Transcript PARTNERS SIGNATURE QUALITY AND COST EFFECTIVENESS …

Influence of Market Forces on
Healthcare: A Case Study
Thomas P. Glynn, COO
April 9, 2009
Agenda
I.
Market Forces: 1993
II.
One Case: Partners Strategy and Founding
III. Market Forces: 2009
IV. Partners in the Suburban Market
V.
2
Market Forces: 2009 - 2014?
I. Market Forces: 1993
3
Environment - 1993
 Unemployment Rate – 7.5%
 Stock Market – 3300
 Volume – Down
 Margins – Down
 Beds – Down 24%
 Research Grants – Slow Growth
 Residency Slots – Going Down 20%
 HMO Growth 27%
50%
 Capitation – wave of the future
4
Strategic Response in 1993
 Leadership roles in restructuring the area’s health care by creating
the core for a superior integrated care delivery system
– Geographic coverage
– Comprehensive services
– Highest quality programs and services
 Reduce and transform system capacity and capabilities
– Shift the mix of resources towards integrated care
– Shift location of some services closer to the patient
 Significantly improve cost position throughout the institution while
improving quality of programs and patient care
– Consolidation
– Rationalization
– Re-design
 Ensure critical mass is retained for clinical, teaching, and research
excellence
5
Resources
1993
Partners
Children’s
BIDMC
NEMC
Caritas
BMC
X
Strategy = Results
2000
Partners
BMC
Caritas
NEMC
Children’s
BIDMC
6
2009
Partners
BMC
Children’s
BIDMC
NEMC
Caritas
II. One Case: Partners Strategy and Founding
7
Partners Clinical Strategy
 Physician driven (not corporate driven):
– Physicians comprise the majority of executive decision-makers
– Partners has an extended family of more than 5000 physicians
– Patients pick doctors - not hospitals
 Local:
– Where people get their health care is usually a function of
geography
– Partners hospitals serve the largest share of patients in their
home communities
– Expanding the base is easier than de novo recruitment
 Management:
–
–
–
–
8
GM vs. Microsoft
Coke vs. Pepsi
Physicians vs. Hospitals
Service vs. TV ads
80% of Academic Medical Center Patients come from Physician
Referrals
Consumers
Physicians
PCP
40%
80%
Community
Specialists
40%
20%
ER andER
Self-Referral
and Self-Referral
20%
9
20%
AMC
Service Leader MGH FY93
10
Service Leader BWH FY93
11
Branding: GM vs. Microsoft
 Branding – Partners Brand vs. MGH Brand and BWH
Brand – Two of the best
 Baybank - $25M to replace Harvard Trust
 A stew not a puree in organizational culture
 Parent Company – recognizes strength and energy
comes from founding hospitals
 “No one ever cured at Partners”
12
Partners HealthCare
1993
MGH vs. BWH
Two Administrative Systems
13
2009
MGH and BWH (NSMC & NWH)
One Administrative System
Zero Integrated Training Programs
28 Integrated Training Programs
200 Primary Care Physicians
1200 Primary Care Physicians
Inpatient Volume Falling
Inpatient Volume Rising
Marketing = Used Cars
Marketing = Future
Cost Plus
Cost Management
III. Market Forces: 2009
14
Partners is just one component of a large and diversified
health care market
Eastern Massachusetts
Partners
3 Medical Schools
1 Medical School
2 Schools of Public Health
2 Teaching Hospitals
14 Teaching Hospitals
6 Community Hospitals
43 Community Hospitals
1 Psychiatric Hospital
16 Psychiatric Hospitals
2 Long Term Acute Care Hospitals
17 Long Term Acute Care Hospitals
2 Inpatient Rehabilitation Facilities
8 Inpatient Rehabilitation Facilities
7 Owned Community Health Centers
60 Community Health Centers
~850 Primary Care Physicians (1)
~3,700 Primary Care Physicians (1)
Source: American Hospital Directory
(1) Sources: Folios, Partners Corporate Provider Master, PCHI credentialing data base. Partners total includes all PCPs and PCP specialists credentialed
by PCHI. Does not include OB/Gyns or peds
15
Partners HealthCare’s Market Share in Eastern MA
Partners’ inpatient Market Share in Eastern
Massachusetts has been constant at 22% for 10 years
Acute
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
All Discharges
21.1%
21.4%
21.5%
21.8%
21.6%
21.8%
22.0%
21.9%
Notes:
• PHS market share is calculated on “same store,” i.e. discharges for all hospitals
currently in the system
• Market share data only available from state through FY06
16
Eastern Massachusetts Communities where MGH and
BWH are the Top Inpatient Provider
17
Source: MADHFCP FY 07; Market leader is based on total inpatient volume excluding newborns.
Eastern Massachusetts Communities where PHS is
the Top Inpatient Provider
Source: MADHFCP FY 07; Market leader is based on total inpatient volume excluding newborns.
18
Partners Finances: Patient Share Percentage
Partners patient share percentage is moderate compared to similar
organizations around the country with whom we compete for research
funding and physician and scientific leadership
Regional Market Share Comparison
100%
96%
90%
80%
70%
60%
50%
40%
43%
35%
30%
30%
22%
16%
20%
15%
10%
8%
7%
UCLA - Los
Angeles
New York
Presbyterian New York
0%
Mayo Clinic - Cleveland Clinic Duke - Raleigh- BJC - St. Louis
Rochester, MN
- Cleveland
Durham-Chapel
Hill
19
Partners
Healthcare Boston
Johns Hopkins Baltimore
UCSF- San
Francisco
Note: Market share for other Honor Roll hospitals defined as percent of total discharges in each MSA, 2004 data; Only 2002 data available for Duke University
Sources: Bain & Co., Solucient 2006 Profiles of US Hospitals
Partners’ market share is moderate when compared with
other health care providers throughout Massachusetts.
Hospital/System Market Share By Primary Service Area (FY07)
80%
74%
70%
61%
60%
52%
50%
42%
43%
40%
28%
30%
22%
20%
10%
10%
0%
South Coast
Cape Cod,
Umass,
(New
Cape &
Central Mass
Bedford/Fall
Islands
Children's,
Baystate,
Eastern Mass, Western Mass
Age <18
South Shore,
PHS, Eastern
Caritas,
Southeast
Mass
Eastern Mass
Expressway
River)
Source: FY07 MA Division of Healthcare Finance and Policy; Excludes MDC 15 (Newborns and Neonates )
20
Quality: Our Perspective
Geriatrics
Gynecology
Neurology/ Neurosurgery
Kidney Disease
Orthopedics
Otolaryngology
2
4
4
17
3
5
4
31
BWH
8
25
5
8
12
22
1
21
1
14
35
1
4
6
14
7
SRH
7
McLean
DFCI
4
5
MEEI
4
BIDMC
50
32
13
16
9
TUFTS
25
5
29
48
31
Baystate
39
40
BMC
25
43
Lahey
NE Baptist
23
Austen Riggs
15
• All Massachusetts hospitals ranked by US News in at least one adult specialty are listed in the table above. If a hospital is not listed, it was not
ranked in any adult specialty.
•
21
Rheumatology
Gastrointestinal Disorders
4
Rehabilitation
Endocrinology
7
Respiratory Disorders
Heart and Heart Surgery
5
Psychiatry
Cancer
MGH
Hospital
Ophthalmology
Honor Roll
Boston is the only city with 2 hospitals (BWH & MGH)
on the 2008 US News Top Ten List
US News uses a comprehensive and detailed methodology that is over 100 pages long.
20
Commitment to Mission: Our Perspective
Partners Commitment: Impact on Preserving
Health Services
Community Hospitals




