Authors: K. J. Janssen
Siblings (6 page)
Monday at the Symington Medical Center—8:45 a.m.
“Are you sure about these figures, Pete?” he asked as he went through the numbers.
“As sure as I can be. I can certify the October numbers and the estimates for November for most of the practices. Their billings are mostly tied to private and government insurance payments which, even though they have a built-in delay, come in like clockwork. Family Medicine and Podiatry both have their private payment plans and they tell me many of their patients are behind in their payments and are asking for more time to pay.”
The Symington Medical Center occupied a three story building in the center of town. The twelve medical disciplines represented included Cardiology, Family Medicine, Gastroenterology, Internal Medicine, Neurology, ENT, Obstetrics & Gynecology, Oncology & Hematology, Pediatrics, Physical Medicine & Rehabilitation, Pulmonology, and Rheumatology. They represented a group of highly qualified, Board-certified medical physicians and specialists, each recognized in their area of expertise. Most offered same day appointments, evening, and Saturday hours.
On the first day of a calendar quarter, each of the practices paid a percentage of their revenues to Symington Medical Center, Inc. The upcoming payment deadline, January 1, was the subject of this meeting being held between Dr. Ronald Symington and Dr. Peter Mickelson, a pediatrician by trade, Ron’s original partner, and the Center’s accountant and general manager.
“It looks like the fourth quarter revenues that will be reported on January 3rd will be off about ten percent year-to-year. The fiscal year will be up about four percent.”
“The shareholders will never stand for that. We’ve had forty-one consecutive quarters of increases since we incorporated. Our yearly growth trend has averaged over nine percent. There’ll be a lot of questions, especially from John Baker over at the Harvest Investment Fund. We represent a large part of their portfolio.”
“I tried moving things around every which way, but no matter how I worked the numbers I couldn’t change the bottom line. I have to be very careful; too many footnotes send up flags for discerning analysts.”
Ron sat quietly for a few minutes to let the full impact of the problem sink in. Finally he leaned forward and asked, “What if the figures somehow included estimated revenues from the in-house drug dispensary and the physical rehab center?”
“I can’t use those figures. Those two companies haven’t even been approved by the New Business Committee. Sure, the estimated revenues would be more than enough to offset any revenue reduction, but even if they were approved before year end, we wouldn’t see any income until the end of the first quarter of next year. It would be unethical to include those figures in our current financial report. I could use them as fluff in my outlook for next year, though.”
“I always thought of you as inventive, Pete. The biggest corporations in the world practice creative accounting. Hell, many of them have billions in revenue and don’t pay any corporate income taxes. I’m not asking you to lie, just to be a little resourceful.”
“That’s easy for you to say. I’m the one in the spotlight.”
“I have to sign the reports too. Anyway, all we have to do is get the addition of Mitchum’s Pharmacy and St. Stephen’s Rehabilitation Center approved by the New Business Committee. John’s had the applications for two months already. I’ll go talk to him. In my opinion you can carry this due diligence thing too far. He’s had more than enough time to do whatever vetting is required by his committee.”
Dr. John Hazleton, head of the Cardiology Group, was chairman of the New Business Committee. The committee was responsible for investigating and approving any enterprise seeking to join the Symington Medical Center, Inc. group. Dr. Hazleton ruled the committee with an iron fist. He resented anyone trying to circumvent the stringent procedures that he established upon taking on this responsibility. He was especially bitter because Ron took advantage of his absence the previous year to ramrod the approval of a new business. Ron waited until John was off on a vacation cruise to call the New Business Committee together and pressure them into approval of the Wallington Sleep Disorder Clinic. John Hazleton wasn’t a man to forget, or to easily forgive.
“I wish you luck, Ron. I’m concerned that the bad blood between you two is going to be a potential road-block for approval of the two new companies. Don’t forget that I can’t do anything until you secure those signatures. Even then, I still have a queasy feeling about this. We have a catch twenty-two with this whole thing that may come back to bite us in the ass.”
“You don’t have to remind me. I’ll just have to make him understand how important it is that we sign those two up by year end. Hell, I don’t even care if the leases are only three years instead of five. We need to do whatever it takes.”
“Remember that this only gets us off the hook for our last quarter. In light of what will still be a flat finish for this year, the stockholders are going to be expecting a bright forecast for next year. The way things seem to be trending, even with the addition of these two lucrative businesses, I don’t see any super fireworks for next year.”
“You worry too much, Pete. First things first. After we get by the year-end report, I’ll work with you on the forecasts for next year.”
Monday at the Symington Medical Center—9:20 a.m.
Ron felt uncomfortable sitting at the small conference table in Dr. John Hazleton’s office. It was the most expensively decorated office in the building, being furnished out of the doctor’s personal funds rather than from the construction budget. John’s taste leaned toward the flashy and didn’t seem to adhere to one style or another. He had a mixture of Oriental, Mediterranean, American Indian and African artifacts, wall coverings, antiquities, carpets, furniture, and sculptures placed around the office in no particular order, as far as Ron could tell. That was Dr. John Hazleton; renegade in his personal style and in his business practices.
