Sunday, November 17, 2013

A modest proposal

I’m going to offer an idea that is so outrageous it might actually have merit.  This concerns the Boston area health care market, but my readers from other regions might also find it of interest.

There are two health care entities in Massachusetts that face uncertain futures.  One is Tufts Medical Center, a relatively small but highly respected academic medical center with a notable history, going all the way back to its antecedent’s founding by Paul Revere and other patriots. The other is Steward Health Care, a chain of hospitals purchased from the Boston Archdiocese several years ago by a private equity company, which converted it into a for-profit organization.

Not withstanding superb executive and board leadership over the past dozen years and a dedicated medical staff, Tufts remains trapped by the lack of an extensive referral network of doctors and community hospitals.  It suffers, too, from some bad luck going back to leadership decisions made several decades ago.  For example, although located in Boston’s Chinatown neighborhood, the community health center serving that densely populated neighborhood decided to affiliate itself with another academic medical center several miles away.  When people in Boston say, as they sometimes do, that there are too many academic medical centers in town, Tufts is the one that is most often suggested for elimination.  Such facile comments are, of course, unfair, in that the quality of clinical care, teaching, and research at Tufts is excellent: Were this institution to close, the community and the world would suffer a true loss.

Nonetheless, in the changing world of healthcare, a lonely academic medical center surrounded by other such centers with large (and growing networks) is at a disadvantage.  Tuft’s inability to keep and create significant strategic alliances with physician groups and community hospitals is a major vulnerability going forward.

Steward Health Care presents a totally different performance problem.  Owned by a private equity firm, the hospital system’s leadership has done what private equity managers do.  Assets have been stripped away to create cash flow for the owner. Actions have been taken to increase the top line performance of the company: Acquire, at high price, physician practices to increase referrals; sign front-ended loaded global payment contracts with the largest insurance company; sell (and lease back) real estate; sell clinical laboratories (and enter into a long-term vendor relationship with the purchasing firm); and minimize capital investment in the system, to produce earnings before depreciation that look robust.

But even those steps cannot hide the fact that actually running a hospital system in the Massachusetts market is not a highly profitable enterprise.  Payment increases from private insurers, Medicare, and Medicaid seldom rise at rates greater than overall inflation. Meanwhile, service worker unions expect wage and salary increases to exceed that rate of inflation. Renewal and replacement of capital facilities and medical equipment by far exceeds the original cost of such investments. A for-profit firm faces the additional challenges of relying on taxable debt rather than tax-exempt debt; having to pay sales tax, local property taxes, and the like; and being unlikely to attract philanthropy to support its programs.

The private equity business model calls for a sale (or flip) of purchased companies within a short time frame. Indeed, the investors in private equity funds are promised such terms.  In general, two types of sales are envisioned: An initial public offering, in which the company’s shares are offered to the general marketplace; or a secondary sale to another firm in the private equity market. In either event, the selling entity needs to create a colorable story that the enterprise has a high chance of financial success, meeting the hurdle rate of the new investors.

From reports I see in the media, it is unclear to me that Steward has much to offer to new investors.  As mentioned, its financial strategy seems to have been tied to stripping cash out, leaving questionable value for the next investor. Profitability seems difficult to achieve. Indeed, we can imagine the current firm seeking concessions from its labor unions and perhaps even asking for property tax relief from municipalities if its earnings deteriorate significantly. Such actions would be a precursor to a loss of political support.

There is talk of selling Steward to one of the large American private hospital companies.  But what can Steward’s owners truly expect such a company to offer in the way of a purchase price, when the likelihood of the system meeting a private market’s hurdle rate is so small? If I were the current owner, I would be searching for a way to get out—to take solace in the cash I have been able to extract, and to avoid the possible future costs of running the system.  Indeed, I might even be willing to give away the investment to cut future losses and report a reasonably successful investment result to my private equity fund participants.

