Dallas Parkland Memorial Hospital built wealth as patient care conditions worsened

Cash reserves of more than $1 billion were built up, in part, by skimping on staff and building upkeep.

Staff Writer
Dallas Morning News

Parkland Memorial Hospital quietly amassed more than $1 billion in cash reserves even as deteriorating patient-care conditions brought it to the brink of closure, an analysis of financial records shows.

The Dallas County taxpayer-supported hospital built the reserve over the last several years, in part by reducing staff and available beds, neglecting its aging building and moving hundreds of millions from the operating budget to help finance construction of a new hospital.

Federal regulators have since forced Parkland to plow at least $75 million back into operations to remedy lapses that they said threatened patients’ lives. That has prompted questions about whether focus on the new $1.2 billion hospital complex exacerbated Parkland’s patient-safety breakdowns.

Dr. Allan Shulkin, a member of Parkland’s governing board from 2004 to 2009, said a reason he left was because he was “a little troubled by what I thought to be an over-emphasis” on construction. He recalled hospital management assuring the board that patient care was under control and sufficiently funded.
It is clear now neither was the case, he said.

“Did we — the board, my board, the current board — get so focused on the new building that we forgot about operations?” said Shulkin, a pulmonary specialist who trained at Parkland in the mid-1970s. “I worry that that began to happen.”

Parkland officials declined Dallas Morning News interview requests. They referred to annual year-end statements of the Parkland Health & Hospital System for information about hospital finances. The News analyzed 10 years of such statements, obtained under the Texas Public Information Act. The statements don’t clearly explain how much money Parkland has at its disposal, but the hospital eventually said its “reserves” encompass cash, investments and assets limited to use, which is akin to savings.

By the Sept. 30 close of fiscal year 2012, those sources totaled just over $1 billion. Of that, about $315 million was restricted to new construction or bond debt repayment.

“We have plenty of cash on hand,” Ted Shaw, Parkland’s interim chief financial officer, told the Board of Managers during a December public meeting.

Parkland benefits from one of the nation’s biggest local-government hospital subsidies — a property tax that generates more than $400 million annually, about a quarter of Parkland’s total revenue. The tax rate is the second-highest for a Texas public hospital, at 27.1 cents per $100 in assessed property value.

Dr. Dana Forgione, an expert on health-care finance and accounting at UT-San Antonio, said public hospitals often don’t make clear how much they have in reserves so as to avoid questions from taxpayers.

“How can they have $1 billion and they couldn’t improve quality a little bit? Those are the questions they don’t want,” Forgione said after reviewing Parkland’s two most recent annual statements. “I understand there’s got to be a trade-off between current expenditures and long-term investment in new and improved facilities. But $1 billion is a lot of money, right?”

Starting in fiscal 2005, Parkland took surplus revenue from daily operations and saved the funds for construction of a new state-of-the-art hospital. Officials have touted what became a 17-story facility on Harry Hines Boulevard as “the largest hospital construction project in the United States,” likening it in size to Cowboys Stadium.

By 2011, Parkland had set aside more than $400 million, records show. The surpluses came from cutting spending on staff and charging higher prices for treating its mostly poor, uninsured patients, among other things.

The amount saved was higher than the $350 million in “cash reserves” that hospital officials had promised to contribute as part of a bond deal approved by voters in 2008. That election gave Parkland permission to sell more than $700 million in construction bonds — the biggest chunk of the new hospital’s financing.

Parkland’s total cash supply peaked at nearly $1.5 billion in early 2011 and began to decline as construction got under way.

Kevin Holloran, a health-care analyst from the Standard & Poor’s credit-rating agency, said Parkland’s balance sheet looked a “little rich.” But the cash levels were a “blip right now on the radar screen” because of construction.

“Cash becomes a very contentious topic at a public hospital. ‘Shouldn’t you spend it all down?’” Holloran said. “But if you’re about to build a new hospital, our opinion would be they financially, soundly did a good thing to put away some money.”

As Parkland’s cash supply grew, the hospital’s medical care in 2008 was coming under “near constant surveillance and investigation” because of “scores of patient complaints, injuries and death,” a federal report later showed.

The scrutiny intensified in 2011, when the U.S. Centers for Medicare & Medicaid Services found that Parkland’s patients were in “immediate jeopardy” of injury and death because of poor staffing and hospital conditions. Federal regulators took the unusual step of placing Parkland under independent safety monitoring in lieu of closure, making it the nation’s largest hospital to face such oversight.

In their February 2012 overview report on Parkland, the monitors said some hospital units lacked enough staff to accommodate emergency patients, worsening overcrowding and treatment delays in the ER. Cuts in the women and infants’ specialty hospital led to bed shortages and “unsafe” nurse-to-patient ratios. The building had soiled floors and holes in walls — duct tape covered one in an operating room — that jeopardized infection control.

The monitors quoted Parkland employees as saying that some safety problems were “the result of a budget reduction in a previous fiscal year” and “budgeted staffing constraints imposed last year.” Some concerns, such as the ER backlogs, were flagged by hospital consultants as far back as 2004, The News found.

The state also faulted Parkland for a “failure to adequately staff nurses in certain areas of the facility” — including the psychiatric ER, where a 2011 patient death triggered the CMS crackdown. In August 2012, the Texas Department of State Health Services fined Parkland a record-setting $1 million.

James A. Smith, former chair of the Texas Society of CPAs and managing director of a Dallas accounting firm, said Parkland’s leaders couldn’t blame patient-care problems on a lack of money, based on his analysis of the two most recent annual financial statements.

“Knowing what we know now,” Smith said, “it seems to me like the construction project, which was a grandiose plan, sucked an awful lot of air out of the room financially.”

For at least a decade, Parkland administrators and board members have argued that a new hospital was the cure to old Parkland’s problems.

“Indeed, Parkland’s future is largely being pinned to the public hopes arising from a new billion-dollar hospital that is making its way up from the ground across the street,” federal safety monitors noted last year. “But hospitals are not simply buildings, bricks and mortar.”

