Universal Health Services, Inc. will acquire Psychiatric Solutions, Inc. in a deal that includes $2 billion to purchase PSI at $33.75 a share, and $1.1 billion to assume its debts, the two companies announced.

Franklin, TN-based PSI is the nation's largest standalone operator of owned or leased freestanding psychiatric inpatient facilities with 94 facilities in 32 states, Puerto Rico, and the U.S. Virgin Islands. UHS owns or operates 25 acute care hospitals and 102 behavioral healthcare facilities and schools in 32 states, Washington, DC, and Puerto Rico.

The 2009 combined revenue and EBITDA of UHS and PSI was more than $7 billion and approximately $1.1 billion, respectively. On a combined basis, in 2009 the company had approximately 6.2 million patient days in 221 heathcare facilities in 37 states and territories. With the acquisition, King of Prussia, PA-based UHS' revenue from the behavioral healthcare business will represent approximately 45% of combined 2009 revenue and approximately 54% of combined 2009 EBITDA, before UHS' corporate overhead costs.

"The combination with PSI will further strengthen our behavioral health division, which has already grown substantially through capacity expansion and strategic acquisitions," said Alan B. Miller, CEO/chairman of UHS. “Importantly, the combined company will have ample opportunities for further growth in both the acute care and behavioral healthcare sectors."

The acquisition is expected to generate approximately $35-45 million in annual cost synergies within three years, with the majority occurring in years one and two. Excluding one-time costs related to the acquisition, the transaction is expected to be significantly accretive to UHS' earnings per share. In 2009, PSI's revenue was $1.8 billion with EBITDA of approximately $330 million.

The transaction was unanimously approved by the board of directors of UHS. PSI's board, acting on the unanimous recommendation of a special committee, approved the agreement and recommended that PSI shareholders do so as well.

UHS expects to complete the transaction in the fourth quarter of 2010, subject to customary closing conditions.

A spate of very large whistleblower settlements in the healthcare sector amounting to billions of dollars in fines have been reported over the last few years. For the most part, the big ticket fines are directed at pharmaceutical companies, such as Pfizer, which paid $2.3 billion last fall to settle whistleblower claims that it illegally marketed its drugs to physicians.

Hospitals are not immune from prosecution, however.

Neither are physicians.

It would be reasonable to assume that the primary motive for whistleblowers–who are eligible for up to 25% of the recovery—is money. After all, the six whistleblowers in the Pfizer settlement split more than $102 million from the federal share of the civil recovery. Ka-ching!

Not so, say most of the 26 whistleblowers surveyed in the May 13 issue of The New England Journal of Medicine.

"Every relator we interviewed stated that the financial bounty offered under the federal statute had not motivated their participation in the qui tam lawsuit," said the study, which focused on whistleblowers in 17 federal suits against pharmaceutical companies. "Reported motivations coalesced around four non–mutually exclusive themes: integrity, altruism or public safety, justice, and self-preservation."

The survey, led by Aaron S. Kesselheim, MD, of Harvard Medical School, found that the "most common theme" motivating the whistleblowers was personal integrity and strong ethical standards. "One relator reasoned: 'When I lodged my initial complaint with the company, I believed what we were doing was unethical and only technically illegal. This ethical transgression drove my decision. My peers could live with the implications of 'doing 60 in a 55 mph zone' because it did indeed seem trivial. However, my personal betrayal . . . so filled me with shame that I could not live with this seemingly trivial violation,'" the study reported.

"The relators in this group felt that financial circumstances helped to subvert such ethical standards in their colleagues, saying that most colleagues were unwilling for personal or family reasons to jeopardize their jobs."

The survey found that most of the whistleblowers tried to fix matters internally by speaking with their superiors, of filing an internal complaint.

"One explained: 'At first it was to the head of my department, the national sales director, and the national marketing director. . . . After being shooed aside, I went to the executive vice president over all the divisions of sales and marketing. Then eventually I went to the CEO of the company, the chief medical officer, and the president.' Insiders who voiced concerns were met with assertions that the proposed behavior was legal and dismissals of their complaints, with accompanying demands that the relators do what they were told," the study said.

Maybe some of these whistleblowers are now blowing smoke about their altruistic motives. Most of them are relatively well off as a result of their actions, 13 of the whistleblowers collected between $1 million and $5 million, and seven got more than $5 million. There may be some revisionist history going on at the poolside as they sip mojitos, admire their pedicures, and contemplate their rags to riches stories.