It is that thought that swiftly leads me to today’s modest proposal. I suggest that Tufts and Steward would both be better off if they reach an agreement under which Steward sells itself to Tufts for $1and in which the hospitals in the Steward network are re-established as non-profit institutions within a greatly expanded Tufts network of physician groups and community hospitals.  Overnight, Tufts would become the second or third largest health care network in the state, with outposts throughout the Boston metropolitan area.  It would thereby enhance its ability to negotiate with the private insurance companies.  Steward’s tertiary referrals, which today go to the high-priced Partners Healthcare System, would instead be treated at Tufts’ main campus in Boston, offering lower priced care of equal quality. As non-profits, the community hospitals could again return to their tax-exempt status, saving millions in costs over the coming years and benefitting from the generosity of local donors. And, by the way, the two hospital systems are already part of the Tufts Medical School training program, so there are benefits of better coordination for graduate and undergraduate medical education.

How crazy is this? If you think through the alternatives for the two parties, the approach I outline doesn’t look so bad—and could look quite good.  The public policy ramifications are also positive: Beyond solving the sentimental problem of keeping Paul Revere’s legacy alive, the proposal offers the potential for the entry of a third vibrant competitor in a health care marketplace that is looking more and more like a duopoly.  Contestability in this sector requires at least three competitors.  This proposal could help make that scenario more likely.


old doc said...

Paul----not outrageous in the least. It has always been clear to a number of folks I know that Steward's plan to sell off all the assets and then sell the skeletal remains of a captive geographical population to a big for-profit would flop. How they sold this scheme to the AG and the local communities is a mystery. Sadly, during the Caritas years, the hospitals declined and the Steward years have only further hastened the end. Multiple cut backs and layoffs have seen the census at their hospitals plummet to unsustainable levels. The effort of "rebranding" as Steward did not result in increased business. It seems that rather the converse is true and that the captive population in the Steward catchment areas has escaped. Hospitals in these suburban areas and their emergency services are essential for the safety of the people living in those areas. The layoffs and declining levels of service in these areas jeopardizes the overall healthcare of the people in those communities. I have long thought that one of the Boston hospitals would have to ride over the hill to bail Steward out and a sale for $1 to Tufts would be a blessing. None of this will work, however, if the present management team brings their flawed business plan and attitude to the new entity. A clean sweep might just save what remains. Good on you for the courage to point to the state of the Emperor's dress and how to keep him warm!

Anonymous said...

Paul - You make a lot of good points in your post but at the end of the day all these private equity Cerberus guys care about is money. You can't expect them to have a reasonable bone in their body.... it's only about the bottom line. So they will keep selling off assets (they also sold off their physician hospitalists to a publicly traded company) and cutting costs to squeeze out every last dollar before selling it to any bidder who offers them the highest price. They don't care about Paul Revere and NEMC surviving. Cerberus also said they would sell their Freedom Gun Group after their gun killed all of those kids in Newtown, Connecticut. They still haven't sold and the obvious reason is that gun sales are at an all time high and they want to cash in as long as possible. These are amoral people so to try and present a reasonable scenario to them simply won't work. Frankly, the faster theses private equity sharks disappear from Massachusetts healthcare the better it will be for everybody.

mark said...

Among Paul's points is that it matters little what the Cerberus-Steward guys want. They sold off anything worth anything and what remains will not likely look very attractive to a buyer unless patients can be forced to receive care in their hospitals. That sort of policy is not very popular in these parts and patients have already made it apparent that they are not buying what Steward is selling. As humiliating as it might be, since it's simply business with Cerberus; it would make sense to cut the losses while there is anything left to save and allow an established hospital system with some understanding of Boston and Bostonians to take over. It may have been tragically prophetic when Delatorre said that they would be happy to be Filenes when the ruins of Filenes already lay at Downtown Crossing.

Anonymous said...


Even if you could get Cerberus to agree to sell to Tufts Medical (which is difficult since they lose their equity invested plus time value of money - from memory I think $120 million "plus"), you have the same problem you had when they were run by Caritas Christi, it is difficult to raise capital and invest for a non-profit that is unprofitable. And investment in information technology, outpatient centers, and enhancing doctors networks etc is necessary in this environment for long term success and maybe even survival.

The scenario raised this summer in the Globe involving Tufts, Tenet and Vanguard still looks like a good one to me (though I don't know what negotiations have happened). Tenet (vanguard) buys Steward in partnership with Tufts Medical. Vanguard was a high quality operator and Tenet appears to be trying to develop in the same mold. They like regional partnerships with high quality low cost institutions like Tufts Medical, and they are the only large for profit hospital network that is pursuing a strategy that embraces health care reform, things like ACO's etc.