The existing hospital, which opened in 1954, had long been overcrowded. Even $140 million in improvements wouldn’t bring the structure into code compliance, consultants said at one point. And if Parkland hoped to compete for new patients, it needed modern facilities like those of other Dallas hospitals, officials said.

But expansion planning stalled in 2003. Parkland suffered a $76 million budget shortfall that year and started cutting about 500 jobs. County commissioners, who approve Parkland’s budget and appoint its board, were angered they weren’t consulted about new construction and hired outside consultants to study Parkland’s operations.

In February 2004, the board chairwoman sought a succession plan for Dr. Ron Anderson, putting his two-decades-long tenure as hospital CEO in doubt. She didn’t succeed and quit two months later, along with three other members who clashed with Anderson. A newly constituted board led by Dr. Lauren McDonald and other Anderson supporters extended his contract, and Anderson announced that his priority was to “get into a new hospital.” He did not respond to requests for an interview.

With political tensions easing, commissioners in 2005 appointed a blue-ribbon panel to explore construction options. In 2007, it proposed replacing Parkland with an 862-bed hospital. The replacement was about one-fourth larger, along with clinics and offices. Construction would be completed in phases, each likely needing voter approval. The first — featuring a medical, surgical and trauma facility — would tentatively open in 2013 at a cost $840 million.

As final plans were drawn up, Parkland administrators recommended a different approach: Building all at once.

The final bill could drop by $100 million to about $1.2 billion by avoiding the price inflation and redundancies of a gradual move-in, according to a 2008 planning briefing The News obtained. Accelerating construction, though, would require another $400 million sooner in the process.

To make that work, $747 million in bonds and a property tax-rate hike as high as 2.5 cents would be necessary. Parkland promised “to reduce the burden on taxpayers” by raising $150 million in private donations and using $350 million in “cash reserves.”

Parkland’s cash supply was nearly $600 million by mid-2008, after doubling in the previous three-year span. One-time windfalls and record-setting budget surpluses had stabilized Parkland’s finances. Commissioners also let Parkland keep its tax rate at 25.4 cents per $100 in valuation to generate extra money from higher property values.

That meant Parkland could immediately put $250 million of the $350 million into the project, according to the 2008 planning briefing. Enough cash would remain that Parkland could operate for at least four months without collecting another dime — above the median “days cash on hand” for hospitals with strong credit ratings, the briefing said.

The cash commitment helped reduce the amount of bonds needing voter approval but was about $130 million more than originally planned. Parkland forecast that its cash and investments would grow once construction began, according to the briefing.

Aiding that growth, hospital officials said, would be “revenue enhancements” and “productivity and expense improvements.” Parkland’s briefing described those as price increases above inflation and “strategic pricing” of patient services, as well as improvements in billing coding, “employee productivity” and “salary and benefit costs.”

Parkland did not define specific terms for achieving those savings but said doing so could gain $150 million between 2009 and 2014 — perhaps even eliminating need for an additional 1-cent tax hike once the new campus opened.

When Parkland’s board voted for the build-at-once plan in summer 2008, it prompted applause. “When the project got derailed almost five years ago,” Anderson said, “I wasn’t sure that this day would ever come.”

Two months later, safety inspectors showed up unannounced.

The inspectors, working on behalf of CMS, found that Parkland patients were undergoing surgery without informed consent, as federal rules require. The American Medical Association’s code of ethics says patients have the right to approve or reject their surgeon in advance.

Yet Parkland’s consent forms and other records reviewed by inspectors in September 2008 were unclear over who was performing the surgery — faculty physicians from UT Southwestern Medical Center, which staffs Parkland, or resident trainees. Consultants as far back as 2004 had found that many UTSW physicians weren’t supervising residents and urged Parkland to make changes, including hiring its own doctors.

In late October, two weeks before the November bond election on the new hospital, Parkland officials presented CMS a new consent form and insisted they saw no evidence of residents operating unsupervised. Six days later, CMS told Parkland it had revised the original inspection report to remove references to “deficiencies.” The incident remained out of public view until The News reported on it in March 2010.

Another complaint in September 2008 did get noticed. A 58-year-old man named Mike Herrera died after languishing 17 hours untreated in the main emergency room — the type of problem consultants foreshadowed in 2004. A national hospital accrediting agency, the Joint Commission, cited Parkland for about a dozen safety failures.

Parkland enacted new ER procedures and made 10 nursing hires early in the next year, as it promised CMS. Anderson, however, later said Herrera, who had a history of heart disease, was probably going to die even “had our system been working.”

Shortly after Dallas County voters overwhelmingly approved construction of the new hospital, Parkland’s board agreed to reserve the $250 million, as planned, plus another $16 million in cash for the project.

The new building, by that point, was taking more and more of the board’s time, said Shulkin, the former member. Meetings were lasting longer, and new ones were added to the schedule.

“There was a sort of new charge and direction for the board,” he said. “I got the sense that there was a lot of enthusiasm, ‘Oh, man, let’s do the new building.’”

Shulkin said he understood the project’s enormity. But that should not “distract from what we do today” — patient care, he said.

“I thought, hire the people and build it. We’ve still got a hospital to run. We still have patients to take care of,” said Shulkin, who practices at Medical City Dallas Hospital and serves on the Texas Medical Board. “We don’t need to be picking out the drapes.”

Herrera’s ER death had been appalling, he said, and frustrated some board members who had “demanded that the ER’s long waits had to stop.”

In March 2009, Shulkin decided to depart the board months earlier than planned.

“I knew, for me, I didn’t fit in there anymore,” he said. “If so much of the demands on the board are the development and construction of the new building, then let the people who are going to be there at the end be at the beginning as well.”

A month later, Parkland awarded $100 million in contracts to construction managers and designers. At a news conference to announce the firms, administrators talked excitedly about having a first-class, environmentally friendly building that was “patient-centered.” Anderson added that Parkland would no longer be a place of last resort, but rather “a hospital of choice.”

Construction bonds for the new Parkland were sold in August 2009, doubling its cash supply from about $600 million to more than $1.3 billion.

