In writing this series about corruption at San Bernardino County’s only county-operated hospital, Arrowhead Regional Medical Center (ARMC), there was one thing I could never understand about the situation and that is why does ARMC contract out over $28 million in services every other year but is not required to go through the RFP process even though many of these contracts are for a million dollars or more, well above the statutory limit for no-bid contracts.  So I asked an expert and here is his answer:

Contracting for Physician Services

There are two ways for a county hospital to contract for professional services.  The one that most academic-oriented hospitals such as ARMC uses is as follows:

When a Department Chair position is vacated the Medical Executive Committee forms a search committee made up of members of the Medical Executive Committee, staff physicians in the appropriate department, as well as, those departments that work closely together, appropriate members of the administration and most often members of the Board of Trustees as well as faculty members from the appropriate affiliated medical school (if any).

The function of the search committee is to perform a national search to find the most qualified candidate for the position.  This can be done either by the committee seeking applicants for the position by advertising the search in the appropriate medical journals, sending letters to other academic institutions and talking to recruiters for a set period of time.

The committee then reviews the credentials and recommendations of all applicants and selects the top five or so candidates. The successful candidates are invited to visit the institution and interview with the search committee.

The search committee will generally prioritize the candidates and submit them to the Medical Executive Committee, medical director (if there is one) and other appropriate hospital and the Chair of the corresponding department of the affiliated medical school.

This group will review the credentials of the candidate and if satisfied with the information presented will recommend his/her appointment by the Executive Committee of the medical staff for approval in accordance with the By-Laws of the Medical Center and forward the recommendation on to the Board of Trustees for final approval.

Upon final approval, independent contract negotiations to provide the necessary teaching, administrative, supervisory and clinical services and personnel deemed necessary by the Medical Center, Medical Executive Committee and affiliated institutions.

Since a national search had been performed the selected candidate often had to relocate his/her family and recruit other faculty members.  Thus, in order to ensure longevity the contracts were usually written for three years and then automatically renewed unless given a 90-day notice of termination for cause. However, after passage of the Stark Bill the contracts had to be for a specific length of time and could not be automatically renewed.  This led to changing the contract to two or three years with a good-faith agreement that they would be renewed unless terminated for cause.

Using this method one was assured of being capable of recruiting a highly qualified candidate as Chair of any department and the affiliated university/universities could be assured that their medical students and post graduate students would be taught by competent academic physicians.

The alternative way is to ask the Board of Supervisors to authorize permission to seek an RFP or RFQ from those physician or physician groups interested in providing all the clinical, administrative, teaching and other services needed.  The RFP or RFQ must be advertised for at least 90 days.

It must be noted that since this contract requires the provision of medical services one does not have to strictly adhere to the low bid if it is obvious that the applicant cannot satisfactorily provide the quality patient care or teaching.

Thus prior to awarding the bids, the credentials of the most likely candidates should be submitted to the Medical Executive Committee for approval of the granting of clinical privileges and appointment as Chair of the appropriate department.

These contracts again can only be awarded for two years and at the end of the two years these contracts cannot be reapproved without first requesting and advertising RFPs or RFQs for bids on all contracts that expire for that period.

Problem with this method:

Those bidding for these contracts usually hold similar contracts elsewhere and thus cannot devote full attention to ARMC.  In contrast the Chair selected by the first method was issued a contract which prohibited the major share holder (who was the appointed chair from holding an administrative position elsewhere and mandated that he/she devote 1800 hours per year to performing the contracted services.

Please Note: During Dr. Gnanadev’s tenure as Medical Director he did not follow either of these two methods. When a Chair’s position became vacant (usually because he canceled the former Chair’s contract for personal reasons), he alone sought the replacement, appointed him/her, and negotiated a contract.  After finalizing the contract he then sent the person’s name to the Medical Executive Committee.  Since he already had contracted with the individual the Medical Executive Committee had no choice but to approve him/her as Chair.

In almost every instance the individual was someone who held positions or private practice elsewhere but were loyal friends of his who would not question his authority.  As a result they were usually far less qualified than the Chair replaced.

So now you have it.  It is not that ARMC does not have rules and laws it must follow.  It is that its medical director considers himself to be above the law and the county flagrantly violates yet another law, putting patients and taxpayers at risk yet once more.