My understanding of Tufts Med financial situation they need some element of partnership with someone with capital to pursue the purchase of Steward (and investments necessary) as a joint venture. My understanding of how the original Vanguard Tufts Med, agreement was Tufts would have a minority (blocking?)stake in hospitals bought together with "vanguard/Tenet".

Vanguard/Tenet and Yale New Haven Hospital have a joint venture for two and possibly four hospitals in Connecticut, which offers a potential template (though I am not privy to the details of that agreement). I assume Yale has some elements of control in the relationship to protect its investment in time and money.

The default position in much of new england seems to be "for-profit" health care is bad. But just because some one is making a profit doesn't mean the service they provide isn't of good quality or that the "profit" is evil.

If, for instance Brigham and Women's might charge $10,000 for a routine birth of a baby in its hospital, and Metrowest can do the same thing at the same quality for $5000 and make a profit doing so, does that profit negate the lower cost for the patient, the insurer and possibly tax payers?

If for some reason the deal with Tenet/Vanguard can't be made to work (and I am a believer you dance with the one who brought you) then there is another possibility.

Tufts Med could partner with a non-profit who has better access to capital. A couple of good possibilities might be Lahey or Bay State.

There could even be a hybrid situation where Tufts and say Lahey jointly work with Tenet. That might maximize the leverage Tufts and Lahey (or?) could have in the partnership with Tenet.

Paul, I think the only way the scenario you delineate could work is if, Steward could be guaranteed to immediately become profitable after being taken over by Tufts Med. Then Tufts Med could make the investments necessary on its own without threatening their own (TMC's) viability, which is much better than five or six years ago, but its financial reserves are limited.

Paul, are opposed to a high quality group like Vanguard/Tenet (working jointly with Tufts Med) who are pursing a strategy of high quality and low cost and have a strategy than embraces health care reform?

Or don't you think that partnership of Tufts Med and Tenet (working with Steward management) is working?

Barry Carol said...

While I’m not going to defend private equity ownership in this case, I think it’s important to note that healthcare in Massachusetts is the most expensive in the country even though both its hospitals and its insurers are, for the most part, non-profit entities.

A big reason why healthcare is so expensive in MA is because a disproportionate amount of care, including lots of routine care, is provided at expensive teaching hospitals and their satellite facilities with the market power to extract unduly high reimbursement rates from insurers. Since there are comparatively few economies of scale in the hospital business, perhaps a better approach would be to force the dominant teaching hospital systems to return some of their satellite facilities to community hospital status unrelated to the teaching institution. Let them then negotiate lower reimbursement rates with insurers that are more appropriate for community hospitals while letting the teaching hospitals handle the relatively small percentage of complex cases that they really are best equipped to treat.

Do you really want the whole hospital sector in metropolitan Boston to be controlled by expensive academic medical centers?

Paul Levy said...

Anon 6:19,

Very interesting. I think you are wrong about the the "for-profit is bad" default in this region. The issue is not for-profit per se, but the kind of for-profit that has no interest in a long-term presence in the region.

Paul Levy said...


As always, right on target. I would certainly not favor academic-medical-center centric ACOs; but that is what we have in Partners--with its tremendous market dominance--and that is what is on the horizon with the other growing network.

Like you, I think that is a troubling approach and would rather see systems centered on primary care/multi-specialty practices and community hospitals. But that horse has left the barn in MA, so perhpas the only step left is to create some diverse countervailing market power.

Paul Levy said...

JOhn McDonough offers some thoughts here:

Anonymous said...

Barry, I was going to say exactly what Paul did. It isn't really the for-profit opposition in MA (to the extent that it is, it's misguided). I actually think dedicated health care for-profits have the potential to run things more efficiently than the well-meaning-but-sometimes-bumbling community-run non profit hospitals of old. (But Partners has made a mockery out of being 'non profit.') It was the idea that Cerberus, of gun factory and Chrysler fame, thought it was actually going to run hospitals, with an ambitious and somewhat questionable CEO pulling the local strings.
As for ACO's vs community hospitals, see the comment section of Jeff Goldsmith's post on Medicare on THCB, where the locals in Charlottesville have long preferred their community hospital to UVa, for reasons belonging largely to simple leadership and trust. It seems the problem in Boston is that Partners got hold of the local politicians long ago and has not let go. Shame on that political system.


Anonymous said...

