed physician to lead the group before it can be incorporated. He expects a medical director to be licensed in Nevada next week .

HMG has identified physician recruits, both local and out of state, who are licensed in Nevada, Houff said. According to the contract's timeline, HMG must put forth its "best efforts" to contract with physicians within 120 days.

HMG, which has subsidiaries providing hospitalist services at locations around the country, always has taken the same approach to starting the companies, Houff said.

He also said that his lawyers will determine how the company is incorporated, so it may not end up being an LLC.

But if that is the case, Nutile said, what entity did UMC sign a contract with in December?

The HMG agreement was controversial within the medical community. When Thomas presented the hospitalist contract to the commission for approval, he noted that UMC's Medical Executive Committee - made up of 23 UMC doctors who ensure contracts meet standards of patient care - would not sign off on the deal.

Committee members and county officials said that while the panel reviews contracts, its approval is not required.

Thomas contends the decision to award the contract to an Ohio-based company was controversial because it was against the interests of doctors on the committee. Nine groups, several including local doctors, competed for the contract.

The proposals were scored by a group of four administrators and four physicians who gave the highest ratings to HMG and another hospital management company. Thomas told the Clark County Commission, which oversees UMC, and Silver also has said, that the top two companies could provide constant in-house doctor coverage.

But that was also true of other groups competing for the contract, including doctors from the University of Nevada School of Medicine.

"We satisfied every requirement of the contract in our application," said Dr. James Lenhart, vice dean of the medical school and the physician who submitted the contract. The school also listed local doctors in its proposal, he said.

Nutile said it seems clear, based on the scoring, that UMC wanted a national hospital management company to run its hospitalist program.

And while that decision may yet prove to be best for the hospital, she said the unusual way that the contract was awarded makes it impossible to evaluate the quality of services that will be provided.

Sun reporter Mary Manning contributed to this report.