Then in January 2010, Parkland met its election pledge to put $350 million toward the new hospital. The board unanimously approved hospital administrators’ recommendations to transfer a lump sum of $53 million and monthly $2.5 million allotments during the next year from operations.

Before the vote, then-board member Louis Beecherl III cautioned that taking the money from operations at that time left Parkland “with a pretty fine line here of comfort.”

“If we don’t earn a positive bottom line, we’re going to be in real trouble,” Beecherl said, noting Parkland might not be able to build new community clinics if money became tight. “We need to be careful about what we’re doing here.”

Another board member, Alan Walne, said the money could be used for operations if necessary later. But there needed “to be pressure to bear that … we can put these other dollars away and can, in fact, perform in a manner that we told the voters we would,” according to a tape-recording of the meeting.

Parkland’s chief financial officer at the time, John Dragovits, told the board that the hospital would enforce fiscal “discipline so that we’re not in that situation.” Anderson added, “This is first things first.”

In a recent interview, Beecherl said his comment had “nothing to do with patient care.” He simply wanted Parkland to ensure a strong bottom line to maintain investor confidence, he said. Two credit-rating agencies, Fitch and Standard & Poor’s, had given Parkland’s bonds their highest scores, which reduced borrowing costs.

Asked whether Parkland’s large construction project had created financial pressures, Beecherl said the only pressure was finishing it.

“We were functioning in a 60-year-old building, and patient care was not up to current-day standards because of the age of the facility,” said Beecherl, an energy businessman. “The quicker we could build a new facility, the quicker we could get in and improve patient care to modern-day standards.”

Walne added, in an interview, that there was no talk that “we can skimp on patient care so that we can spend on a new hospital.”

“At the end of the day,” he recalled, “when we’d gotten everything taken care of, any dollars that we had … [in surplus,] we would try to set those dollars aside for the new hospital.”

As the hospital broke ground across Harry Hines Boulevard in October 2010, Parkland was also delivering on the “operational improvements” promised before the bond election.

Parkland earned nearly $150 million more in revenue between fiscal years 2009 and 2011 despite the sluggish economy. The hospital did that through price hikes in commercial insurance contracts, rate increases in Parkland’s managed-care plan for Medicaid recipients and “record-breaking reimbursements” through improved medical billing.

Parkland also cut salaries, wages and benefits. From fiscal 2007 to 2009, those expenses had increased by nearly $130 million. But in 2010, they were up only $33 million and, in 2011, they declined $3 million. That was the first reduction since 2003, when state budget cuts prompted layoffs.

A similar trend was apparent in the number of full-time employees, according to a News analysis of data Parkland produced in a public information request.

From fiscal 2007 to 2009, nurses and other classifications of caregivers increased by 9 percent, and Parkland’s total workforce was up by 8 percent. Both exceeded a nearly 7 percent growth in patient volumes.

In 2009 through 2011, however, nurses and caregivers increased by 1 percent, and the total workforce decreased by about 1 percent. Both lagged behind an 8 percent growth in patient volumes.

The cutbacks included about 200 jobs that Parkland eliminated to save $14 million in the fiscal 2010 budget. Officials had cited fears that property values would decline. Parkland said at the time most of the jobs were clerical, and an unspecified number would have been phased out because of a shift to electronic medical records. About half were already vacant, officials said.

For their 2009 and 2010 efforts, top hospital executives and administrators were awarded year-end “incentive” payments. Those bonuses totaled about $6 million for achieving goals such as reducing ER wait times and improving Parkland’s net income.

In recent interviews, former board members Walne and Shulkin said they may have asked administrators to justify staffing expenses, in general. But they recalled no edict to slow hiring or salary spending starting in fiscal year 2009.

“The question of staff was always,” Walne said, “do you have the resources you need to meet the goals you’re trying to achieve in the increase in quality?”

Walne said periodic safety inspections and News coverage of Parkland’s patient care failures had not suggested a “chronic problem” by the time his term ended in early 2011. The Joint Commission, he noted, had also extended Parkland’s accreditation after doing its own inspection in 2010 and was “very complimentary, quite frankly, of the care that was going on.”

“We would have reacted to whatever the recommendations would have been to accommodate patient care,” said Walne, who runs his family’s auto paint and body business. “We would not have known as a board where we needed to be spending money, because no one was giving us an indication that we had deficiencies where stuff needed to be addressed.”

Parkland finished its 2011 fiscal year with a surplus of $105 million — the seventh straight year with a margin of 5 percent or more. It even committed nearly $50 million more to construction. All of that despite having lowered the property-tax rate from 27.4 cents to 27.1 cents per $100 in assessed value.

Some county commissioners had questioned that cut, because of looming state and federal health-care overhauls that might change funding and patient volumes. But Dragovits had assured them during public discussions over the 2011 budget: “We’re not in a position of needing any kind of relief.”

Ongoing patient-safety breakdowns, meanwhile, prompted CMS to launch a massive, top-to-bottom inspection of Parkland.

Regulators found patients were in “immediate jeopardy” of harm or death and faulted the board’s oversight of the hospital. In September 2011, just weeks before the fiscal year ended, the government threatened to cancel more than $400 million in annual Medicare-Medicaid funding.

Continued federal funding was made contingent on Parkland hiring outside safety monitors to overhaul hospital operations, under CMS supervision. The board hired the Alvarez & Marsal Healthcare Industry Group, at a cost now exceeding $9 million, and accepted an April 2013 deadline to reform.

Alvarez & Marsal monitors found that Parkland was failing to meet about half of the government’s 100 or so safety standards and continuing to have an “extremely troubling” number of adverse patient events. Senior hospital managers also hadn’t kept board members “as informed as they should have been” and did not initially share “critical information and documents” during the government crackdown, the monitors wrote.

“Parkland faces regulatory, safety and patient care deficiencies in nearly every aspect of its organization and delivery system,” the monitors said in their February 2012 overview analysis. “If the deficiencies catalogued in this report are not addressed and fixed, Parkland could not pass a CMS hospital survey [inspection] and would not continue as a Medicare and Medicaid participating hospital.”