Union Hospital in Lynn losing $2m/year (1997)
Faulkner Hospital losing $4m/year (1998)
Newton-Wellesley Hospital losing $21m/year (1998)
New emergency rooms at Newton-Wellesley, Salem, and Union
Hospitals
Mental Health Services
 McLean Hospital in Belmont losing $9.7m/year (1993)
 Added psychiatric beds at McLean, Faulkner, Newton-Wellesley,
North Shore Medical Center, and MGH
22
Premium increases are national – not uniquely local issues
Massachusetts 2005 Health Insurance
Compared to US Average
MA
US
Difference
MA Rank
out of 50*
Family Premium
$12,290
$11,381
8.0%
5th
Single Premium
$4,448
$4,118
8.0%
16th
• Premiums are not adjusted to reflect standard benefit packages.
• A portion of the premium differential reflects the impact of Massachusetts market
dynamics:
– State mandated benefits
– Less cost-shifting to employees than in other areas of the country
* Ranking of 1 indicates most expensive and 50 indicates least expensive.
Source: Agency for Healthcare Research and Quality, 2007.
23
Four New England states have higher premiums than
Massachusetts
2006 Family Health Insurance Premiums:
Massachusetts and New England States
$12,686
$12,416
$12,363
$12,290
$12,000
$11,934
$11,631
RI
VT
$10,000
$8,000
$6,000
$4,000
$2,000
$0
NH
CT
ME
Source: Agency for Healthcare Research and Quality. Medical Expenditure Panel Survey.
24
MA
Boston has a higher relative cost of living overall –
health care is not unique
The cost of living in Boston is 35% higher than the
national average. But health care insurance costs in
Massachusetts are only 8% above the national average.
175
162.3
150
138.4
135.6
118.7
125
106.1
108.0
Transportation
Health Insurance
Premium
100
75
50
25
0
Housing
Utilities
Grocery
Composite
Boston 2006 Cost of Living Index Relative to Other Communities
25
Source: Council for Community and Economic Research Cost of Living Index 2006 Q1
Relative cost of health insurance premium is based on AHRQ 2006 employer survey.
IV. Partners in the Suburban Market
26
Nationwide hospital outpatient visits have grown over the
past two decades
700,000
Inpatient Days
Outpatient Visits
600,000

500,000
400,000
300,000
200,000
Since 1986, hospital
outpatient visits have
increased by 156% while
inpatient days have declined
100,000
Source: AHA Annual Statistics
0
1986
1996
2006

