Thursday, October 26, 2006

CareGroup -- Part 2

Shortly after arriving as Administrative Dean at Harvard Medical School in the fall of 1998, I was invited to attend a three-day strategic planning retreat for the senior managers and clinical leadership and lay leaders of CareGroup. They were kind enough to invite me, as someone new to the medical field, to get an intensive briefing on the inner workings of part of the Harvard hospital system. It was a fascinating experience, and I learned a lot.

I was struck by the sense of unity and purpose of all those attending to create a vibrant and strong CareGroup integrated health care delivery network. Nonetheless, within a short time, I noticed that it wasn't working.

First of all, the merger of the BI and the Deaconess was well into several years of bad results. What had been portrayed as a merger of equals was actually a takeover of the Deaconess by the BI. A look at the clinical and administrative leadership of the BIDMC made it clear that the BI folks had the overwhelming role in running the place. This, along with other misteps, left the Deaconess people feeling left out and alienated and undervalued. Doctors left, nurses were disgruntled, referring physicians changed loyalty, and lay leaders from both the BI and the Deaconess in the community became disenfranchised. Operating losses grew year after year, into the tens of millions of dollars.

The CareGroup holding company, meanwhile, made clinical judgments that further weakened the BIDMC -- most noticeably a commitment to moving the preponderance of orthopaedics to New England Baptist. For a general hospital like BIDMC to lose this specialty meant a significant hit and loss of potential growth to its bottom line.

As BIDMC weakened, both the Baptist and Mt. Auburn, the two other major hospitals in the system, feared for their financial future -- because the debt issued under the CareGroup name was a joint and several obligation of all of the hospitals. How could the two hospitals raise philanthropic donations, for example, if donors thought that funds would be used to bail out the Medical Center?

Meanwhile, the system's three small community hospitals in Needham, Waltham, and Ayer were suffering from the usual woes of community hospitals in Massachusetts, and the Baptist and Mt. Auburn also fretted about the financial impact of those hospitals. The CareGroup board ultimately voted to close the Waltham hospital, but it had to remove the local board to do so, because that local board refused to accede to this action. This use of reserve powers by the holding company board sent a shock wave throughout the system: While everybody knew that the CareGroup board had this authority, it had never been used so dramatically.

You can imagine why this series of events led to a lack of cooperation and collaboration among the Caregroup hospitals. All hope for an integrated health care delivery system was shattered. Eventually, at the behest of the hospitals, the CareGroup board voted to reduce its authority over the member institutions, removing itself from clinical matters and focusing instead on its fiduciary responsibility to the bond holders.

7 comments:

Alicia said...

This is very insightful-I want to work in a hospital in a few years since I have two more years of school becoming a Pharm D, but it is good to look at another professional's perspective.

Paul said...

Thanks, Alicia. And, I didn't give the punchline of the story: All three hospitals in Caregroup are now doing very well!

Roy M. Poses MD said...

CareGroup's members actually turned out a lot better, I think, than some other hospitals that got involved in the 1990's merger mania.
One of the worst examples was the Allegheny Health Education and Research Foundation (AHERF) in Pennsylvania, which ended up bankrupt, the second biggest bankruptcy of any type in the country at the time, and whose CEO wound up in the federal penitentiary.
What strikes me is how many management fads there have been in health care since it became more "business like" starting in the 1980s, and how some of them turned out, e.g., gate-keepers, capitation.
Let's see if P4P turns out any better. I have my doubts

fred trotter said...

Would like to hear more about the punchline. How was CareGroup able to turn things around?

Paul said...

Patience, Fred: I can't give away the whole thing in just two chapters! :))

Patient Dave said...

In the transplants thread, you talk about the inefficiency of having multiple providers offer the same specialty. Others have pointed out that each provider wants the business and the marketing visibility of offering that service.

But here, you cite the stress on BI when orthopaedics was "taken away" by a sibling hospital. Sounds like a contradiction - but maybe it's not apples to apples.

I'll speculate - the difference might be:

(a) orthopaedics is a mainstream business with lots of demand and plenty of experienced practitioners so it's practical to do orthopaedics efficiently in many hospitals;

(b) transplants are a low-volume practice yet patient survival and success demand greater staff skills, so it makes much more sense to concentrate the required expertise in fewer places.

Is that the difference?

In any case it's a tricky balancing act to create or undo a merger and not damage vital "organs" of the organism, so I too look forward to the next installment.

Paul said...

You have it exactly right, Dave.