I meant to say AMC's vs community hospitals in my comment above, not ACO's. The acronyms are getting to me.


Anonymous said...

Criticisms of Stewards primarily come in three flavors:

1) Leveraged buyout out firms are not long term investors

2) Steward has not invested huge amounts in its hospitals

3) Steward has "stripped assets" maximizing its use of idle assets for investment.

1 - Response - I agree with the first point, leveraged buy out firms are not long term investors.

But this could be changed if Steward was bought by a for-profit operator with a long term perspective, especially if done with a local partner who has some degree control in the partnership.

2 Response - investments adequacy - I am not privy to all of Stewards actions, but from press reports, I think Steward has invested in a prudent way in its facilities and continues to do so. For instance, Steward made large investments in I.T. systems, built many new emergency rooms in its hospitals and is now refurbishing & reopening (after more than a decade) a birthing wing in Quincy hospital.

If you are comparing Stewards investments to much richer networks like Partners, BID or even UMass or Lahey, then they do not seem large. But Steward is attempting to compete as a high quality, low cost institution. To maintain low costs means being prudent when investing and outsourcing functions that can be done more efficiently by a focused outsider.

3 Response - Asset stripping. Steward is criticized for selling and leasing back buildings to access capital for investment and outsourcing some functions like hospitalists among other things.

Tufts Medical Center sold and leased back two of its buildings a few years ago. So do many well run lean (not six sigma "lean") organizations who are focused on accessing hidden value for investment in the future.

When I read about the hospitalists practice that Steward sold, it seemed to be less focused on accessing capital than flexibility to bring in hospitalists from across the nation if there was a "surge" need for hospital staffing. Without being intimate with the details, this seems like a smart approach from an outsiders perspectives. The hospitalist firms has access to lots of doctors, and they are difficult to recruit quickly if requirements change. What rich firms do is lots of "extra capacity". What smart firms do is something like Steward appears to have done.

Anyway I don't want to appear to be an apologist for Steward or de la Torre, but I call it like I see it.

I think Steward is doing many of the right things, though as Paul said in a previous post a few days ago, allowing open access high union wages and maybe more important, the inflexibility of union contracts probably wasn't Stewards best moment. But this appears to be expediency to get the Steward buy out deal done in a heavily "blue state".

Anonymous said...

There has been criticism above of Academic Medical Center focused networks.

I see no problems with such networks if they are done properly, in fact they make some logical sense.

If the object of the network is to suck as many patients as possible into the academic medical center as seems to be the case with Partners, that is problematic.

If the object is to refer only tertiary and quaternary cases to the academic medical center and even have some doctors from the academic medical center working at local hospitals to help with diagnostic work etc, what Tufts Medical Center calls its "distributed academic medical center" approach, which is a term I think they have trade marked then having an academic medical center as the apex of the steep pyrimid makes some sense especially if the academic medical center has expertise in population management, treating patients at low cost etc.

Susannah said...

Totally a "genius" proposal on your part and I will not be surprised to see it receive its fair share of outrage, much like Mr. Swift's earlier modest proposal. I have fretted over Tuft Medical Center's future ever since I have been in the municipal bond world, back when it was known as New England Medical Center and I unkindly dubbed it "the seventh hospital in a six hospital town". The place is still struggling after the yeoman work done there by Ellen Zane (a Partners alum, as we will remember), and whatever we think of the efforts of her successors (amazing that this is now in the plural). It needs help. Steward needs help. Why not have the two entities throw their fortunes together? It seems unlikely they could do any worse together than they have done separately. I doubt that either side would see it that way, which is too bad, but I applaud you for putting the idea out there.

Barry Carol said...

Paul –

Perhaps a quality for profit operator like Vanguard could provide the countervailing power that we both think would be desirable in the metropolitan Boston healthcare market. I’m a bit more dubious about Tenet though. There should be a role for a lower cost provider that can clearly demonstrate comparable or even better quality across most of the healthcare spectrum.

One thing I wonder about is how hospital reimbursement rates are negotiated. Are they based on a percentage above Medicare or a discount from the chargemaster? In this day and age, negotiating up from Medicare rather than down from the chargemaster would be most appropriate, in my opinion. Maybe there could be one percentage above Medicare negotiated for E&M codes and a lower one for more highly compensated medical procedures and MS-DRG codes.