Percent of Hospital Gross Revenue from
Outpatient Services
40%
38%
36%
33% 33%
34%
32%
34%
35% 35% 35% 35%
36%
37%
38%
31%
30%
Source: Avalere Health analysis of
American Hospital Association Annual
Survey data, 2006, for community
hospitals.
28%
26%
24%
22%
20%
1996
27
The proportion of hospital
outpatient revenue has been
increasing steadily in the
past decade
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Despite the growth in outpatient procedures, hospitals
are losing market share to free-standing and physiciansponsored outpatient facilities
Annual Volume Growth, Outpatient Procedures
2001-2003
All U.S. Procedures, Hospital Market Share
1981
2005
10%
5.8%
2.2%
56%
90%
Hospitals
Non-Hospitals
Hospitals
Source: The Advisory Board Company
28
Non-Hospitals
44%
Massachusetts has Experienced a Similar Growth in
Outpatient Procedures
Outpatient Visits
Inpatient Days
16000000
14000000
12000000
10000000
8000000
6000000
4000000
2000000
0
FY96
FY07
Percent of Hospital Net Revenue from Outpatient Services For
Massachusetts
55%
48.4%
50%
45%
43.6% 44.1% 44.6%
51.2% 51.1%
49.7% 50.9%
45.8% 46.1%
40.6%
40%
35%
30%
25%
20%
FY97
29
FY98
FY99
FY00
FY01
FY02
FY03
Source: Massachusetts 403 Cost Reports
FY04
FY05
FY06
FY07
Boston Globe
September 18, 2006
“The rising number of Massachusetts
residents with cancer will outstrip the
capacity of radiation treatment facilities
within four years, say public health officials,
who for the first time in 13 years are asking
hospitals that do not already offer such
therapy to build expensive new treatment
centers.”
“Treating these patients will require at least
eight additional multi-million-dollar radiation
facilities, and health officials in July
changed state regulations to allow more
hospitals to build such centers.”
30
Examples of Suburban Investments by Local AMCs
Partners
Children’s
BIDMC and
Affiliates
Lahey
Caritas
Dana Farber
Waltham
Waltham
Lexington
Peabody
Methuen
Milford
Danvers
Lexington
Needham
Lexington
Norwood
Weymouth
Foxboro
Peabody
Waltham
Arlington
Fall River
Londonderry,
NH
Weymouth
Brockton
Chestnut Hill Billerica
Milford
Winchester
Natick
Martha’s
Vineyard/
Nantucket
Beverly
Framingham Amesbury
Concord
Methuen
Chelsea
Beverly
Framingham
Medway
Essex
Weymouth
Marlborough Hamilton
Norwood
Eastham
Lawrence
Source: Hospital Websites
31
Truro
Brookline
Danvers
Ipswich
Examples of Suburban Investments by our National Competitors
Type of Facility
Partners
NY
Presby.
Baylor
Univ. of
Pitt
Medical
Center
Univ. of
Penn.
Health
System
Johns
Hopkins
Downtown
Hospitals
2
9
1
1
3
1
3
Community
Hospitals
5
15
5
13
--
8
--
Major Outpatient
Facilities*
4
2
2
38
5
16
4
Specialty
Hospitals and
Other Major
Facilities
4
1
3
--
1
2
--
Totals
(excludes
downtown
hospitals)
13
18
10
51
6
26
4
*Excludes hospital-licensed and affiliated community health centers
32
Cleveland
Clinic
Source: Hospital Websites
Community Hospitals Have Not Been
Negatively Impacted by Partners

