Shrink to grow

I want to make an outrageous proposal to the board of trustees of Partners Healthcare System (PHS) as they go about deciding on their next CEO:  Hire someone to split up your health care system so that it can productively grow.

This is a matter of good management and good public policy.  Let me explain.

From the beginning, the creation of PHS was never intended to result in a clinical integration of the flagship hospitals, Massachusetts General Hospital (MGH) and Brigham and Women’s Hospital (BWH).  The two organizations have disparate cultures and have always suffered from mutual jealousies, sometimes rising to the level of disdain.  The senior leadership of PHS recognized early on the futility of clinical integration and instead focused on back-office functions—purchasing, information systems, and negotiations with insurers.  On those fronts, they were relatively successful, achieving some economies of scale and other financial gains.

As the system grew, with acquisition of physician groups and incorporation of outlying community hospitals, the clinical split between the flagship hospitals was reinforced.  To this day, physicians and community hospitals refer their patients primarily either to MGH or BWH.  Researchers in each flagship hospital have no special interaction with those in the others, compared to interaction with the other non-PHS Harvard hospitals.  Education programs—undergraduate medical education and residency programs both—likewise are physically and culturally separate in most respects.  Quality improvement programs, to the extent they exist, are hospital-centric.  Development of new clinical initiatives occurs in one place or the other, but seldom in both.

Beyond that, each hospital has used its influence at the PHS headquarters to impair some of the creative energies in the other.  There are plenty of stories, for example, of times an initiative at BWH might have the potential to be truly competitive with an established program at MGH, and only to find itself quashed at the corporate level.  These were not cases of rationalizing care delivery: They were simply opportunities for ego-flexing.

Likewise with regard to philanthropy.  Donors are identified early and separately as MGH targets of opportunity or “BWH people.”  Never the twain shall meet, and their identities are carefully guarded until the gifts are secured.

So this is not truly an integrated health care system, and it will never be.

On the business side, too, the existence of economies of scale has clearly reached a point of diminishing returns.  Look, for example, at the recent $1 billion information systems contract with Epic.  I am willing to bet that disparities in the models of care and administrative requirements between the two segment of PHS are causing that IT system to have higher costs than would occur if it were being constructed for two separate and more culturally distinct organizations.

Likewise, there is little or no advantage in purchasing contracts for this large system that would not be available for two somewhat smaller, but still very large systems.

Further, the centralized PHS corporate office with high salaried people in the high-rent Prudential Center is quite properly viewed with resentment as mere overhead by those both on Fruit Street and Francis Street.

The one thing that might be argued is that PHS has had effective and extreme power in its negotiations with insurance companies, leveraging its network spread to demand higher rates than almost all in the region.  But, even there, a case can be made that the leverage was based on geographic dominance in each subregion—a dominance based either on the presence of the MGH-affiliated branch or the BWH-affiliated branch—as much as the system as a whole.

Meanwhile, though, the size of Partners makes it a target for opponents when it seeks to grow.  Witness the recent objections to the acquisition of community hospitals to the north and south of Boston.  What might make sense from a public policy point of view, with regard to suburban-to-urban secondary-to-tertiary clinical integration, gets squashed or subject to burdensome regulatory requirements.

Everybody interested in health care in Eastern Massachusetts—government officials, business customers, and consumers—seeks to bring about cost savings, service improvements, and a drive to higher quality care.  Notwithstanding lots of recent state legislation, there is a growing recognition that the only way to achieve this is a greater level of competition in this marketplace.  As things stand, Lahey, BIDMC, Tufts and the others can only nibble at the edges, and they scarcely make a difference in the overall results in terms of those desired areas of improvement.  Meanwhile, Steward Healthcare System is showing signs of rapid decline and irrelevance.  Boston Medical Center, too, remains in its safety-net niche, scraping by with diminished state and federal resources.

The best way to generate real competition is to split PHS so that MGH and its network and BWH and its network have separate corporate identities and bottom lines.  This would acknowledge the de facto clinical separation of the two components of the PHS system and give each organization a real incentive to grow—but this time through excellence in care delivery rather than corporate heft.  Each, too, might seek new clinical alliances with the aforementioned Lahey, BIDMC, Tufts, Steward, and BMC, offering the potential for rationalization of care and better use of financial resources.

Would the Partners board have the nerve to dismantle a system they assume is working well?  Frankly, not likely.   But this is not a case of having to worry about accretive value for shareholders or private equity investors.  There are no shareholders here.  The only audience of concern should be the public.  The board owes it to that public to review the twenty-year history of the corporation and objectively determine whether the region is better off for the creation of Partners Healthcare System, and whether the future is better served by one entity or two. Indeed, any potential CEO worth his or her salt should be asking the question before taking the job.

(Note to Attorney General-elect Maura Healey:  Might they be more likely consider a breakup if you tossed out the wrong-headed proposed agreement negotiated by your predecessor and threatened a true antitrust lawsuit jointly with the US Department of Justice?  This is a moment for a great negotiator, and you have the power to set up the situation for an agreement that is truly in the public interest.)