Consciosuness Raising Exercise #38

A major teaching university/medical center has a notoriously bad reputation among its vendors as a slow payer crippled by bureaucratic incompetence. Whenever a new set of consultants is hired, checks to vendors tend to be delayed beyond the terms of payment.

Several years ago, when a local medical transcription service tried to subcontract work from the university, it was told that in order to qualify as an approved vendor all of its drivers would have to be bonded. The medical transcription service owner (MTSO) tried to explain that since all dictation was performed over the phone – instead of on cassette tapes – and all work was uploaded electronically (via the Internet), there were no tapes being transported to or from his medical transcriptionists. Because there were no vehicles being used to transport tapes, there was no need for drivers.

The university’s Purchasing Department would not budge. "The same rule applies to all contracts – your drivers have to be bonded," insisted one of its purchasing agents. After a practice manager intervened on behalf of the MTSO, the university grudgingly accepted the concept of electronic delivery of documents.

Several years later, after the MTSO had signed a second three-year contract with the university, a new head of the Purchasing Department arrived on the scene who insisted that every vendor produce a certificate of insurance. This new regulation was to be applied to all vendors, no matter what service they provided.

When asked for a certificate of insurance, the MTSO reminded the purchasing agent that the university had signed a three-year contract and was bound by the terms of that contract. He also reminded the purchasing agent about the changes had to be made in the university’s boilerplate contract which -- although weighted down with legalese -- was designed for services like nursing registries and janitorial companies but reflected no understanding whatsoever of the medical transcription industry.

"But what about errors and omissions?" asked the purchasing agent.

"Our errors and omissions insurance is very simple and is already in the contract," replied the service owner. "It’s a simple statement that our company can not and will not be held liable for a dictating physician’s failure to communicate."

When the service’s contract next came up for renewal, so did the topic of the university’s demand for a certificate of insurance. "Could you please explain to me what I’m supposed to be insuring my company against?" asked the MTSO. Neither the purchasing agent nor the risk manager could come up with anything more specific than "We have to protect the university against potential losses."

Recalling the incident several years back where he had to explain why his service did not need bonded drivers, the service owner attempted to make the following points:

• If the university’s risk managers were worried about losing documentation, the MTSO’s standard contract already provided for archiving all documents for six months on dual servers (which, coincidentally, were located 3,000 miles apart.) The university would not suffer any loss because there would be no problem replacing missing files.

• Since no one from the transcription service set foot on the university’s property, the chances of the university being sued for personal injury were absolutely nil.
  

Although the university’s risk manager still could not articulate the type of loss from which he was seeking to protect the university, at about this time two curious stories started to make headlines.

• An extremely influential member of the university’s Board of Regents issued a scathing report which castigated the administration’s near-medieval bureaucracy and its inability to stay current with modern business practices.

• Multiple products manufactured in China (toothpaste, pet food, children’s toys, etc.,) started to be recalled after people became sick from toxic materials used in the their manufacturing process.
  

Upon finally receiving the university’s written description of its requirements for a certificate of insurance, the problem quickly became obvious to the MTSO. The hospital’s risk managers had absolutely no idea what was involved in the process of dictating and transcribing medical reports!

Although the university was trying to protect itself from a scenario in which a vendor might have used third-party suppliers whose raw materials or participation in the manufacturing process could have left the university liable for losses, the raw materials used in the dictation/transcription process were the sounds emanating from the mouths of the university’s dictating physicians.

The MTSO argued that he was not about to take on the cost of insurance – much less the professional liability -- for risks which are covered by a physicians’ medical malpractice insurance. Because neither side would budge, the MTSO lost the clinic’s account and, much to her chagrin, the client’s practice manager lost a valued vendor.

When the harried practice manager told the MTSO that she had precious little time to find a new vendor for her extremely busy clinic, he replied. "The bottom line is a question of who gets to feel the pain: the university or my transcription service. In this case, I decided it could be the university."

In 150 words or less, explain how this situation could have been avoided.