Community Hospitals 2001-2007
–
–
–
33
Share of admissions has remained stable at
approximately 53%
Share of total net revenue has remained stable
at approximately 40%
Average operating margin increased from
negative 0.5% to positive 1.8%
V. Market Forces: 2009 - 2014?
34
Market Forces: 2009 - 2014?
 Quality Websites – Who referees quality?
 HMO’s as Health Care Organizations (vs. Insurance
Companies)
 Aging of Population – Baby Boomers
 National Health Care Reform
–
–
–
Federal Reserve
Single Payor
Global Payment
 Cost Pressures and Payment Reforms – State and
National
35
Transparency, the concept
 Provide the public
comprehensive cost and
quality information
 Consumers will make
“value” based choices
using this information
 A competitive marketplace
will develop where cost
effective, high quality
providers will be rewarded
with business growth
36
Transparency, the reality
Johns Hopkins: best in US, worst in Baltimore
2007
Ratings
Ranked #1 overall
•1st in the nation for urology,
gynecology, rheumatology and
ENT
•2nd in ophthalmology,
psychiatry, geriatrics and
neurology/ neurosurgery
•3rd in cancer
•4th in heart and heart surgery
No other Maryland hospital
made the top 20
37
2007
Ratings
• Did not make this list of America’s
50 best hospitals
•Did not earn a clinical excellence
award – 6 other Baltimore hospitals
did
•Only awards for specialty excellence
were for bariatric surgery and
pulmonary care
2008 Survey Results: Differences in behaviors and attitudes are
significant: the health care consumer market is not homogeneous
Copyright © 2009 Deloitte Development LLC.
38
Trusted source for treatment information: Medical societies and AMCs
rate highest – MA less trusting of governmental sources than US overall
Sources
39
US
MA
Medical associations/societies (e.g., American Medical Association,
American Cancer Society, etc.)
51
52
Academic medical centers/teaching hospitals
50
55
Community hospitals
31
26
U.S. Department of Health and Human Services
31
24
State Departments of Health and Human Services
28
19
Pharmacies
28
17
U.S. Food and Drug Administration (FDA)
27
21
Independent health-related websites (e.g. WebMD)
28
22
Independent health-related websites (e.g. WebMD)
26
24
Health insurance companies/health plans
13
13
Pharmaceutical, biotech, or medical device/product manufacturers
11
6
Employers (e.g. health benefits office)
10
7
Copyright © 2009 Deloitte Development LLC.
Hospital Selection: 1 of 3 consumers check insurance coverage before use;
2 of 3 discuss the hospital with their physician – less “shopping” in MA
Measures
US
MA
10
13
9
11
Checked to see if my insurance company/health plan covers the
treatment
33
26
Checked to see if the hospital accepts my insurance/health plan
34
24
None of the above
53
62
Asked a doctor/medical professional
64
52
Contacted my/a health insurance company, program, or health plan
41
29
Read a health – or disease-related blog
10
10
Looked or asked for information about a particular hospital
Compared hospitals before choosing one
Copyright © 2009 Deloitte Development LLC.
40
Hospital reputation: Insurance coverage, reputation matter –
perception of cost less relevant in MA
Measure
US
MA
Some people believe they get the same general quality of care no matter
which hospitals they use. Other believe there are great differences in the
quality of care provided by different hospitals (% see quality differences)
73
78
9
2
Affiliation with a medical school
20
20
Costs of services
41
25
Quality/satisfaction rankings
51
50
Overall reputation
64
64
Physician recommendation
64
67
Insurance coverage
74
76
Close to home
52
47
Affiliation with a religious organization
Copyright © 2009 Deloitte Development LLC.
41
Baby Boomers: Impact on Medicine
 Baby Boomers: 1946-1964
– 75 Million
 Consumer Attitudes – Entitlement
– Can do
– Skeptical of Authority
– Computer Literate
 Start Turning 65 in 2011 – but not 80 until 2026
 Expectations – Medicine is Omnipotent
42
Expecting a Miracle
“In the US, the baby-boom generation has
transformed every institution with which it
has come into contact. As this generation
ages and begins to have chronic disease,
we can expect healthcare to be next…”
- T. Lee, NEJM, 344, 26:2001
43
Baby Boomers Impact on Healthcare System
1. Children – 1980s
2. Parents – 1990s
3. Selves – 2025!
– Healthier lifestyle
– Health screenings and check-ups
– Web-based independent research
44
Lifestyle Habits: Impact on Long Term Health
Greatest Generation – WWII
Smokers
Whiskey
Couch Potatoes
Steak and Eggs
Steak and Potatoes
Coke
Aspirin – Headache
“If it get’s really bad, I’ll
call the doctor”
Dr. Spock
45
Baby Boomers
Non-smokers
Wine
Runners
Yogurt
Chicken Stir-fry
Bottled Water
Aspirin – every other day
Annual check-ups and regular
screening
WebMD
Baby Boomers’ Impact on Medicine:
Two Crystal Balls
More of the Same
More beds
More Surgery
65 is trigger
80 is big trigger
Population is driver
Less of the Same
More monitoring devices –
blood pressure, heart rate,
oxygen saturation
More drugs and devices
65 is 50
80 is 65
Innovation is driver: statins,
genetic based therapy
More families providing financial
support for healthy 90 year old
patients
46
Appendix
47
Related Readings
 Harvard Business School Cases
– Partners HealthCare System, Inc. (A) – April 18, 1996
– Partners HealthCare System, Inc. (B): Cardiac Care
Improvement – June 6, 2001
 Available at Partners website: Graduate Medical
Education Centers for Expertise
– http://www.partners.org/gme/coe/coe_health-care-mgt.html
48
Massachusetts Health Care Reform
49
National News
“Massachusetts Sets Health Plan for Nearly All”
New York Times, April 5, 2006
“Massachusetts Bill Requires Health Coverage”
Washington Post, April 5, 2006
“Massachusetts Seeks to Mandate Health Coverage”
Wall Street Journal, April 5, 2006
50
Goals of Health Care Reform
Coverage
Reimbursement
 Expand Medicaid  Invest $270 million
outreach and
over 3 years - $90
eligibility
million per year
(approximately $45
 Create incentives
million in state cost)
that encourage
businesses to
 Medicaid and
provide for their
uncompensated care
employees
pool reforms
 Protect the
 Adequate annual
safety net
inflation adjustment
 Create affordable
products
51
Quality and Cost Management
 Focus on making the delivery of care
more reliable
 Improve disease management
 Incentives for providers that promote
efficient, high quality care
 Manage chronic medical conditions
 Medicaid managed care
 Invest in information technology
 Right care, right place
 Pay for performance
Health Care Reform
 Chapter 58 included $90M per year for three years for
the express purpose of closing the gap between
Medicaid payments and the cost of providing care to
Medicaid patients – estimated at 20¢ on the dollar
– Chapter 58 allocated the new funds as follows:
o 15% for physician rates
o 85% for acute hospital rates
 This gap had grown over the past decade as payments
to acute hospitals failed to keep up with inflation
– Some hospitals had been protected due to special
circumstances that warranted higher payment rates
52
Increase in Insurance Coverage: June 2006 – March 2008
500,000
Total: 439,000
450,000
Total: 369,000
400,000
176,000
350,000
300,000
158,000
Total: 206,000
250,000
72,000
200,000
150,000
100,000
50,000
0
-50,000
Total: 116,000
80,000
32,000
25,000
27,000
18,000
36,000
104,000
64,000
-1,000
December 2006
Private Group
-4,000
June 2007
Individual Purchase
Source: DHCFP Key Indicators Report, August 2008
53
55,000
159,000
131,000
December 2007
MassHealth
March 2008
Commonwealth Care
Statewide Progress on Reimbursement Gap
95
90
85
80
75
FY07
FY08*
Estimated Reimbursement Percentage
*Projected
54
FY09*
Remaining Gap
Community Benefits
55
Community Benefits vs. Tax Exempt Status
Assertion:
 Harvard Professor Nancy Kane asserts that tax
exempt status is worth 8.5% of operating revenue.
 Partners only provides 2.3% according to 2009
guidelines issued by the Massachusetts Attorney
General.
Response:
 Partners spent $151 million in community benefits last
year.
 According to the information that the IRS will collect
(new schedule H in 2010) we arguably provide up to
12.3% in Community Benefits.
(The major difference between AG and IRS is whether you can
count losses in Medicare and Medicaid)
56
Variation About What to Report and Count
American
Hospital
Association
Catholic
Hospital
Association
IRS *
(2010)
Mass.
AG
Partners’
Broader
Definition
Charity Care