Some problems were attributed to past budget constraints that led to staff reductions and beds taken out of service. Others were the result of a lack of investment in operations and the existing building.

Parkland, for instance, hadn’t implemented rigorous methods to track the quality of care and performance of UTSW physicians and residents. Hospitals were required in 2008 by the Joint Commission and other accrediting groups to collect such data, monitors noted.

Other problems were in plain sight. In medical and surgical units, there wasn’t an “appropriate level of care-staffed inpatient beds” at key times. That translated into about 30 available but unstaffed beds a day.

“We were told that this was due to budgeted staffing constraints imposed last year,” monitors wrote.

In the ER, patients were forced to wait “longer than acceptable” to transfer. The backlog increased workloads for an already understaffed nursing team. It also “creates safety risks and creates delays for other persons presenting to the hospital for evaluation and stabilizing treatment,” monitors said.

Patients chose to leave without treatment at rates twice the national average in 2011, monitors found. The ER was so full Parkland diverted ambulances to other trauma centers during one-third of its hours each month.

In Parkland’s women’s and infants’ specialty hospital, known as WISH, two units were closed in 2011 and staff decreased by about 20 in anticipation of a decline in deliveries. But the number of patients increased in a few months’ time, monitors wrote.

That made beds scarce at peak times and forced women to recover in hallways or classrooms. Nursing-to-patient ratios in some areas became “unsafe.”

“While Parkland’s new hospital facility should be designed to resolve the inadequate size, proximity and model of care,” the monitors wrote, “Parkland must still make investments in the current hospital facility, specifically in WISH, to ensure a safe environment.”

The hospital itself was in such disrepair that some areas required immediate attention. Floors were soiled, paint chipped and furniture torn in WISH. An operating room had a hole covered by duct tape and a door that wouldn’t close completely. In another unit’s break room, large wet stains on ceiling tiles contributed to infection control risks.

“While Parkland’s current facility may show wear and tear due to its age, it does not have to be unclean,” monitors wrote. “Even the oldest facility can maintain an appearance and standard of cleanliness appropriate for patient care.”

Monitors warned that fixing the deficiencies by the April 2013 deadline was a “heroic challenge” that would require the focus of front-line staff, executives, the board and the community.

“The hospital is in the midst of a major construction project with the ongoing construction of a new hospital facility,” they wrote. “However, construction updates and discussions should not overwhelm or overtake the critical time necessary to oversee quality and safety functions and successful performance.”

The challenge also required money. Parkland estimated that it spent about $32 million in CMS-related expenses by fiscal 2012’s end in September. Just over half of that was on staff salaries, retention payments and benefits. Parkland projected adding roughly 250 full-time employees, including nurses, patient-care assistants and social workers.

The additions contributed to an 11 percent increase in nursing and other caregivers from 2011 to 2012, while patient volumes fell by about 1 percent. The growth rate was also the biggest since at least 2005, the earliest year-to-year comparison possible using the employment data Parkland provided The News. Despite the hires, another 400 nursing positions remained unfilled just before fiscal 2012’s end.

Another $45 million in CMS-related spending was estimated for fiscal 2013 year.

Among the specific investments made since the government’s intervention:

•New hires in the hospital’s medical and surgical units to accommodate more patients from the ER. Parkland also will create a 13-bed medical unit by converting space UTSW researchers were using and add 22 beds by remodeling offices that were once patient rooms.

•Renovations totaling up to $4.3 million in the main emergency department and psychiatric ER, and a redesign of the replacement hospital’s ER to meet safety standards. More than 100 caregiver positions were added in those short-staffed areas at nearly $6 million in fiscal 2012 alone. In early February, privately owned Green Oaks Hospital in Dallas was hired for about $1 million annually to manage the psych ER.

•An additional 28 beds in the women’s and infants’ hospital by reopening one of the closed units and filling 26 positions. Monitors also recommended studying how to use the second closed unit.

•At least $3 million on software systems to better manage patient cases, collect data, and measure clinical outcomes and physician performance. The monitors had urged Parkland’s board to “commit to the provision of financial support for the quality program.” They also recommended a patient rights and safety executive post, which is unfilled.

The expenses had Parkland executives worried publicly over their bottom line. Blaming the CMS-related improvements in part, they predicted fiscal 2012 would end in a loss for the first time in a decade.

“This is something we haven’t had to worry about since I got here,” Dragovits, the CFO who arrived in 2006, said during a March 2012 board meeting.

Dragovits retired last summer. He did not respond to requests from The News for an interview.

By the fiscal year’s end in September, Parkland reported making about $30 million more than it spent, according to its financial statement.

“We’re very financially healthy,” Shaw, Parkland’s interim CFO, said during December’s board meeting. “We continue to be well positioned.”

Nonetheless, there was some financial uncertainty.

Parkland forecast that it would close the fiscal year in September 2013 with a $6 million deficit because of the CMS-related spending, increased drug costs, more uninsured patients and Medicaid funding changes. Officials said balancing its budget would require using some of the $1 billion in “reserves.”

Parkland staff also told the board the replacement hospital would either need more funding to finish it as originally designed under the build-at-once plan or would need to be scaled back. And the 1-cent tax-rate increase it thought “operational improvements” could eliminate would be assessed starting in fiscal 2014, at a slightly higher rate of 1.4 cents.

If Parkland requires more money for construction and patient safety, the hospital could have its finances tested unlike in previous years, financial experts said. Dipping excessively into reserves would potentially make investors nervous, and asking for additional tax support is politically risky.

Already Standard & Poor’s has placed a “negative” outlook on Parkland’s bond rating. It did so after monitors released their critical analysis of Parkland’s problems. That meant a 1-in-3 chance Parkland’s rating could be downgraded, increasing future borrowing costs.

“We felt the risk is significant enough,” said Holloran, the S&P analyst, “that we owed it to the public to say they have a potential problem here.”

For former board member Shulkin, Parkland’s failures have left him “stunned and heartbroken.” He said he’s read the inspection reports and analyses and agreed with CMS’ mandates that the hospital spend millions on improvements.