For argument's sake, however, let's assume that the whistleblowers' motives are pure: they saw a wrong and they made it right. As the NEJM study points out, whistleblower settlements between 1996 and 2005 let to more than $9 billion in recoveries. The federal government has said it will vigorously pursue healthcare fraud, in part, as a way to pay for healthcare reform. The fact is, their motives are almost irrelevant if your hospital is cutting the recovery check.

While the study focuses on the pharmaceutical industry, the lessons are here for everyone in healthcare. Listen to your employees. If they tell you something is wrong, they're probably not making it up. They're trying to save your hospital from millions of dollars of heartache and bad media attention. Ignore them at your peril.

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If you're in healthcare—or if you're just a scandal fan—you've probably been following the imbroglio surrounding Beth Israel Deaconess Medical Center CEO Paul Levy.

Levy, an avid blogger, media darling, and outspoken champion for transparency in hospital quality and costs, has been downright opaque in his public response to what he called "lapses in judgment" and what the Boston newspapers are calling an improper personal relationship with a female subordinate.

For brevity's sake—and to deflect accusations that I am piling on—I refer you to the local media, and note only that the board at Beth Israel Deaconess this month fined Levy $50,000 for his still-undisclosed lapses. They said they were disappointed in his conduct but still support him and that the matter is now closed.

So why has this scandal gotten so much attention? First, Levy is the CEO of a powerful and trusted institution. By the nature of their jobs, all hospital CEOs are held to a higher standard of conduct. As Spiderman's Uncle Ben told the super hero, "With great power comes great responsibility."

Second, Levy's calls for transparency—whether unfairly or not—raise expectations that Levy should have nothing to hide. There may be valid reasons why Levy hasn't detailed his lapses, but that doesn't quell speculation about what he did, and who he did it to, no matter how much the hospital board tells the rest of us rubberneckers to keep moving folks, show's over, nothing to see here.

Levy's lapses don't necessarily demonstrate that he is a bad guy or an incompetent leader—only that he is human. But those lapses provide us with a cautionary tale about the double-bladed nature of transparency. Don't call for transparency if your windows are dirty.

The real harm in these lapses, however, is that they corrode institutional trust from within. The public will quickly forget this relatively mild scandal, as there is always a steady stream of men behaving badly in the media: Mark Sanford, Tiger Woods, Jon Gosselin, Ben Roethlisberger, Charlie Sheen, John Edwards, David Letterman, Jesse James, etc. Take your pick.

Employees at Beth Israel Deaconess won't be so easily distracted. The Boston Globe reported that Levy's favorite female subordinate had a good job while she was with the hospital, and collected a nice severance package when she left. Of course, that has prompted grumblings–as noted by the Globe—about how this person got her job, and whether the severance package was due in some way to her relationship with Levy. I have no idea if any favoritism was shown, but those questions should be expected given the circumstances.

Levy apologized on his blog, Running a Hospital, and said he hoped "this series of events and revelations will not undercut the importance or validity of what I have been saying. I especially apologize to you if you feel that I have let you down and, in so doing, in any way weakened the case I have been making.''

Somebody told me once—on an unrelated topic—that while healthcare workers might forgive, they never forget. Could you blame any employee at Beth Israel Deaconess for being just a wee bite skeptical the next time Levy talks about the hospital's values, its openness, or its healing mission?

Levy can never again make the call for transparency and openness in healthcare with the same authority and not run the risk of ridicule. If he isn't more specific about the nature of his lapses, such as what–for example—prompted him to pay a $50,000 fine, he should probably abandon the whole "transparency" argument. Hand it off to someone who is more transparent. It's an important issue and the case must continue to be made.

Now, when Levy talks openness, it's no less true, but it's not believable.

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Does your physician practice have what it takes to be lean?

For decades now, we've heard about manufacturers and retailers running Lean or Six Sigma or whatever you want to call it—putting workplace processes from scheduling to supplies management under the scalpel to carve away excess overhead, inefficiencies, and redundancies.

In the past few years, larger hospitals and health systems have bought into the process, and now a growing number of physician practices have embraced Lean, including Kalamazoo, MI–based Borgess Ambulatory Care (BAC).

"It is an intense effort, and it works," says Ed Millermaier, MD, MBA, chief medical officer and COO at BAC. "Breaking down processes into individual steps is daunting work. We're learning that we need to focus on pieces of the process so we can measure improvement and track ourselves. This is a long-term process; there are no quick wins."

It's also a very time-consuming process that requires a lot of expert help, which may prove to be the biggest challenge for many physician practices that want to go Lean. BAC, with 58 physicians and 16 offices, didn't do it alone. It had help from Lean experts at the University of Michigan Health System and funding and guidance from Blue Cross Blue Shield (BCBS) of Michigan.

