Health network shifts costs, care
By Robert Weisman, Globe Staff | August 31, 2009
With economic pressures on Massachusetts hospitals starting to ease, the strongest recovery may be taking place at an organization that was one of the weakest financially: Caritas Christi Health Care.
By aggressively cutting costs and boosting revenue from medical care, the Boston-based Catholic hospital chain is on track to post operating income of $31.1 million for the fiscal year ending Sept. 30, compared to a $20.4 million loss last year.
The anticipated swing of more than $50 million has been achieved through a series of moves, Caritas officials said. The chain consolidated operations at its six Eastern Massachusetts hospitals, cut jobs and froze salaries, negotiated higher reimbursement rates from insurers, and recruited more specialists to perform more complex – and profitable – procedures. A new urology group, for instance, has performed hundreds of prostate operations this year.
“We literally dismantled and reengineered everything to be more efficient,’’ said chief executive Ralph de la Torre, who was hired in April 2008 to run the state’s second-largest hospital group, which includes St. Elizabeth’s Medical Center in Brighton and Caritas Carney Hospital in Dorchester.
Two years ago, Caritas’s weak financial condition led to the collapse of a tentative deal for it to be acquired by Ascension Health of St. Louis. Other health care providers also have been struggling because of the slumping economy, which caused a drop in the number of admissions and elective surgeries and battered investment income.
Partners HealthCare, the state’s largest health care system, had an $18 million deficit through the first nine months of its fiscal year, largely because of a hit to its investment portfolio. But with the economy strengthening, Partners believes it might be able to avoid the first annual loss in the company’s 15-year history. Beth Israel Deaconess Medical Center in Boston, which had been on track to lose $20 million this year, now hopes to break even after cutting costs and consolidating research operations.
Caritas Christi executives said the system has stabilized its finances by becoming more efficient, citing moves including bulk purchasing and inventory tracking, more effective billing, and renegotiated rates with Blue Cross and Blue Shield of Massachusetts and other health plans. Over the past year, Caritas has hired more than 75 primary care physicians and specialists to perform “high-value’’ care, which can be billed at higher rates. At the same time, it has eliminated 200 jobs – including doctors, nurses, and administrators – frozen salaries, and trimmed retirement benefits.
“We drove a lot of costs out of the system,’’ said James J. Karam, chairman of the Caritas board of governors. “It creates a lot of pain initially, but now the hospitals are starting to see the results.’’
In spearheading the turnaround, de la Torre drew on his background as a cardiac surgeon and an engineer trained at the Massachusetts Institute of Technology. “It was a marriage of health care leadership and industrial engineering,’’ said Marc A. Bard, managing director of Navigant Consulting in Needham.
Bard said de la Torre, who came to Caritas from Beth Israel Deaconess Medical Center, has assembled a management team that makes decisions in the interest of the organization rather than individual hospitals. Four of the six hospital presidents are newly installed, as are seven of nine other employees who report directly to de la Torre.
“Historically, they operated like a holding company, a group of independent hospitals without a cohesive strategy,’’ said Bard, who has worked with the Caritas physicians group.
But the chain has experienced some setbacks and embarrassments in recent months.
It abruptly ended a joint venture with a Missouri-based insurer at the insistence of Cardinal Sean P. O’Malley, who feared the relationship would entangle Catholic hospitals with abortion providers.
The former president of Caritas-owned St. Anne’s Hospital in Fall River filed a lawsuit accusing the system of retaliating against him after he voiced support for a colleague’s discrimination complaint.
And a senior vice president hired by de la Torre stepped down after Mount Auburn Hospital in Cambridge complained about a threatening voice mail message the Caritas official had left for a Mount Auburn recruiter.
But even executives at Boston’s prestigious teaching hospitals acknowledge Caritas has made strides in improving its operations and finances during de la Torre’s short tenure.
“Ralph’s done about three years’ worth of bold ideas in one year,’’ said Thomas P. Glynn, chief operating officer at Partners HealthCare, which runs Massachusetts General Hospital and Brigham and Women’s Hospital. “He hasn’t gotten where he is by tinkering.’’ Glynn said he has met several times with de la Torre over the past year to compare notes about managing hospitals in a tough economy.
Unlike some other hospitals, which have resisted union organizing efforts, Caritas signed an agreement with the Service Employees International Union to permit “free and fair’’ elections. Groups of employees at St. Elizabeth’s and Caritas Carney subsequently voted to join the union. Although the labor contracts are likely to boost expenses, de la Torre said he is sympathetic to workers who live in the same communities Caritas hospitals serve.
Higher labor costs as a result of unionizing will be offset by more than $30 million in annual cost savings, said chief financial officer Mark Rich, including by having groups of specialists treat patients at more than one hospital, and by merging physicians’ administrative functions. “There’s no one silver bullet,’’ Rich said.
Caritas also has taken steps to boost quality standards for medical care. Its hospitals are focusing on “best practices,’’ such as hourly checks on patients at St. Anne’s, said chief medical officer Justine M. Carr. She said, “If we see one hospital that’s doing something exceptionally well, we spotlight what they’re doing and share it with the others.’’
Robert Weisman can be reached at weisman@globe.com.
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