When Outsourcing Goes Awry (HBR Case Study and Commentary)
Grant Newman, CEO of Regional Medical Center (RMC), 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 (PDS), a contract management company. 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. What can Newman do to resolve this conflict? In 95309 and 95309Z, Ken Alvares, Anthony R. Kovner, Joellin Comerford, Rudy Puryear, Vaughn Hovey, Tom Chapman, and Gary P. Pisano offer advice on this fictional case study. THIS CASE STUDY INCLUDES BOTH THE CASE AND THE COMMENTARY. FOR TEACHING PURPOSES, THE REPRINT IS ALSO AVAILABLE IN TWO OTHER VERSIONS: CASE STUDY ONLY, REPRINT 95309X, AND COMMENTARY ONLY, REPRINT 95309Z.