Bad Debt

--

--

Medicaid Loss



--

Medicare Loss

--

--

Unreimbursed
GME



--

Program Expense





Grants Managed





Linkage/PILOT
--
--
--
--

Volunteerism
?
?


--
Research
--
--

--
--
NA
NA
NA


7
5
8
5
9
DON Community
Commitment
(Mass. only)
TOTAL
Note: *Items to be reported on the IRS Schedule H in FY2010.
57
Detailed List of Reporting Categories
Category
AG
IRS
Community Benefit Program Expenses
$16.7
$16.7
Health Center Losses
$41.9
$21.6*
Grants for Community Health Centers
$6.9
$6.9
Determination of Need Commitments
$4.8
$4.8
Grants Managed
$5.9
$5.9
Doctors Free Care
$16.3
$16.3
Net Hospital Charity Care
$57.9
$81.8**
Bad Debt
not included
$45.2
Medicaid Loss (hospitals and doctors)
not included
$143.6
Medicare Loss (hospitals and doctors)
not included
$330.1
Unreimbursed Graduate Medical
Education
not included
$8.1
$0.9
$0.9
Linkage/In Lieu/Taxes
not included
not
included
Research
not included
$135.0
$151.3 M
$816.9 M
Contributions for Charities
Total
*Does not include Medicare and Medicaid losses.
58
**This number is actual costs for net hospital charity care, whereas the AG requires hospitals to report estimates provided
by the state’s Division of Health Care Finance and Policy.
Partners Community Commitments, 2007
Potential Benchmarks
$817 M
$800
$700
Other $57 M
1
IRS Schedule H Form
(Starting in FY2010)
Research Losses
$135 M
$600
Kane 19962
(8.4% of operating revenue)
$500
$400
$300
Medicare Losses
$330 M
Medicaid Losses
$144 M
$200
AG Upper Suggestion
(6% of patient-care related expenses)
$100
AG Com. Bene.
$151 M
AG Lower Suggestion
(3% of patient-care related expenses)
$0
Note:
1. Other includes bad debt, PILOT payments, and unreimbursed GME. Also adjustments were made to eliminate any double counting.
2. Kuttner, R., “Columbia/HCA and The Resurgence of the For-profit Hospital Business,” NEJM, August 1, 1996
59
Partners’ Public Payer Losses are Increasing
Medicare and Medicaid Losses
($$ in millions)
FY96
-$28
FY97
-$30
FY98
-$26
FY99
-$54
FY00
-$59
FY01
-$63
FY02
-$89
FY03
-$113
FY04
FY05
FY06
-$107 -$124 -$134
FY07
-$144
FY08
-$146
-$227
-$330
-$401
Medicaid Medicare
Note: Medicare Losses Not Available for FY96 – FY05
60
Public Payer Losses are Significant for Partners
Number of Discharges Covered by Public Payers
35,000
30,000
25,000
20,000
15,000
10,000
5,000
Medicare
Fa
ul
kn
er
H
W
N
t.
Au
bu
rn
Medicaid/Free Care/Commonwealth Care
Source: MA DHCFP 403 Cost Reports, FY2007
61
M
Total Cost per Adjusted CMAD
Tu
fts
La
he
y
S.
Sh
or
e
St
.E
's
st
N
or
th
ea
C
SM
N
BI
D
M
C
C
BM
H
BW
M
G
H
0
Other Govt.
Without Health Reform, Partners’ Public Payer Losses
Would Be Higher
FY04
FY05
($117)
($115)
FY06
FY07
FY08
FY09*
($263)
($267)
$0
-$50
($160)
Dollars in Millions
-$100
-$150
($229)
($87)
($88)
-$200
($98)
-$250
($99)
-$300
($92)
($11)
-$350
-$400
($105)
($14)
Medicare
Medicaid
Additional Medicaid Losses without Health Reform
Note:
This chart includes public payer losses for only BWH, FH, MGH, NSMC, and NWH. It does not include total public payer losses across the entire
Partners system.
* FY 09 projection based on first quarter results. Not seasonally adjusted. Incorporates estimated impact of Medicaid “9C” cuts effective in
December 2008.
62
Partners’ Community Benefit Spending Exceeds Others
FY07 Community Benefit Spending According to AG Guidelines
($$ in millions)
$151
$81
$50
$48
$22
Source: Mass. AG Website
63
$7
$6
t.
A
ub
ur
n
$9
M
$10
sh
ire
Be
rk
Tu
fts
Ba
ys
ta
te
C
BI
DM
C
BM
H
Ch
ild
re
n'
s
M
BW
em
or
ia
l
G
H
M
as
s
Um
PH
S
To
ta
l
$13
La
he
y
$25
E
$33
St
.
$35
A Comparison of Hospital Community Benefit Spending
as a Percent of Patient-Care Related Expenses
FY07 Community Benefit Spending According to AG Guidelines
as a Percent of Patient-Care Related Expenses
5.6%
5.6%
5.2%
3.9%
M
2.6%
Tu
fts
2.7%
t.
Au
bu
rn
2.8%
's
3.0%
St
.E
C
M
Source: Mass. AG Website
64
3.2%
BI
D
Ba
ys
ta
te
Be
rk
sh
ire
H
BW
ta
l
To
PH
S
hi
ld
re
n'
s
H
G
M
C
U
m
as
s
3.5%
C
4.0%
BM
4.3%
Partners Direct Community Benefit Spending has more
than Doubled Since 1996
Average Annual Percent Change = 13%
Dollars in Millions
100
75
50
25
0
FY96
FY97
FY98
FY99
FY00
FY02
FY03
FY04
FY05
Health Center Losses
Health Center Grants
Community Benefit Programs
DoN Spending
Note:
Analysis includes hospitals as they were acquired
65
FY01
FY06
FY07
More than $65 M in Capital Commitments