Given the financial resources Parkland had at its disposal, Shulkin said, “It never should have come to this.”

“The problem with Parkland is, they forgot to take care of what they have to deal with every day,” he said. “They were so seemingly focused on what’s going on across the street that they’re forgetting about what’s going on inside these hallways.”

Staff writers Miles Moffeit and Sherry Jacobson contributed to this report.


Parkland Memorial Hospital blaming affiliated UT Southwestern Medical Center doctors for problems with patient care

A major factor behind Parkland Memorial’s patient care crisis is the hidden power struggle between the hospital and its medical school partner, UT Southwestern Medical Center.

Publicly, Parkland Memorial Hospital and its affiliated medical school, UT Southwestern Medical Center, present a united front. “We have a great relationship,” the hospital’s longtime leader told a group of aspiring UTSW doctors just last fall.

Behind the scenes, however, the reality has been far different. Dr. Ron Anderson, the former CEO, lamented the “vitriol” from UTSW faculty doctors, who supervise patient care at Parkland.

“They honestly don’t know how to work collaboratively with another (non-UTSW) physician who is demanding higher levels of performance and accountability,” he wrote in late 2011.

The tension between the two institutions reflects their tangled relationship. Parkland actually has little control over the doctors working under its own roof. Most are employed by, or answer to, UTSW. Parkland’s priority is supposed to be patient care. Yet UTSW lists its missions as medical education, research and patient care — in that order.

The organizations’ divergent missions, business interests and turf battles contributed to a dysfunctional culture at Parkland over the last decade, jeopardizing patient care, The Dallas Morning News has found.

Federal safety monitors have flagged the culture as a major factor in plunging Dallas County’s hospital for the poor and uninsured into its safety crisis.

Many times over the last decade, UTSW faculty physicians have failed to show up to care for Parkland’s patients. Instead, they see privately insured patients at the medical school’s separate system of hospitals, or focus on research. Resident doctors-in-training at Parkland often have been left with little or no faculty supervision. And front-line caregivers who report to the doctors, especially nurses, have felt powerless to resolve patient-care breakdowns.

Trust and transparency issues abound.

Welcome to the annual UTSW-Parkland cage match,” UTSW’s chief of internal medicine wrote in a September 2010 email to colleagues, describing contract talks with Parkland over the cost and scope of physician services.

“We can’t let them control faculty,” another UTSW chief said in an email to co-workers last March.

The problems between the two institutions run deep. Parkland’s ability to change depends in large part on UTSW. But few, if any, governmental or industry standards exist nationally to help responsibly manage such complex partnerships.

Since 2004, at least three separate consultant firms have urged Parkland, for the sake of better and more efficient patient care, to change its management model to take more control of clinical operations from UTSW. The Dallas County Commissioners Court, which approves Parkland’s budget and appoints its board of managers, also was put on notice. But the contractual relationship between Parkland and UTSW has remained fundamentally unchanged.

“That [relationship] has to be dealt with,” said former Parkland board member Chris Luna, who left in early 2011. “It’s daunting. The culture at Parkland can’t be fixed unless UTSW’s power is addressed.”

The institutions’ problems could worsen after Parkland and UTSW both open new, larger hospitals in the next few years.

Federal regulators and onsite safety monitors have prescribed 499 reforms to turn around Parkland by the end of April. By then the hospital must prove that the changes have taken root or lose massive government subsidies vital to staying open.

Doing that means transforming the culture, according to the monitoring team of Alvarez & Marsal Healthcare Industry Group. The monitors have warned of widespread divisiveness. They have said Parkland workers are lacking in personal accountability and could be desensitized to patients. They have cautioned that UTSW may put the “training and teaching of new doctors above a safe patient experience.”

Recently, the monitors said progress had been made toward a safer culture but warned that a “check-the-box” mentality, instead of sincere efforts at reform, persists. They also wrote of doctors’ lack of engagement in changing their practices, as well as their limited grasp of the government’s action plan for reform issued a year ago this month.

UTSW declined to discuss its relationship with Parkland or furnish details about the work its doctors provide at the hospital. In a statement to The News, it called the model “successful” and stressed the school’s commitment to improving health care through doctor training, biomedical research and patient care.

“UT Southwestern’s partnership with Parkland Hospital is structured to ensure outstanding patient care while fulfilling our responsibility as a state institution to educate and train future generations of physicians to care for the people of this community,” the statement said. “Based on the many hundreds of thousands of patients cared for under this arrangement, we believe the current model has been — and will continue to be — effective in achieving both of these mission-related goals.”

Current Parkland officials also have declined to answer most questions from The News about the alliance, including whether they would pursue a new staffing model.

Since 1943, the public has entrusted the two tax-funded institutions with balancing their different missions.

Parkland furnishes the grounds for UTSW’s doctor training and research pursuits. The medical school serves as the exclusive provider of care for Parkland’s mostly indigent patient population. For those services, UTSW is now paid about $160 million a year.

Their 10-year affiliation agreement, last renewed in 2006, touts the relationship as a national model and a “covenant of mutual responsibility.”

But UTSW’s influence inside Parkland is vast: Its physician force accounts for virtually all of the doctors at the hospital — about 1,000 residents and an estimated 700 faculty members who are supposed to supervise them. Doctors, with a few exceptions, don’t directly report to the hospital’s leadership.

The school has essentially acted as a shadow government over clinical care. Its department chairmen oversee Parkland’s clinical departments. Its faculty physicians serve as the direct chiefs over departments. Its faculty members serve as medical directors over units inside departments.

Parkland directly employs only a handful of attending physicians in its administration or on the main campus. It mainly provides the supporting cast for the UTSW physicians: about 2,500 nurses, hundreds of aides and techs, and directors who supervise them.

The patient safety spotlight has been on Parkland as the entity certified by the U.S. Centers for Medicare & Medicaid Services to receive government funding. But most of the serious patient care breakdowns that forced Parkland into a rare form of federal oversight last year were a shared responsibility with UTSW, which doesn’t answer to CMS.