John was chosen as chairman of the New Business Committee for two reasons. First, because he wasn’t on any other committee at the time, and second, because his scholastic training seemed, at the time, to support the special analytical skills that would be needed to do a thorough vetting of any candidate wanting to join the group.
The New Business Committee did an excellent job of screening new partners for the first two years. Then, as the open slots narrowed, John raised the standards higher than many of the other partners believed necessary. Conflict arose between some of the partners and John when the committee rejected several businesses that the partners had supported.
Dr. John Hazleton, it seemed, was more interested in new partners that would make a larger than normal contribution to the profits of the corporation or would present a prestigious aura for the Center. To him, with only two slots left, it was now or never if the partners expected a higher return from the enterprise. Most of the other partners were looking to the longer term and wanted more diversity in the disciplines represented, rather than immediate profit enhancement. Several of the partners even talked of removing John from his responsibility as chairman.
When Dr. John Hazleton entered a room, he did so with much bravado. He was a man in his late fifties, six-three, and one hundred and ninety-five pounds. He visited a salon periodically to trim and touch up his jet black hair. It was apparent that he knew the value of his magnetic persona and took advantage of every opportunity to primp and pose regardless of the gender or status of his audience.
“Good morning, Ron, so sorry to keep you waiting. Holidays always seem to mess up our schedules. I hope you and Lynn had a very nice Thanksgiving.”
“Yes, we did, John, and I hope you and Lorraine had the same.”
“We certainly did. Dorothy was home from school and Michael drove down from Rhode Island with Betty and the kids. It was nice having a houseful of family again. Dorothy stayed the weekend and left for school this morning. That’s why I’m a bit late. I wanted to give her a proper sendoff.”
“I know we were on for nine; I apologize. It’s just that I only get to see her a few times a year since she transferred to Oregon State University for her PhD. OSU has an outstanding program for New Venture Research. I don’t know exactly what that all entails, but it’s what she has her heart set on doing. I know that whatever she does, she’ll be good at it. She has a great mind and total dedication to whatever she pursues. So, Ron, what’s on your mind this morning?”
“John, I want to talk to you about expediting the study your committee is doing on Mitchum’s Pharmacy and St. Stephens Rehab. It’s been several months since they submitted their applications.”
“To be more precise, it’s been exactly sixty-three days.”
“That’s exactly my point. That space has been open and not producing revenue since the former tenants left. That was over seven months ago. Our bottom line is being hurt by these vacancies.”
“I’m well aware of that, Ron. I’m also aware that it's very costly to turn over tenants. We must be certain that any addition to our center has a solid reputation, has a good long term potential, and doesn’t overlap any of our existing disciplines.”
“You know that both those prospects fill the bill on all three. What’s the holdup?”
“Hold on there, Ron—don’t be so sure of yourself. Did you know that Mitchum’s shareholders are calling for the removal of their current board chairman? Are you aware that they’re conducting tests at pharmacies with in-store clinics? From what I hear, the test is going well and they’re considering a nation-wide roll-out. That would mean they would want to have a clinic in the pharmacy located in our building. A clinic that would perform minor check-ups and dispense prescriptions, if necessary. That would clearly be an overlap. So, unless they were willing to make a pharmacy in our building an exception from their plans, we couldn’t accept them as tenants.”
“Now, as for St. Stephens, were you also aware that they had a loss for the last two quarters and that they’ve had several recent resignations among their top management? Ron, these situations have to be carefully taken into consideration. They complicate the appraisal process. I realize that many companies have operating difficulties at some point, even some of our own practices, but it’s my ass on the line if things go wrong down the road.”
“I agree with you that Mitchum’s could be a problem, but not if they agree to build without a clinic. We need to discuss this issue with them immediately. I’m sure you know that rehab centers in general tend to have soft periods occasionally, but if you look at their year-to-year comparisons, you’ll see that the amount of the current slowdown is significantly less than it has been for the past three years. That suggests that their annual figures will be higher. Slowdowns are a quirk in the rehab business model and shouldn’t be a reason for denying them a partnership with our group.”
“We’re in agreement on that point, but you’re ignoring the management changes. That’s a red flag I can’t ignore. We need to examine deeper to ascertain what the cause is. The committee is committed to filling the two open spaces, but at the same time, it’s much too disruptive, from a center operations viewpoint, for us to do two separate openings. So if we can’t pass on Mitchum’s, were going to have to suspend our review for St. Stephens until we receive another suitable candidate.”
“That’s ridiculous, John, and you know it. Why not let Pete Mickelson worry about that? He’s the General Manager. It should be his call. Don’t you realize that there’s a glut on the market of space for medical offices? If we delay our approval any longer, St. Stephens is likely to accept an offer from another suitor.”
“We’ll have to risk that, but I don’t think there’s a better location or price anywhere else in town. Symington Medical Center is still the prime medical office facility in the city.”
“Damn it, John, you’re acting very arbitrary. Does this have anything to do with the Wallington Sleep Disorder Clinic?”
