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The History of NPHS continued Although the Hospitals served a community that was declining in terms of socioeconomic factors, the Hospitals continued to expend capital and invest in numerous program and service expansions. When prospective payment for services (the “DRG Program”) was introduced in 1984, neither of the Hospitals made the changes in administrative and clinical practice responsive to the incentives of the DRG program. By the end of the 1980’s, the Hospitals had experienced several years of declining financial performance, substantial erosion in overall patient volumes coupled with weak and problematic management. In 1987, GMC found itself reeling from a succession of problems in quality of care, governance and management filed for bankruptcy pursuant to Chapter 11. In 1989, SJH suffering from the same symptoms, also filed for bankruptcy pursuant to Chapter 11. At that time, the logic of uniting the two hospitals became apparent. NPHS was created in August 1990 as part of the bankruptcy plan of reorganization for both GMC and SJH. NPHS, a single corporate entity, combined all assets, employees, medical staff, management and governance of the Hospitals. The operative portions of NPHS’ strategic plan called for savings through consolidation, expansion of drug and alcohol and psychiatric services and ability to increase on historical volumes of medical-surgical admissions.
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