Dr. Kern Wildenthal, president of UTSW from 1986 to 2008, said the “standard of physician care and supervision by UT Southwestern faculty in Parkland was judged to be high in each and every review by every accreditating agency during my tenure.”

Yet, Alvarez & Marsal outlined more than 50 violations — better than half of all regulations — in the comprehensive analysis of Parkland it completed a year ago. Parkland’s failures in infection control, emergency care, surgical services, resident supervision, physical medicine and rehabilitation, and psychiatric care, among other areas, also fell under UTSW oversight.

“We believe the current operation of Parkland’s resident training program is contributing to the hospital’s deficiencies in meeting all standards,” the monitors said, referring to the program jointly administered with UTSW.

In reality, there are two separate chains of command inside Parkland.

Parkland’s chief medical officer, for example, is supposed to provide leadership over clinical affairs and quality of care at the hospital. Yet the UTSW president “is actively involved in the selection, regular evaluation and decision to continue or terminate the employment of the CMO,” according to the affiliation pact. The current interim chief medical officer is a UTSW faculty member paid by the university, not Parkland.

Employees say the system — what some call the “two-headed beast” — fosters confusion and chaos.

UTSW medical directors, for example, are expected to collaborate with Parkland department directors on decisions. But the structure stymies cooperation.

“Ideally, they’re supposed to meet and discuss the best approach to provide the best of care for patients,” said a former Parkland nurse who has filed a legal claim against the hospital and requested anonymity for fear of retaliation. “What occurs is: they collide. Both have power and both want control.”

UTSW research projects — about 700 studies are currently under way at various stages at Parkland — also can derail patient care priorities.

“If the resident or attending is seeing a patient for medicine management, yet there is also a study on medicine management for which they need participants, during their appointment the resident may cover both,” the nurse said. “This will back up the patient load for the day. The residents get brownie points from their attending [faculty] doctor for signing up participants.”

Parkland’s longtime management structure failed to give the chief nursing officer direct oversight of nurses, despite the title. Many nurses have felt powerless because of the blurred lines of authority. Yet they are expected to backstop and monitor the very doctors who give them orders.

Safety monitors flagged that as a serious problem in their February 2012 report. Nurses, they said, are the “constant eyes and ears of hospital care,” adding that it was crucial to have a vigilant nursing service to monitor the residents.

As part of its reforms, Parkland has now given the chief nursing officer direct authority over the nursing staff.

Concerns about physician oversight kept surfacing over the years as UTSW embarked on an ambitious growth and profit-making strategy, opening its own hospitals.

In late 2000, the school purchased St. Paul Medical Center as a private-referral hospital for its faculty physicians. Five years later, it took formal ownership of Zale-Lipshy Hospital, a private facility adjacent to Parkland that UTSW had managed since 1989.

Some Parkland officials were alarmed.

“Up pops St. Paul, and we’re thinking, it’s a difficult situation for faculty doctors to be covering three different spots,” said a former Parkland board member.

Nurses were regularly noticing that faculty physicians weren’t showing up for work, leaving residents alone to deal with patients. A frequent comment was, “Where’s the doctor?” several caregivers told The News. Parkland employees weren’t always sure whether to take problems up their own chain of command because some of the hospital’s top executives were paid UTSW faculty members.

Anderson, for example, was a tenured professor at UTSW, his alma mater, for most of the 30 years he served as Parkland’s chief executive. He earned $100,000 total in supplemental salary from UTSW until payments stopped in 2007, records show. Parkland officials told The News that board members became concerned that state law prohibited such dual payments, and the practice was halted by UTSW. Parkland’s policy now is that “no one double dips,” according to a hospital statement.

Anderson was forced to resign as Parkland’s CEO more than a year ago after federal inspectors confirmed the hospital’s patient-safety breakdowns, though he was retained as a paid consultant through the end of 2012.

For years, there were concerns that Anderson had conflicting loyalties between the hospital and medical school. After Anderson resigned, a coalition of area churches and schools asked Parkland board members to find a new permanent CEO “free of any conflict of interest.” The group’s leaders, who had worked with Parkland for years on community health care issues, told The News that Anderson’s potential conflicts were behind the request.

Anderson told The News that his role with the school did not compromise his Parkland oversight. As for the payments from UTSW, they were “small” and were reported to the board, he said.

By late 2003, Parkland’s emergency room waits were averaging 13 hours. Women were going through labor in hospital hallways. Packed operating rooms were forcing delays.

Anderson believed a new larger hospital complex was the solution to those problems. So he and the Parkland board moved forward with a $1 billion strategy to build one.

But county commissioners, concerned about the hospital’s ability to manage costs amid government funding cuts, forced Parkland to put the plans on hold. Instead, they hired an outside firm, Health Management Associates, to do a comprehensive study of Parkland.

In 2004, the firm began pointing to the medical school as a major source of problems.

UTSW president Wildenthal was demanding that Parkland increase by $24 million what it paid for annual medical services, saying the school was being underpaid. In Texas, because of a lack of state funding, medical schools generally recover the costs for providing indigent care from the hospitals that contract for their services.

At Parkland, faculty doctors, Wildenthal contended, were working longer hours because of new national accreditation standards that capped residents’ work hours. At the time, Parkland paid UTSW $70 million for its doctors’ services, including supervision of residents and administrative overhead. (Parkland ultimately paid UTSW an additional $7 million for the next fiscal year, which began that fall.)

But the HMA consultants questioned the payments. UTSW had been unable to document much of what it was delivering to Parkland. Administrative costs were “extremely high.” UTSW was charging for “performance enhancements” to encourage more faculty members to supervise care at the hospital — behaviors that consultants said “shouldn’t need additional payments to assure.” And payments to more than 100 medical directors who “had no identified real authority” needed explanation, they said.

They also noted the contract had more than tripled since 1993, when it was $22 million, “despite the lack of any significant service volume increase over the past decade.” They called for more transparency in the partnership and suggested a third party verify costs.

Dr. Allan Shulkin, who served as a Parkland board member between 2004 and 2009, recalls that steps were taken to try to confirm UTSW’s physician costs. But he wasn’t sure how effective they were.

UTSW’s new focus on profits saddened Shulkin, now a pulmonary specialist at Medical City Dallas Hospital and a member of the Texas Medical Board. “You could see that there was another agenda evolving,” he said.

He remembered a different culture during his residency at Parkland in the 1970s.

“We viewed our mission as almost sacred to take care of the poor.”

The consultants also spent months evaluating Parkland’s clinical operations. They found a chaotic and fragmented structure.

UTSW’s academic mission was sidetracking care, they said. Parkland was a “resident-run” hospital.

“The foundation of the clinical care delivered at Parkland is built on the teaching model wherein the training needs of residents essentially guide policy and practice,” the HMA report said.

Trainee-doctors bottlenecked emergency care through unnecessary patient evaluations. Those “who need to experience certain kinds of surgeries in their training, will often look for the most interesting cases, leaving general surgeries behind.” In Parkland clinics, residents ran patient care while a faculty physician “personally never lays eyes or hands on the patient.”

“Most [UTSW] physicians work substantially in other venues and admit [patients] to other hospitals,” consultants said, referring to UTSW facilities.

A common complaint among doctors was that they didn’t know “who is in charge.’’

HMA urged Parkland to work with UTSW toward achieving a dedicated staff, where UTSW physicians — or doctors hired by Parkland — would spend most or all of their time at Parkland. It also urged the hospital to negotiate with UTSW to give the chief medical officer clear authority over the school’s doctors.

But Anderson hesitated.

“Our partnership with the medical school has been a wonderful asset,” he said, adding that he would explore the dedicated staff proposal.

At the time, Parkland’s board was operating without a patient quality committee — a common vehicle used by hospitals across the country to address problems. Such a panel wasn’t activated until after John Dragovits took over as chief financial officer in 2006.

Over the next few years, Anderson’s administration moved aggressively on the new construction front. Parkland hired PricewaterhouseCoopers to work on a strategic plan and master facility plan.

Parkland developed a campaign to replace its old hospital. “We will define the standards of excellence for public academic health systems,” the vision statement said. “The construction of this facility is an opportunity to maintain that vision.”

In 2007, PricewaterhouseCoopers supported plans for a new $1.2 billion hospital. But the firm also echoed some of HMA’s concerns, saying Parkland’s partnership with UTSW created “operational inefficiencies inherent in the teaching process.”

That draft report, obtained by The News, urged Parkland to seek partnerships with other health care services, with or without the support of UTSW, because it had “no substantial provider relationships beyond UT Southwestern.”

It also identified another weakness. It was imperative, the firm said, that Parkland develop quality metrics, as recommended by the national Institute of Medicine, to measure the clinical performance of doctors and to benchmark itself against other hospitals.

Parkland had been paying UTSW without rigorous methods for assessing the quality of doctor care.

By fall 2010, the hospital’s patient-care breakdowns had become widely known. The News had been investigating them since March after a UTSW surgeon alleged that lax resident supervision and absentee doctors were causing widespread harm at Parkland.

One case involved Jessie Mae Ned, a former Parkland employee whose leg was amputated after she was injured during a surgery by a UTSW resident. Following the surgery, Ned went three days without seeing a faculty doctor as she faced life-threatening complications.

Former board member Luna recalled board discussions in 2010 about changing the physician model out of fear that UTSW doctors were spending too much time at their own hospitals and transferring Parkland’s privately insured patients to the school’s hospitals.

“There was this growing concern: Are there two classes of care?” Luna said.

Anderson remained passive, he said. When such changes were discussed, Anderson would say, “It’s not provided for in the contract,” Luna recalled. “He used that a lot.”

Another board member, Alan Walne, once pressed Anderson on that point, Luna said. “We can change the contract. If it’s not right, if it’s not the best thing, we should fix it,” Luna recalled Walne saying. Walne declined to comment for this story.

Dr. Lauren McDonald, who resigned as chairwoman of Parkland’s board last year, said the board instructed Anderson to move toward developing a staff of doctors dedicated to Parkland. “The CEO did not follow through on this along with other important recommendations. You are aware of the outcome,” she told The News.

Anderson said it had been his intent to move toward a dedicated staff, with the help of UTSW. “I wanted to see it happen,” he told The News. “But it will take time to grow into that model.”

He noted that he had persuaded UTSW some time in the few years following the HMA study to agree to allow Parkland to employ and supervise a handful of its own medical directors, as well as have the chief medical officer report to Parkland instead of to both institutions.

In late 2010 a third group of experts, Chartis Management Consultants, issued a striking new finding: Roughly two-thirds of the 700 UTSW doctors assigned to Parkland were spending 50 percent or less of their time at the hospital.

The News obtained only a summary of the report, so it’s unclear whether the consultants offered any more details on the physician absences. Parkland has refused to release a copy of the full report. Chartis did not respond to inquiries.

Like previous consultants, Chartis did not say the Parkland-UTSW alliance is inherently bad. To the contrary, such hospital-school collaborations can be highly effective if both parties work more closely and openly, and ensure “a cadre of faculty physicians whose primary focus is the care of Parkland’s patients,” the firm said.

“Parkland needs a model where most of the care is provided by physicians practicing at Parkland 75 percent or more of their time rather than the current situations,” Chartis said.

Parkland “must be steadfast in its negotiations with UTSW due to the complexity and magnitude of change required,” and it must be prepared to hire its own doctors, the report said.

That fall, Parkland officials sought some changes in the contract with UTSW, though it is unclear whether the request was tied to the Chartis findings. The hospital asked for guarantees from UTSW to commit a group of hospitalists — specialists in acute hospital care — to Parkland 100 percent of the time, according to emails obtained from UTSW through an open-record request. The emails don’t make clear how many doctors would be involved.

Inside UTSW, administrators balked.

“The 100 percent dedicated Parkland hospitalist language is not something we can abide by, it’s not how we are structured, and not something we can be in 100 percent compliance on,” Dr. Ethan Halm, chief of internal medicine, wrote in an email to colleagues. “These are UTSW faculty, not Parkland employees.”