This approach would also fit in nicely with my longstanding advocacy for price transparency. For example, community hospital X charges commercial payers 115% of Medicare for all services, tests and procedures, academic medical center Y charges 130% and Partners charges 160%. Medicare rates are readily ascertainable and can probably be made even more so with a database that is searchable by DRG or CPT-4 code as well as descriptive terminology like hip replacement, MRI, colonoscopy… for each provider.

Barry Carol said...

One factor that would complicate price shopping somewhat under my proposed percentage above Medicare pricing scheme is that Medicare pays academic medical centers more than community hospitals in the same area for the same work to reflect the AMC’s higher structural costs for medical education and research beyond what AMC’s receive from Medicare GME payments and NIH research grants. However, a good database should be able to provide Medicare rates by provider to which the appropriate percentage can be applied to determine the commercial insurance contract rate for a specific service, test or procedure.

Anonymous said...

There was more than a bit of arrogance in Delatorre's "Burn the boats on the beach, baby!" This has not been a terrific year to try to hide on or make boat escape metaphors. It seems that we can expect little kindness and no humility from that front. Perhaps it is time for that rendition of the Emperor's New Clothes to slink off stage and out of our state rather than to try to craft a way to allow them to stay and pretend that they offer warmth and protection from the wind. Steward has skeletonized the Caritas hospitals financially, created a heathcare scenario more smoke and mirrors than reality and now wants to either be subsidized or sold to the "next fool STOP IT!!!!

Peter said...

Not crazy at all. We've been seeing variations on the theme for years. Textbook case: Judge Roy Hoffeinz, Texan, built the first domed stadium. ASTRODOME Sold it to the city for $1. "All ah want," quoth he, "is the parking concession." Abracadabra. Everybody wins!

Don said...

One more thing regarding the Steward playbook: The physician practice I go to was sold to Steward and the first thing they did was start changing all the procedural areas (day surgery, etc.) to a hospital clinic license to get the bump in technical revenue. So much for Ralph's stated purpose of being a low cost provider. They also started diverting patients to one of their hospitals about 12 miles away.

Anonymous said...

It's an interesting proposal and here's an alternative. A more likely scenario is for Vanguard to acquire TMC giving it a presence in Boston. Vanguard has noted they want to be a bigger player in the Northeast and TMC and Vanguard already have a relationship and it can build from there. NECQA is actually a pretty robust physician network so let's not discount their value and Vanguard has the resources to invest. Then there is Minuteman Health, the insurance co-op that I believe Vanguard has an interest in.

Most of the hospitals Steward acquired have no value but the physician network does. I say let the investors do what they will with everything and have other systems pick up whatever pieces they want. Some of those hospitals will go out of business. We have too many beds chasing too few inpatients.

Paul Levy said...

Barry, in response to your question "One thing I wonder about is how hospital reimbursement rates are negotiated. Are they based on a percentage above Medicare or a discount from the chargemaster?":

The chargemaster is irrelevant for these discussions. You more often hear about a percentage above Medicare. Of coure, even that is subject to the market power of the hospital or health system. And, where the insurer and the health system have a common bottom line (i.e., owned by the same holding company), the calculations are heavily influenced by the ability to engage in transfer pricing throughout the corporation.

Anonymous said...

anon 3:52 AM

An interesting thought [TMC being acquired by a for-profit], but from what I have read locally, I don't think either Tufts Medical Center management nor Tufts University, (which while not an owner does have strong influence at the hospital which has a contiguous campus to its medical school) have an interest in becoming a for-profit hospital at this point. They would seem to prefer to partner with a suitable for-profit or possibly another high quality low cost non-profit.

Some in earlier postings have speculated that there is hope Tufts Medical Center is the seventh academic medical in a six hospital market possibly with the hope it closing would leave opportunity for other academic medical centers would pick up the pieces.

Tufts Medical Center is the primary campus of Tufts Medical School and will not be allowed to fail. So if the only alternative was becoming a for profit, that probably would happen.

Also bear in mind, that several years ago Tufts Medical Center management proposed opening a campus south of Boston, which if the idea is still percolating somewhere would be an alternative way to reducing crowding in the Boston hospital market.

But as to Tufts Med Center being acquired by a for profit, I would guess all other alternatives would be explored first.

But you are right, it is an alternative if necessary.

