Case Study: Governance Challenges at Good Hands Healthcare (A)

Brief Summary

Following the deteriorating performance of Good Hands Healthcare in the mid-2000, there was the need for the Board of Directors to determine the problem and address it before the company became bankrupt. During this period, the health care industry faced a number of problems including reductions in federal funding, increased attention of the media to cases of poor and irresponsible care accorded to patients, and the increased number of lawsuits filed by patients’ families. Although other industry players such as Health US and Elder Care faced similar problems, they increased their profitability. Consequently, the Board of Directors noted that the problems the company was facing were internal. Moreover, Good Hands Healthcare lacked a succession plan as well as internal efforts to develop future leadership of the company. These factors made the future of the already miserably performing enterprise unpredictable.

The company, which was founded as a small nursing home in 1970, had for 30 years expanded to have a total of 400 facilities operating in 25 states. Its CEO and founder, George Jackson, was also the chairman of the Board of Directors (Hillman & Seymann, 2004). Additionally, the organization had diversified its operations to cover other areas of healthcare such as assisted living, outpatient facilities, care facilities for individuals with Alzheimer’s disease as well as skilled nursing and nutritional services. As a result, Good Hands Healthcare had grown to become one of the most important companies in the healthcare industry in the United States. Apart from operating net revenues from the nursing homes, the organization was also considered as one of the best employers in the United States with a total of 61, 000 employees. However, most of its employees were high school graduates since the company had difficulty in attracting qualified and certified nurses and other facility personnel. These problems led to a decline in the performance of the organization, making it reach the verge of collapse in 1999. During this time, the firm relied on borrowing to sustain its operations.

The already worsening situation of Good Hands Healthcare was aggravated by the government regulations on the Eldercare industry. Health reform measures, for instance, required healthcare facilities to provide care to Medicaid residents as well as those who were deemed to qualify for it in the future. Additionally, the increase in the number and sizes of claims by the patients led to a rise in liability costs, causing the insurance companies to stop insuring long-term care companies such as Good Hands or minimize their liability insurance. Although the company’s reputation was slowly deteriorating, it was led by the most competent leaders. The CEO, founder and chairman of the Board of Directors, George Jackson, had seen the company through its successful years but was not willing to stop working. Others in the management team were faced with problems such as unwillingness to implement changes within the company, unhealthy competition among the management team members, lack of management experiences among some members of the management team, and poor handling of the legal matters of the company especially by the in-house counsel. All these management problems contributed to the poor performance of Good Hands Healthcare. There was, therefore, the need for the Board of Directors to address these issues to revive the company…

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