66
Boston Healthcare for the Homeless

Lynn Community Health Center



Renovation
Market Square & Western Ave. Sites
Eye Clinic

American Cancer Society Hope Lodge

Charlestown Recovery House


Harbor Health Services
 (Neponset Health Center &
Geiger-Gibson Health Center)

South End Community Health
Center
Whittier Street

Revere Health Center

Charlestown Health Center

Brookside Health Center

Southern Jamaica Plain Health
Center

North End Community Health Center

Codman Square Health Center

Upham’s Corner Health Center

Dorchester House Health Center
Partners PILOT Payments Totaled $3.6 M in 2007;
Over 80% of Payments Made by Medical Institutions
 MGH paid $2 M
 BWH paid $1 M
 BIDMC paid $167 K
*
* Massport is a state authority, not a 501 (c) 3
Source: Boston Municipal Research Bureau
67
Partners Ranked as the 5th Largest Corporate
Charitable Contributor
Other Rankings:
#17 BIDMC
#32 Tufts Medical Ctr.
Source:
Boston Business Journal,
Book of Lists, 2009
68
Gall Bladder vs. Gall Bladder
69
Gall Bladder vs. Gall Bladder
MGH and BWH Costs are Higher Compared to their Local
Competitors (All Payers)
$7,000
37
,6 4
$
18
,1
6
$
15
,0
6
$
81
,5 8
$
$6,000
63
,1
5
$
$5,000
19
,4
4
$
$4,000
$3,000
$2,000
$1,000
$0
BWH
MGH
St. E's
BMC
T ufts
BIDMC
Sources: MA DHCFP 2006 403 Cost Reports (cost and discharge data from Schedules 18 and Schedule 3). CMI calculated with Partners MDW
APDRGv21 discharge volume and internal AP21 weights.
70
Partners 2006 Hospital Costs Remain Below the U.S.
News and World Report Honor Roll Median
Case Mix and Wage Adjusted Medicare Inpatient Cost Per Case
$13,000
$12,000
$11,000
$10,000
Median = $8,554
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
71
Cl
in
ic
C
Cl
ev
PM
U
uk
e
D
n
Pe
n
Y
al
eN
Y
ne
s
Ba
r
ay
o
M
H
G
M
H
BW
hi
ng
to
n
go
Source: Analysis of PPS-23 (2006) Medicare Cost Report data.
W
as
Ch
ic
a
N
Y
-P
re
s
n
ic
hi
ga
M
CS
F
U
CL
A
U
fo
rd
St
an
op
ki
ns
H
Ce
d
ar
s
$0
Why do MGH and BWH Have Higher Prices?