“Ron, how could you ask such a question? Are you suggesting that I’m being swayed by the fact that you managed to get the Wallington Sleep Disorder Clinic approved in my absence? The same Wallington Sleep Disorder Clinic that withdrew from the group seven months ago? The Wallington Sleep Disorder Clinic that subsequently went into bankruptcy, owing us six months of unpaid rental fees, and the same Wallington Sleep Disorder Clinic that managed to get the Center listed as co-owners in a lawsuit against them for non-delivery of pre-paid services? You’re not referring to that Wallington Sleep Disorder Clinic now, are you?”
“You’re being ridiculous, John. There was no way we could have known the management of the clinic would revert to shady practices once they were under the protection of our corporate umbrella. Their stats looked outstanding at the time and you know it.”
“That’s rubbish. It was your inept handling of the situation that caused the problem we now have filling those slots. It was our job to know; my job to know, but you circumvented my authority and signed them up. I know that you’re one of the founding partners of the Center, but you were, nevertheless, wrong to go around me to serve your own purposes. What I’m saying, Ron, is that you’re responsible for the mess that we’re in and I don’t appreciate your showing up at my office attempting to muscle me into approving another one of your schemes. The New Business Committee will proceed as planned. Mitchum’s is out for now and St. Stephen’s is on hold. If you want to do something useful, go out and find us viable candidates. If you have a problem with my decision, let’s discuss it at the next board meeting. That’s all I have to say on this subject.”
John turned his back on Ron and walked over to his desk, giving Ron ample time to save face by exiting the office; an opportunity he gladly seized.
***
Minutes later, Ron was pacing back and forth in Peter’s office. “He absolutely refuses to approve either one of them. I understand about Mitchum’s, so let’s scratch them, but there’s no business reason to put St. Stephen’s Rehabilitation Center on hold. That excuse he has about the inconvenience to our current tenants doesn’t hold water.” He waited for a response from Peter and when one didn’t come, he added, “He is wrong, isn’t he?”
“I’m afraid not. It’s not only inconvenient, but also very costly. There are economies when you set up two together; enough to make it difficult to justify doing them separately. The only chance we have left is to come up with another candidate with outstanding credentials; one good enough to blow John’s socks off.”
“What are the chances that we can build a case for one of the companies on the waiting list?”
“You tell me. You and I investigated all fourteen on the list before recommending Mitchum’s and St. Stephen’s. Those two were by far the best. We attached our critiques to the other twelve when we presented our findings to the New Business Committee. I don’t think we could reverse our recommendations now just to fill the remaining slot. Anyway, I’m sure John has already thought about the same possibility and he will be waiting to ambush us if we try to push through one of those companies now.”
“What can we do, then?”
“I guess I’m just going to have to release my original report and let the partners deal with it.”
“Just like that? To hell with our consecutive quarter profit record? Why are you willing to give up so easily?”
“What do you want me to do, Ron? Falsify the figures?”
“I’m not suggesting that.”
“Maybe not, but that’s what your implying. I don’t mind doing a little dipsy-doo now and then—all accountants do that—but I won’t be a party to anything that could land me in jail; records be damned. I’m just going to have to present the report and the partners and investors are going to have to accept it for what it is.”
“I’m not suggesting you do anything fraudulent. I’m just saying there must be some way to gloss over some of the negative stuff. After all, we’re still making money, even if not as much as last year, and the fiscal year still looks good.” Ron stopped pacing and sat down on the couch. “I’m not happy about this any more than you are.”
“I kept thinking we were going to fill the empty space and save the year. I never anticipated it would take so long.”
“It’s your responsibility to anticipate any financial bumps in the road.”
“Don’t you get so high and mighty with me, Ron. You’re as much to blame as I am for the lack of vision. After all, you’re the CEO of Symington Medical Center, Inc.”
“You don’t have to remind me of that.”
“Well then, stop pointing fingers and trying to fix blame. It is what it is. At this point, there’s little to gain by trying to bury it. I’m going to prepare my earnings report this afternoon. Let the chips fall where they may.”
“Wait a minute—didn’t we receive a proposal from a new practice last week? It was from a doctor specializing in vascular surgery and interventional radiology. If I remember correctly, his requirement was for about the same square feet that Mitchum’s needed. He recently bought the practice from the founder, Dr. Rudolph Lassinger, who was located north of town. He wants to expand the practice and move it into the center of town. I think his name was Dr. Marshall Wentworth and he wants to call the new practice Wallington Vein and Laser. Look, Pete, can you give me a few days before you start your report? If this Dr. Wentworth wants to get set up right away, maybe we could convince John to expedite vetting him. I think even John will be impressed enough to want to lock him up.”
Peter smiled. “Sure, why not. It’s certainly worth a try. I’ve heard nothing but good things about Dr. Lassinger. He operates Lassinger Vein Specialists. I hear he only uses equipment that he himself invented. There was an article in the Wallington Tribune about six months ago. I’ll dig it out of our files. What the hell, we may solve this problem yet if we end up recommending Dr. Wentworth to the committee.”
“We certainly have nothing to lose by trying,” Ron said. “I’ll leave you to work on it.”