Anonymous said...

Some have stated above we have "too many beds chasing too few patients".

But that is not the same as "we have have too many low cost beds chasing too few patients".

We have far too many patients filling beds in academic medical centers in Boston. If we close hospitals like Quincy and Carney, which are among the weakest Steward hospitals, we lose the option of patients finding less expensive alternatives to academic medical centers in and near Boston.

If we want a way to reduce our high health costs in Massachusetts the easiest method is moving patients from high cost academic medical centers to community hospitals.

It is patients in and near the city of Boston who are most likely to get their primary care and non-tertiary, quaternary care in a high cost academic medical center.

That is why so many community hospitals in and near the city of boston have closed in the last 30 years and why Carney and Quincy have faced such financial pressure.

Patients have had little or no financial incentive to find good quality, low cost care. So they go to the prestigious option in Longwood or MGH.

James said...

1. Love the idea of Tufts MC and Steward combining, more-so too many trauma centers down-town. Combine Tufts/SEMC and close one of them. Having a Level 1 trauma center in Brighton could cut off a lot of potential revenue that currently drives right past SEMC; while also revitalizing the Brighton campus both academically and clinically. Please share any criticisms -

2. DLT has brought a lot of positives to Steward, i.e. fulfilling pension obligations, renovating mult EDs, saving community facilities, etc. He brought out-of-the-box thinking to the market which was sorely needed, but for some reason goals have not been met with expanding into non-MA markets which point to some flaw in business plan, not to be addressed here. The fact that they probably performed poorly in the pioneer project may point to further issues.

Anonymous said...

Very unlikely that Steward will find a buyer to put up serious money as they have stripped the profitable assets, leveraged up the system with debt and still have a bunch of very old hospitals that require enormous physical investment (they dress them up with new ERs and lobbies but the actual hospitals are ancient). Further, their PCP network leaks over 55% of their medical spend to other networks so their patients do NOT want to go to Steward facilities. Where is there any value in any of this? Only thing worth pursuing is the Primary Care Physicians with established panels.... peel them off and have them direct to your network and not Steward. Steward is a mess and they are going to have a very tough time passing the buck on to a "next buyer".

old doc said...

Correct, Don. There is lots of gaming the system and this method can turn a $150 mammogram done in the same place by the same doctor into something closer to $900. It is not about good and cost efficient healthcare, but about REVENUE STREAMS and grabbing whatever bucks are up for grabs. There should be shame involved here.....

Anonymous said...

Steward has been greatly criticized I think in some cases unjustly.

But it is perplexing that none of Steward's deals outside of Massachusetts worked out. In Florida (Ralph de la Torre's home state), Maine and Rhode Island deals fell apart.

In massachusetts his hospitals have gone through equally perplexing gyrations in profitability. All figures below from the Massachusetts Center for Health Information and Analysis site.

St Elizabeths Stewards flagship went from a $23 million operating profit in 2010 to a $21 million operating loss in 2011, to an almost $4 million operating profit in 2012.

Quincy went from an almost $6 million operating loss in 2010, to a $17 million operating loss in 2011, to a $5 million operating loss in 2012, to an $11 million operating loss in the FIRST HALF of 2013

Carney went from an almost $3 million operating profit in 2010 to a 1 million operating loss in 2011, to a 10 million operating loss in 2012 with large losses continuing in the at a similar run rate continuing in the first half of 2013.

Merrimac a relatively small hospital with only 55 million in revenue in 2012, had an operating loss of about $4 million in 2010, an operating loss of $1 million in 2011, an operating loss of almost $6 million in 2012, which worsened to an operating loss of almost $6 million in the first half of 2013.

Which the exception of St Ann's in Fall River, which has been consistently profitable, most of Stewards hospitals have gone through seeming inexplicable profit gyrations, though I have shown the most extreme cases. Some of the other hospitals have gone from profit to loss and back to profit.

As someone who has been reviewing financial figures for Massachusetts hospitals for a number of years, I have not seen similar gyrations for so many hospitals.

Maybe one hospital will have a problem, but the large changes up and down, is unusual.

frankly, I don't understand it.

What investors look for is opportunity for consistent earnings and preferably consistently improving earning. Volatility is something to be discounted.

This pattern will make it difficult for Steward to get a good return for its investors.