"It is very difficult to truly embrace the principles of Lean without help. I don't think you need a major institution, but you may need some outside consultation or education assistance," Millermaier says. "One could argue that, for the small physician practices, doing this on your own could be more challenging."

BAC used consultants identified through the BCBS physician group incentive program who all had a background in Lean. They were experts who brought their experience from Fortune 500 companies to the organization, Millermaier says. Those experts provided BAC physicians and staff with analytic principles and tools of the Lean process, which allowed them to strip down the typical office day into a series of individual steps. They mapped out the steps needed to complete everything from incoming calls to sick visit scheduling to filing paperwork—then they improved those processes.

At the end of the initial review, the wait time for pediatric well visits was reduced from 60 days to eight days, and mammography patients saw their wait times for follow-up testing after initial screening drop from 19 days to three days. The practices also created efficiencies in medical records filing, storage, and response time.

The value stream map
To identify process inefficiencies, BAC dissected an everyday event: a newly diagnosed diabetic patient scheduling a nonurgent return visit. Staff members walked through the process from start to finish, using everyone involved in the visit—from the receptionist to the physician—to create a value stream map that identified 13 steps needed for a successful encounter.

"The more steps you have, the more opportunities you have for the whole event to not be a complete and accurate event," Millermaier says. "By day two, we had it narrowed to nine steps. We got rid of a bunch of rework on the telephone because we realized the schedule wasn't out far enough to accommodate needs of the patients. We looked at all the silly stuff we do to accommodate the schedules and the physicians stepped up to say, 'This is crazy. We want the schedule out 13 months to account for annuals.' "

The process worked in part because BAC selected staff and providers who would not have problems leaving their titles at the door and focusing on flow, Millermaier says. "The physicians were willing to hear, 'Gee, Doc, when you do that with the chart, I can't find it. When I can't find it, I can't meet the need of the patient.' The medical records clerks were willing to hear that they had to reorganize their medical records. The insights that they got on how to fix flow problems were enough that they could clean up the medical records process. They figured it out on their own. Those were line associates, not the managers."

Tom Leyden, manager of clinical program development at BCBS Michigan, said the Lean program began in June 2008 and now includes approximately 8,000 physicians from about 100 large physician groups in the Lean Professional Collaborative Quality Initiative.

Not every physician group is ready for Lean, Leyden says.

"Once they express their interest, there is a readiness assessment where the coordinating center out of U-M Health System meets extensively with the physician group to determine if they're ready to embrace Lean," he says. For some organizations, it might be a three- to six-month process to determine whether there is strong organizational support for it and to start thinking about what they want to address.

Leyden says BCBS Michigan will fund any Lean program in the ambulatory setting that will improve quality of care and advance the practice "along the path to a fully functioning patient-centered medical home."

BCBS Michigan fully funds three value stream mappings for physicians' groups, which usually take more than 18 months to complete. Consultants' fees are paid by the insurer, which also provides the physicians' groups with about $15,000 to provide compensation for any temporary disruptions to practice work flow.

"The expectation is that each organization will have at least one person who will become the internal Lean coach. It's a 'see one, colead one, do one' approach," Leyden says.

In the first value stream mapping session, the internal Lean coaches observe. In the second value stream mapping, they colead the whole three-day session, the 30-day report out, and the 60- and 90-day reports, working closely with the consultants. In the third value stream mapping, the Lean consultants have it pretty easy. They watch and provide some pointers, but it is the physician organization that does the work.

Outside expertise
"Sometimes the best Lean coaches are the people who haven't had a background in quality improvement or process improvement previously," Leyden says. "It is based on their interest and desire and ability to effectively implement change." So far, Leyden says BCBS Michigan has spent about $2 million funding physician Lean programs in the past two years.

And what bang does the health insurer get for its buck.

"We get improved quality of care for our members, reduced readmissions," he says. "The better the physician organizations use their disease registries, the better care is delivered. Hopefully that results in less [emergency room] visits, in less patient stays, and things of that nature."

Despite its origins in the manufacturing sector, Millermaier believes Lean is a good fit in medicine.

"The principles of Lean can apply," he says. "None of the Lean consultants had a healthcare background when they started with us. They brought to us a perspective around business operations that is challenging for us in medicine, particularly for physician leaders. It is not an area that we are strongly trained in."

"Once you get past the notion of the widget manufacturers coming in to commoditize healthcare, it teaches us how to be more effective and efficient in what we are doing," Millermaier adds. "And it aligns very much with the Institute for Healthcare Improvement's Triple Aim when you look at optimizing the patient experience, improving the population's health, and keeping costs per capita under control."