Tuesday, October 24, 2006

What is CareGroup?

One of the persistent questions I receive from people at BIDMC and outside is, "What is Caregroup?" Here is the answer.

In the mid-1990s, the Partners HealthCare System was established with a merger of MA General Hospital, Brigham and Women's Hospital, several community hospitals, and many physicians. The business concept behind this merger was to establish a new corporate entity that reflected the changed health care marketpace. The new corporation would have better access to capital, garner economies of scale by larger scope, and have more leverage with insurance companies because of its extensive reach and integration of care delivery.

Beth Israel Hospital, the third largest of the adult care Harvard teaching hospitals, was not part of that merger and began to search for its own partner. It joined up with the New England Deaconess Hospital, and added affiliations with New England Baptist and Mt. Auburn, along with three small community hospitals and a number of community physicians. The goal was to establish another integrated health care delivery system -- CareGroup -- to be the bookend to Partners in Eastern Massachusetts.

But many problems soon ensued (which I will describe in future postings), and CareGroup failed as an integrated health care delivery system. A few years ago, therefore, the board of CareGroup, under urging from its member hospitals, redefined its scope. Its main purpose today is to satisfy the fiduciary obligations of the system with regard to previously issued bonds, which are a joint and several obligation of the three hospitals. CareGroup no longer has any clinical responsibilities.

Throughout the country, there are stories of mergers and corporate reallignments gone awry in the hospital world. This is no surprise. I used to be involved in other industries in which competitive market frameworks replaced regulated, cost-plus businesses (electricity, natural gas, telephone -- to mention a few). The first refuge of management in the face of such change was often to look for merger partners, but such mergers often failed. In future postings, I will provide more details about the BIDMC and CareGroup experience, but in the meantime, I would love to receive comments from you about interesting successes or failures from other parts of the country.

3 comments:

Anonymous said...

Do you honestly think Mass General and Brigham & Women's are clinically integrated? They maintain separate chiefs, separate clinical services and separate physician organizations (MGPHO and BWPHO). Mass General opened an expanded obstetrical service shortly after their merger, largely to compete with B&W for deliveries. B&W expanded to Faulkner to keep care under their roof and not let it go anywhere else. This was a network formed for financial purposes only... getting better financial deals in terms of lending and purchasing and, most importantly, better health plan contracts. Name one instance of actual clinical integration and/or consolidation of services between these two facilities? Very simply they have enough mass to set the cost of care in their market.... they esentially come up with what it costs to deliver care and then they tell the health plans to collect that amount by way of premiums. If the plans disagree they threaten to walk away. They clearly have a monopoly in eastern Mass as they set their own pricing levels at any level they want and send the plans to collect the money. It is amazing people can't see the Partners network for what it really is.

Anonymous said...

I look forward to hearing more about CareGroup, what happened, and anything you can share about the relative success of Partners. Thank you for your blog, I enjoy it very, very much.

Paul said...

I never suggested that the MGH and BWH are clinically inetgrated. In fact, Partners wisely made an explicit decision not to carry out that kind of integration. Why was this wise? Because the cultures of the two hospitals are sufficiently different that a clinical integration would have been disastrous. Also, when you integrate two departments of medicine, for example, one chief becomes chef of the new department and the other becomes vice chief and disgruntled. Those doctors loyal to the latter also get upset.

Instead, Partners focused on integration of business aspects of its system, notably creating a very coordinated effort with regard to insurance contracting -- exactly your point.