When combined with an inability to make deals outside of Massachusetts?

Maybe Paul is right. Is it time for Cerberus to cut it's losses exit the Massachusetts hospital market?

As a

Anonymous said...

Specific to the earnings at the Steward hospitals, keep in mind that as part of the deal with the Attorney General they can close any hospital that shows consecutive years of financial losses. They will make sure to show bottom line losses on hospitals like Quincy and Carney to keep their options open in case they can't find a buyer and need to cut their expenses. Walk through the Steward Hospitals and you notice how empty they are and then go to a place like Brigham and Women's and see how vibrant it is... it's like night and day. Steward is left largely with a Medicaid and elderly patient population that does not reimburse very well and are captive to their geography. At Steward St. Elizabeth's you will hear more Russian language patients than English speaking patients.... they really have there work cut out for them to turn things around.

Anonymous said...

It is terribly sad! We need community hospitals in and near boston and they are mostly closed.

The only true community hospital left in the Boston city limits other than Carney is Faulkner, which is now part of Brigham and Womens.

If Steward decides to close carney and quincy (just beyond the Boston City limits), or an acquirer doesn't want them maybe the attorney general could give Partners the option of taking over. (I am assuming [hoping] the attorney general will block Partners take over of south shore - the strongest hospital in the Boston south suburbs.

If they can make those community hospital attractive to patients and keep them open, they will have done a service to the community.

Anonymous said...

Partners saving community hospitals?

It proposes to close two of them on the North Shore - Union and Lawrence Memorial, with its acquisition of Hallmark and revamping its network on the North Shore as Paul has mentioned in previous articles.

Partners seems to operate more like a profit maximizer with semi-monopoly power. It would rather close community hospitals to ensure its academic medical center beds are full even if the cost is much much higher.

It would be nice if they functioned like a true non-profit and worked to help the community hospitals more than just their bottom line.

A Partners which didn't try to dominate the the richest most successful community hospitals Newton Wellesley and South Shore and instead made weaker community hospitals stronger like a Quincy or Carney would be giving back to the community.

But I am not sure that we should hold our breadth. MGH and Brigham and Womens have accumulated almost 3 Billion (with a "B") in profit in the last decade.

They have also been consistent. About 1.5 billion in the last five years and about 1.5 billion in the five years before that.

MGH alone made 2 billion of the almost $3 billion.

And Partners community hospitals which also have higher rates in their communities than their local community hospital neighbors have also made much more than most other community hospitals (the exception is North Shore Medical, which while having higher rates than its neighbors has still lost money. But they have lost a pittance next to 3 billion)

It would be nice if Partners focused more on helping weak hospitals rather than taking over the strongest in a region like South Shore.

But 3 billion in profit in the last decade, makes me skeptical.

Anonymous said...


I was curious what you meant by this statement in your article:

Tufts Medical Center (TMC) "suffers, too, from some bad luck going back to leadership decisions made several decades ago"

You mention as an example the Chinatown health center not affiliated with TMC. If I am not mistaken, that decision was based on a long term view that even though TMC was integral to the development of health centers locally and nationally (founded the first health center in Columbia Point and then proved the concept nationally by helping to set up more health centers in Mississippi with the help of congress) TMC management thought the future of "lower cost" health care required vibrant community hospitals and if they sucked in patients that could be well served in community hospitals it would drive up costs.

TMC is still operating off of that strategy with its "distributed academic medical center" [term is trade marked by TMC] model.

Is this the decision you refer to, or is it something else?

The other major academic medical centers in Boston, "Boston Medical Center", MGH, BID, B&W, all have networks of community health centers in Boston. Only TMC and to a lesser extent St. Elizabeth's chose to focus on being "referral" hospitals.

Could you please clarify?

Paul Levy said...

Whatever the history, Tufts has been trying for years to reconnect with the local community health center and have it change affiliations.

Anonymous said...

I know the tufts community, including Tufts Medical Center, the medical and dental schools and other tufts entities in Chinatown have been working to improve relations with their neighbors for many years.

Relations were poisoned a few decades ago, and the effort to change direction has continued since. I know Tufts Medical Center has many programs focused on its neighbors in Chinatown as part of this effort.

I would guess that is the genesis of the effort to attract that health center. Not a change in their long term strategy of being a referral hospital but a desire to improve relations with its neighbors.