Community General Hospital (cgh)

March 17, 2015

LIU MBA 626 Risk – Professor Darwin

Midterm Exam – Case Study 2: Community General Hospital (CGH)

Izzy Maldonado

I. Rationale for selecting this case:

I am selecting this case because it touches home. Two of my sons (Andy & Paul) were born at Trenton Hospital in 1983 and 1986 respectively and today the hospital is no longer a hospital. I lived and worked in the Greater Princeton Region (NJ) for approximately 25 years. The region is well known for the Ivy League school that bears it's name. Also, it is headquarters for companies like Bristol Myers, Educational Testing Service (SAT tests) and Novo Nordisk among many others.

Like many well known towns in the north east it is surrounded by urban cities like New Brunswick (North) and Trenton (South) New Jersey's capital. Both of these cities used to thrive economically 100 years ago but have “caved in” economically due to the departure of workforce and tax revenues to more modern (and affluent) suburban towns like Princeton, West Windsor and Hopewell.

CGH was located in Newport News, Virginia a city that has approximately 41% African American population and in comparison Trenton approaches 52%. http://quickfacts.census.gov/qfd/index.html Both cities like many others have struggled  to bring themselves back to a stronger economic phase; yet, in cities like Trenton some organizations have been able to adapt successfully to these changes. An example would be Trenton Hospital which, with the help of the government and a larger hospital, Capital Health, transformed itself into the Henry J. Austin Health Center a thriving clinic serving more than 19,000 individuals annually. http://henryjaustin.org/

II. Background Notes (Page/Paragraph)

11.1 Dr. Noland Wright - Manager of CGH. Retired Doctor. Perplexed by CGH financial condition.

11.2 History

-1914 Started as Whittaker Memorial serving mostly black population

-1940’s Hospital gained accreditation

-1950-60’s Hospital had a bustling business

11.3 History

-1970’s Unable to deal effectively with changes in competitive landscape Hospital drew on city emergency fund and reputation starts eroding (perception was that hospital was a “public” hospital).

11.4 Financial Background

-1983 by end of year CGH had ($402,000) budget deficit

-$15m Bond issued

-$1.5m Community Pledges

-Named changed to CGH

-Layoffs, tighter admission criteria & refusal of non-paying patients were implemented

-1984 by end of year CGH had ($749,000) fund deficit

12.1 Financial Decline Accelerates

- During a 6 year period there were 7 administrations

- During 1985 Losses continued

- Political avenues failed

12.2 Financial Disaster Arrived

-1990 Debt exceeded $20m

-Debt guarantor HUD took over loan

-1993 Bankruptcy granted. HUD settled for $4m

12.3 Old habits are hard to break.

-1996 CGH was back to running a large fund deficit!

III. Analysis:

1. What is the situation - What do you actually know about it from reading the case?

a. CGH is a pioneer hospital serving mostly the black community of Newport News, Virginia for 80 years. To give you an appreciation for the racial makeup of the city as of 2010: 49% white, 41% African American, 8% Latino & .2% Asia.

b. Of those 80 years only 20 were profitable. According to the case in the 50-60’s the hospital was bustling.

c. CGH has suffered from a very strong external force that afflict many urban cities: Decentralization. It is an insidious problem for urban areas across the nation and also complex with strong demographic forces behind it. A very good paper on the subject was developed June 2001, Titled: The New Urban Economy: Opportunities and Challenges by Janet Rothernberg Pack, Samara Potter and William G. Gale. http://www.brookings.edu/research/papers/2001/06/urbansprawl

d. As a consequence CGH developed a series of internal issues that later became chronic in nature: