Case study. When outsourcing goes awry ... seven experts discuss how the outsourcing crisis could have been avoided

Grant Newman, chief executive officer of Regional Medical Center, expected the worst from the meeting that was scheduled to begin in less than an hour. The anesthesiologists were at the end of their rope, and the hospital's surgeons and obstetricians were pretty riled up, too. Eighteen months earlier, Newman had made the decision to outsource RMC's anesthesia services, and he had signed a contract with Physicians Development Services, a contract management company. As is typical in these arrangements, the anesthesiologists would be independent contractors with PDS while PDS would be under contract with RMC. Legally, therefore, there would be no agreement of any sort between the anesthesiologists and the hospital where they worked. At the time, PDS seemed a good fit. It had a reputation for providing high-quality physicians both on a permanent basis and for temporary assignments. Unfortunately, however, PDS was undercapitalized and chronically mismanaged. PDS's paychecks to the anesthesiologists began arriving late and then bounced several times over a three-month period. In addition, the contract between the anesthesiologists and PDS had expired three months earlier, and the anesthesiologists were providing services without a contract. Newman knew that he had no legal right to interfere with the contract between PDS and the anesthesia group unless PDS breached the contract with RMC. But Newman felt that the future viability of the hospital would be seriously compromised if he allowed an exodus to occur even for a single day. What can Newman do to resolve this conflict? Seven experts consider how the hospital's outsourcing crisis could have been avoided.