72
Higher Costs
 Standby Capacity
 Teaching Intensity
 Patient Severity
 Research Intensity
Need to cover reimbursement shortfalls from Medicaid (81¢) and Medicare (92¢)
Quality
Commitment to areas that chronically lose money
 Psychiatry
 Obstetrics
 Community health centers
 Non acute care (e.g., rehabilitation)
 Pediatrics
 Primary Care
Investments to create a integrated delivery system
 Electronic medical records, disease management, etc.
 Commitment to developing new medical techniques and technology
All Teaching Hospitals Have Higher Costs Due to their
Broad Mission and Complex Patients
Cost Per Case
$9,000
$8,000
$2,360
$7,000
$6,000
$674
$2,214
$5,000
$1,389
$260
$985
$3,984
$3,993
$4,000
$3,000
$3,974
$2,000
$1,000
$0
Academic Health Center
Base
Wages and Case Mix
Other Teaching
Other Urban Community Hospital
Multiple Mission (Research, Standby Capacity, Teaching)
Chart based on Koenig et al., “Estimating the Mission-Related Costs of Teaching Hospitals,” Health Affairs, no.6 (2003): 112-122.
73
Standby capacity is the largest single component of teaching
hospitals mission-related costs
Mission-Related Costs of Teaching Hospitals
 Standby capacity is
the capacity to
provide hightechnology or
intensive services
whose availability is
essential to the
healthcare system
Indirect medical
education
26%
Wage and Case
Mix
37%
Research
8%
Standby capacity
29%
Chart based on Koenig et al., “Estimating the Mission-Related Costs of Teaching Hospitals,” Health Affairs, no.6 (2003): 112-122.
74
Not all Teaching Hospitals Are the SameBWH and MGH Have Greater Standby Capacity
than their Peers
“Cost” of
Gall Bladder
Removal1
Level I
Trauma
(Adult)
Number of
ICU beds
Adult Burn
Unit
Separate
Psych ED
Pediatric
MGH
$10,600

