Hsm 543 scenario: back to the drawing board!

Sep 20, 2023

Carefully Read Scenario:


The local healthcare market’s dynamics are changing and evolving due to the increased competition between healthcare providers and systems. Things are looking up for Community Memorial as it tries to transition to a value-based care delivery system! But one day, just before lunch, you get a call from Bill Jacobs, the human resource director at Commercial Intertech (CI), the largest employer in the community. Bill says, “I wanted you to hear it from me first. We signed a contract yesterday with MegaPlan Health. It will be the managed care organization for all 4,500 of our employees and their families. About 9,000 patients total. I’m sure that you will want to get a contract with MegaPlan as soon as possible. I noticed that your hospital is not in its preferred provider network (PPN), and I am pretty sure that you will want to be so that our employees can continue using the facility.” By the time you thank Bill for the heads up, the acid is already churning in your stomach. In the hospital world, MegaPlan is known for cutthroat tactics, negotiating steep discounts with hospitals, and fighting every claim the hospital makes. Commercial Intertech has every right to contract with any health insurance provider it likes, but now you have a problem. If you cannot get a decent contract with MegaPlan and become part of its PPN, many local patients may bypass your hospital and go the closest PPN facility. Delivered to your office this afternoon, by no coincidence, is a contract proposal from MegaPlan. It calls for the hospital to provide a 35% discount from charges to MegaPlan and all of its members. And it includes service preauthorization requirements that will make life very difficult for your business office. You know from experience that the hospital loses money whenever the discount from charges exceeds 20%

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Your Role:

You are the hospital CFO, trying to solve the managed care problem.

Key Players and their statements:

Dr. John Evans

Chief of Staff:

I know you are not going to like this, but probably one third of my practice comes from Commercial Intertech . . . employees, spouses, kids. I have had multiple generations of patients who all work out there. You need to sign a contract with MegaPlan and soon. I looked at a contract for my own office. It is not great, but if I don’t sign I could risk losing many of my longtime patients. And sorry to say this, but if the hospital does not sign . . . frankly, I might have to take my patients elsewhere.

Katrina Eaton


Well, we do need to form a relationship with MegaPlan if Commercial Intertech has selected it. I would suggest preparing your own contract proposal for MegaPlan to look at. Be reasonable, but make it something we can live with. Remember, we have some power in this situation ourselves. If the Commercial Intertech employees and families cannot use our hospital, they will be forced to travel a long way for care and may even have to change doctors. That will not make them happy at all. You can bet that the HR folks at the factory will get an earful from their employees if we cannot come to terms with MegaPlan. Make your own counterproposal, and don’t panic.

Linda Freed

Business Office Manager:

There is simply no way that we can work with MegaPlan. I went through that at another hospital. They make it impossible to get claims approved, and when the payment finally comes it is usually wrong. And then we have to fight for the rest of our money. Don’t sign! In fact, tear the contract up and mail it back to HR at the factory. The employees will revolt at the factory when we say no, and MegaPlan will be sent packing down the road!

Nancy Stritmatter


Well, as you know, my husband works at Commercial, and quite a few of the nurses here are in that situation. What happens if we all cannot even use our own hospital for medical care? I am with Dr. Evans; you’d better just sign the contract they sent, and do it today so that no rumors get started around the hospital about this situation. Our people will panic if they cannot get healthcare here in town! I could even lose some of my best nurses!


Given the scenario, your role, and the information provided by the key players involved, it is time for you to make a decision.


Demonstrate a strong grasp of the problem at hand. Demonstrate an understanding of how the course concepts apply to the problem.

Apply original thought to solving the business problem. Apply concepts from the course material correctly toward solving the business problem.

Write your answer clearly and succinctly using strong organization and proper grammar. Use citations correctly.

A quality paper will meet or exceed all of the above requirements.

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