He called the negotiations a yearly “cage match” and insisted that “most of the people who split their time [between hospitals] spend the vast majority of their time at Parkland.”

It’s unclear what happened as a result of the hospitalist negotiations. But over the next two years, both sides continued to battle over staffing, revenue and control. One UTSW official said in an internal email that a “nuclear option” be considered to fire an employee appearing to side with Parkland’s effort to regain some control.

Dr. Claus Roehrborn, chairman of the UTSW urology department, emailed other school leaders in December 2010 expressing frustration over a proposal to provide additional urologists at the hospital. Parkland officials should “find themselves a urologist,” he wrote.

“None of our faculty is truly all that interested in working with a group of nurse practitioners thoroughly disinterested in their job, being reprimanded by the administrators around every turn, and having no patient of their own to follow,” Roehrborn wrote. “Plus, I really need them to all work at Aston [a UTSW ambulatory care center] and Zale. Far better for our enterprise.”

In December 2011, his last month in office, Anderson described “the vitriol of some of our medical colleagues” toward his chief medical officer. The criticism, he wrote in the CMO’s job evaluation, “is directly in proportion to [the CMO’s] pressure for needed change in supervision (amount and quality).” He also said that the current patient safety problems “have to be owned by Parkland, not blamed on UTSW.”

UTSW officials refused to disclose to The News exactly how many of their physicians work at Parkland. After they initially declined to answer a series of questions late last year, they sent a follow-up statement saying they “categorically reject” the findings of the Chartis study and did not have input into them.

In the statement they acknowledged, “While several hundred of our faculty contribute to patient care and teaching at Parkland to some degree, more than two-thirds of care is provided by a much smaller subset (about 30 percent) of our faculty.”

That subset of doctors, they said, is “essentially dedicated to Parkland and do not have appreciable practice responsibilities elsewhere.”

Wildenthal, who left his presidential post in 2008, also said in a statement that “there was a steady, progressive, and dramatic increase in the number of excellent faculty physicians rendering care and supervision at Parkland” over the last two decades. That was made possible, he said, because of the school’s ability to recruit physicians who care for both Parkland patients and UTSW patients.
n the comprehensive report last February in which federal safety monitors detailed Parkland’s many problems, including culture, they stopped short of calling for an end to the UTSW staffing model.

However, in addressing one of the most troubled areas of the hospital, the psychiatric emergency room, they wrote:

“The contractual and financial relationship between Parkland and UTSW cannot be a barrier to the imperative that there must be consistent physician coverage by doctors who are interested and committed to … promoting a new model of care. The Hospital [should] look to non-UTSW physicians for consistent coverage,” if necessary.

Federal regulators also have not directly called for an overhaul of Parkland’s relationship with UTSW. David Wright, deputy regional administrator for CMS, said that fixing Parkland’s most pressing problems — rampant unsafe practices — is the agency’s top priority.

“It’s like trying to walk through a building full of clutter,” Wright said when asked whether CMS or monitors would pursue such an overhaul. “You’ve got to get rid of all the clutter before you can see all the cracks in the foundation.”

Still, federal overseers have been helping Parkland regain control in a variety of ways.

Parkland has persuaded UTSW to commit full-time faculty doctors to the understaffed psych ER, the scene of a series of violent incidents including the death of patient George Cornell following illegal restraints two years ago Sunday. Last week, Parkland struck a deal with a private psychiatric firm to manage all mental-health services.

The hospital has developed a system to document and audit supervision of residents across the hospital but it is still being tested. And, recently, the hospital has contracted with a private company of physician-specialists to staff its urgent care center, which relieves pressure on the main ER.

The hospital also has greater authority over an influential medical executive committee responsible for evaluating doctors and developing proper clinical practices. Committee members were previously appointed by UTSW division chairmen and stacked with faculty doctors who worked primarily at other hospitals. The committee now consists of doctors who work at Parkland.

In addition, Parkland is developing a quality improvement program to measure and monitor patient outcomes and employee performance across the hospital, as required by federal regulations.

Dr. Marty Makary, associate professor of surgery and public health at Johns Hopkins University, said a safety-centered culture is fostered by an administration that measures outcomes, seeks employee input and moves aggressively to fix problems.

“Everyone agrees they know what a healthy culture looks like. But it takes time to change a culture and a business model,” Makary told The News. “In terms of a business model, you can’t fix something if you can’t measure it.”

Health care systems also must be transparent with the public about their breakdowns, said Makary, author of the new book Unaccountable: What Hospitals Won’t Tell You and How Transparency Can Revolutionize Health Care.

“What you don’t want is a situation where leaks to the press lead to embarrassment,” he said. “That’s a system where there is detached management, and people wait for things to blow up and they do patchwork fixes in response.”

Dr. Laurence McCullough of Baylor College of Medicine in Houston is among the few researchers nationally to study the complex power relationships between hospitals and medical schools. He says there is a need for uniform ethical standards to help oversee the partnerships across the nation. Fostering transparency between such organizations is a crucial element, he said.

Otherwise, the quality of care can be corrupted by other forces, he said.

“You have to be anticipating ethical challenges so you can manage them,” said McCullough, a professor of medicine and medical ethics. “When an organization focuses on the bottom line, it loses sight of care. That’s a formula for trouble.”

What it will take to fix Parkland’s problems, the federal monitors said, is a cultural transformation. Everyone, no matter the job, must be focused first and foremost on patient safety.

In retrospect, Dr. Shulkin said he wishes he and other Parkland board members would have taken stronger actions to protect the hospital’s mostly low-income patients.

“I would blame the skill of the medical school in being able to avoid what we were asking of them, and our not putting them to task for it,” he said. “I would demand a lot more accountability from UTSW. I would demand an investment from UTSW, an emotional investment for responsibility for patient care” at Parkland.

Dallas County Judge Clay Jenkins said Parkland needs to revisit the findings of past consultants calling for improved doctor coverage of patients and more openness.

“Parkland must require that doctors are sufficiently present at the hospital and focused on patient care,” Jenkins said after The News shared its findings with him. All contracts and internal rules “must include improving and maintaining transparent safeguards.”