It’s outrageous! A few weeks ago I asked John [Harp, Director of the the Publications Department] for a bid to print Nutrition Today. His bid was $7,000 more than a bid I got from a local printing company.
Jan Sweeney, Administrative Director of the Outpatient Department (OPD) of White Hills Medical Center, was referring to a recent incident in her efforts to prepare a nutrition magazine for distribution to patients on the OPD’s mailing list. She continued:
Despite the $7,000 difference, it seems that Mike [Sampson, the medical center’s chief financial officer] wants me to use John’s department anyway. Why should I have to do that?
White Hills Medical Center was a medium-sized healthcare complex located in northern California, just outside San Francisco. It had earned a national reputation for having a high level of patient satisfaction and for emphasizing preventive care. It had been successful in attracting a wide range of patients from the surrounding area where there was a great deal of competition.
Recently, the medical center had been re-organized, and Ms. Sweeney's department had been designated as a profit center. As such, she was encouraged, but not required, to “purchase” all publication services from the center’s Publication Department, a service center that also was a profit center. Both managers—as well as all other profit center managers—had the possibility of earning annual bonuses based on the surpluses of their centers.
The services of the Publication Department ranged from the printing of relatively simple newsletters to the design, layout, and printing of rather sophisticated, multi-colored, glossy magazines. Because of the complexity of the demands made upon it, and the resulting need for a wide variety of technical skills, the Publication Department needed a rather large staff. Since the medical center was too small to fully utilize its staff, however, the department also sold its services to other organizations, including several smaller hospitals located within a radius of about a hundred miles from While Hills. At the moment, because it was a slow period for most hospitals, the division's staff was not fully utilized. This was not an unusual situation.
The Nutrition Magazine
In planning a magazine for the OPD’s mailing list, which included several thousand individuals, Ms. Sweeney knew that she would need some rather sophisticated layouts. One of these was the vitamin-absorption exhibit, a large scale illustration of the way vitamins are absorbed into the bloodstream from pills versus from food. Her plans called for a graphic illustration showing how the body would be affected by each approach. . . .
- What is the impact on the medical center’s surplus of each of the two possibilities?
- Should Mr. Sampson intervene in this decision? Why or Why not?
- If Mr. Sampson intervenes, what should he do? Please be specific. For example, should he tell Ms. Sweeney to purchase the work from Mr. Harp? If so, at what price? Should he refer the situation to the center’s CEO?
- If Mr. Sampson and the center’s CEO do not intervene, what do you think will happen? Is this good or bad for the medical center in the short term? In the long term?
- What other advice would you give Mr. Sampson, Ms. Sweeney, and Mr. Harp?