156



BWH
$10,100

132

--
--
BIDMC
$9,700

93
--
--
--
NEMC
Not
available
--
73
--
--


77
--

--
Hospital
BMC
Not
available
Notes:
75
1. Median costs are from the Massachusetts Health Care Quality and Cost Council website
ICU
Community Hospitals Rely on MGH and BWH to be Available to Treat
their Sickest and Most Complex Patients
 Transfer-in patients are patients transferred to MGH and
BWH from other facilities.
 Transfer-in patients make up 12-13 percent of patients at
BWH and MGH.
 Transfer-in patients are sicker and more medically
complex than other patients.
 They account for 41-43% of all deaths.
 The raw unadjusted mortality rate for transfer-in
patients is 5 times higher than the non-transfer group.
76
Additional Suburban Expansion Slides
77
Newton-Wellesley Ambulatory Surgical Center
Framingham, MA
 Helps prevent the situation that occurred at Union Hospital
– At Union, a private group of orthopedic surgeons created their
own outpatient facility after NSMC declined to create one. As a
result, the non-profit community hospital lost a major revenue
source that subsidized less profitable services including
psychiatry and emergency services. A similar situation might
have occurred had we not pursued a new center in cooperation
with the physicians.
 Over the past 2 years, complex joint cases and gastric bypass cases
have increased by 10-14 percent at Newton-Wellesley.
 Newton-Wellesley’s main campus lacks the necessary space to
safely accommodate the increases in surgery and GI cases.
78
Mass General/North Shore Outpatient Center
Danvers, MA
 NSMC functions as a safety net hospital for the region.
 Since 2003, the hospital has lost $56 million on treating lowincome patients covered under public programs.
 NSMC depends on Partners subsidies in order to continue its
role as a safety net hospital
 The project was suggested by NSMC and builds on the long history
of NSMC/MGH tertiary-care collaborations.
 More than 40 percent of the facility will be used to relocate existing
services from the NSMC Cancer Center, which has outgrown its
current space in Peabody.
79
Cancer Center at Milford Regional Medical Center
Milford, MA
 Milford Regional Medical Center and its physicians
invited Partners to collaborate on its cancer center in
cooperation with the Dana Farber Cancer Institute.
 Partners only provides physician services at the
cancer center.
80
Patriot Place, Foxboro, MA
 A rare clinical opportunity
 About 30,000-40,000 current BWH patients live in the Foxboro area.
 Population growth in Foxboro and the surrounding region is expected
to outpace the growth in other parts of Eastern Massachusetts.
 Between 2006 to 2016 the Foxboro market is projected to grow by
10.3%, compared to 4.7% for Eastern Massachusetts.
 The site will include a Partners’ medical home project.
 Sturdy Memorial, a local community hospital in the region, has a
strong financial performance.
 For FY2007 it had an total margin of 14.74%, compared to the
median margin for the state of 2.99%.
81
Cancer Center at South Shore Hospital
Weymouth, MA
 South Shore Hospital decided to build a cancer center
and invited Partners and Dana Farber Cancer Institute to
participate.
 The Cancer Center builds on the existing relationship
between Brigham and Women’s Hospital and South
Shore Hospital
– Brigham and Women’s Hospital has provided
OB/GYN, cardiac care and other clinical services in
the past to South Shore Hospital.
82
Operating Assumptions - Compared
 Mergers of Teaching Hospitals in Boston, New York and
Northern California
 Prof. John Kastor, M.D. – former chair of Medicine at
University of Maryland and Chief of Medical Services at
the University of Maryland Hospital
Case Studies: Boston
New York
Year:
83
No. California
1999
Partners (BWH & MGH)
New York (Cornell) and
Presbyterian (Columbia)
UCSF and Stanford
Dimensions – At similar state of development
Boston1
New York
California
Budget
$1.8B
$1.6B
$1.5B
Employees2
16,000
14,000
12,000
Inpatient
Discharges
88,000
90,000
60,000
Doctors
5000
6000
2000
Market Share
13%
22%
30%
Unions
BWH
Presbyterian
UCSF
March 2004
June 1996
November 1996
Date of Merger
84
1Includes
BWH and MGH only
2Different
methods for counting research and physician practice staff
Scorecard I
Boston
New York
California
Parent Co.
Full Asset
Full Asset
System Board
System Board
Univ. Caucus
CEO
CEO
Universities
Positive
Break-even
Losses
Yes
No
No
Modest
Modest
Failed
BWH & MGH
NY Presbyterian
Hospital
UCSF-Stanford
Health Care
Management
Strong
Strong
Mixed
Leadership Transition
Smooth
OK
Hunter
Clinical Programs
Service Lines
Service Lines
Incomplete
Education Support
Joint Programs
OK
Cut
Governance
Boards
Roles of University &
System
Finances
Comprehensive Mgd.
Care Contracting
Allegiance Transfer
Effort
Brand
85
Inherited
One Medical School
One University
Independence from Medical
School
Independence from
University
Founders’ budgets breaking
even
86
Selected Strategy
Parent Company
Board Composition
Finances
Comprehensive contracting
Modest allegiance transfer
Brand
Management
Leadership Transition
HQ
Clinical Programs
Education Support
Anthropology – Choices we made
Managed Locally
Brand
Workplace
Hospital Operations
Operating Budget
Tradeoffs
Clinical
Boards
Management Transition
Space
Planning
Marketing
Research
Education
87
Managed Centrally
Financial Framework –
• Margin Targets
• Capital Allocations
IS
Legal
Contract Negotiations
Materials
Real Estate
Local Comparisons
Partners
PCHI
BWH and MGH
Physician Focus; No TV
Ads
Existing Satellites
Moderate Debt
Stable Leadership:
• Nesson, Thier
• Mongan
• Otten, Gottlieb
88
CareGroup
Community Hospitals
BID
Consumer Focus: TV Ads
New Satellites
Significant Debt
Changing Leadership
• Rabkin, Reinertsen, CFO
and GC
• Kressel, Rosenblatt,
Melzer, Levy
Operating Assumptions – Kastor’s Criteria
 Structure
– Governance
– Boards
– Roles of University vs. Hospital CEO
 Finance
– Budget Balance
– Comprehensive Managed Care Contracting
 Culture
–
–
–
–
Allegiance Transfer
Leadership Transition
Brand
Management
 Program
– Clinical Program Integration
– Education Support
89
Scorecard II
Boston
New York
California
Governance
+
_
_
Boards
+
+
_
Roles of University &
System
+
+
_
Finances
+
+
_
Comprehensive Mgd.
Care Contracting
+
+
_
Allegiance Transfer
Effort
+
+
_
Brand
+
_
+
Management
+
+
_
Leadership Transition
+
+
_
Incomplete
+
Incomplete
+
Incomplete
_
Clinical Programs
Education Support
90
Key Factors
Boston
New York
California
Parent Company Model
Business People on the
Boards
Losses - $1M per
week
Preserve MGH and BWH Brands
and organization
Reasonable leadership
transition
University role in
Boards
Smooth leadership transition
Clinical Consolidation
Cost of Merger
One medical school; One
University
Failure of Columbia Cornell Care
UCSF public
processes
Independence from university
Break-even budget
UCSF Pension
subsidy
Break-even budget
Comprehensive Contracting
Faculty Practice Plan in
Hospital
91
Mt. Zion losses
Management: Operating Choices
 GM vs. Microsoft: Practical
 Coke vs. Pepsi: Flexible
 Physicians vs. Hospitals: Physician-driven
 Service vs. T.V. Ads: Mission-driven
92
Coke vs. Pepsi
 Patriot’s Day
 What made them great
 Consistency is not necessary for greatness
 Tom Peters: Wang, Data General, Digital vs. MGH and
BWH on responding to change
 Respect organizational cultures
93
Systems Experience
Rational
=
ƒ(economics)
vs.
Success = ƒ(economics and
anthropology)
94
Environmental Challenge in 1993
 Emerging analysis primacy of primary care
 Development of integrated delivery systems
 Overcapacity in Boston hospitals
 Changing care patterns (more outpatient)
 Uncertainty of research and teaching funding
 Expected strong growth in HMO enrolled population:
(27% in 1990 in MA vs. projected 52% in 2000)
 Greater marketplace emphasis on cost relative to quality,
choice, and reputation
95
Cost: Our Perspective
Unit costs at Partners have remained flat.
Avg % Annual Growth
FY98-FY08 Feb YTD
5.1%
Avg % Annual Growth - Infl Adj
FY98-FY08 Feb YTD
96
-0.3%
Total Cost per Adjusted CMAD
Year to Year Trend
(including inflation adjustment*)
*Bureau of Labor Statistics, CPI for Medical Care, MA-NH-ME- CT
MGH and BWH only
MA Ranked 31st out of 40 States for Average Annual
Growth In Family Premiums 1997- 2004
Average Annual Growth
In Family Premiums 1997 - 2004
12.0%
MA = 8.9%
10.0%
8.0%
6.0%
4.0%
2.0%
97
UT
AZ
NY
CT
A
M
NJ
G
A
AR
RI
CA
O
K
KY
VA
I
PA
M
IN
S
M
N
M
TN
M
E
0.0%
Source: Agency for Health Care Quality and Research Medical Expenditure Panel Survey. Note: Data only
reported for 40 states in 1997