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March 07, 2008

Caritas Christi: the Massachusetts AG releases a report with recommendations for the system's future

Last November, Massachusetts Attorney General Martha Coakley announced that her office had engaged an out-of-town consultant to review the performance and structure of the Caritas Christi Health Care System and offer some recommendations.  One of the options on the table at the time for Carney Hospital -- one of the Caritas facilities -- looked good to me: convert the struggling inpatient facility to non-acute/outpatient uses.  You can read more about the history and these observations here.

Yesterday, Coakley's office put out a press release announcing the consultant's report and distributing a letter signed by Coakley announcing the following key recommendations, among others:

  • Diocesan leadership should relinquish control over strategic, operational, and financial matters to the independent Board of Governors.  Diocesan leadership should retain influence only over matters of religious direction.
  • Services at Caritas Carney Hospital in Dorchester should be based on current community need, not historical service lines.  Carney should consider further developing, as well as expanding, services such as behavioral and ambulatory health, for which there may be a need in the community Carney serves.
  • St. Elizabeth’s Medical Center in Brighton should continue its realignment as a community teaching hospital, with a concentration on two or three major service lines.
  • The Caritas Physician Network, which had an operating loss of nearly $30 million in FY 2007, should evaluate all physician contracts and compensation arrangements in comparison to industry medians and implement a new compensation structure for employed physicians, with greater emphasis on physician productivity.

An interesting point made by Coakley's office is that the Caritas system is an important counterweight to other health care systems in the Boston area, and needs to stick around in order to maintain some measure of competition in the marketplace.  This raises a series of questions for me:  Whose interests is she protecting here?  The not-for-profit Caritas?  (That's officially why she got involved in the first place.)  The mostly not-for-profit health care insurers of Massachusetts?  Ultimate premium payors, be they individuals or employers?  The "market?"  Can the AG protect a struggling not-for-profit, with her public charities hat on, and the health care market, with her antitrust regulator's hat on, at the same time?

I'll leave that philosophical question hanging, and get back to some of the specifics here.   

The system's troubles have led to its operating margin hovering below 1% for about a decade; it is generally accepted that an operating margin of at least 3% (and probably more) is necessary to generate sufficient funds to cover basic capital improvements, etc., over time.

A structural issue that has contributed to the system's troubles is the command-and-control issue: tight control of the system by the archdiocese. So tight that it probably led to an offer made to a would-be new system CEO being declined.  Caritas is already working on structural changes in the form of bylaws revisions that have been working their way through AG and archdiocesan approval processes.  We'll see how this shakes out.

One key recommendation is the point about St. E's -- it has no business trying to be a tertiary/quaternary care hospital in a hospital town like Boston, and the resources diverted from other parts of the system, and the attempted alignment of other system resources as feeders, resulted in a whole lot of disaffected folks in other parts of the system, and really never got St. E's to where Caritas wanted it to go.  Revamping St. E's plans -- as well as realigning Carney's plans with the needs of its local community (e.g., focusing on behavioral health and other underserved needs, and not necessarily trying to maintain a full-service acute care hospital) -- may help bring the system around.  Caritas leadership says changes at St. E's are already under way -- though the Boston Globe's coverage of the AG's consultant's report and Caritas reaction notes that occupancy and financial improvements have yet to follow.  The Globe story also notes that local pols are still not convinced that Carney should be repurposed as a non-acute facility.

A real key to success will be the rebuilding of the physician network in a sensible fashion.  It has lost money and personnel as Caritas has foundered, and it will play a central role in any recovery of the system as a whole.

The lessons here are not unique to Caritas.  Any system needs to be sensitive to its marketplace, to its component hospitals and physicians, and to the reimbursement environment.  Juggling these issues and others is never easy, and this report should serve as a wake-up call not only to Caritas, but to any system.  These influences are constantly shifting, and just because a health care system has found the right balance for the moment does not ensure that it will remain in balance for the foreseeable future.

-- David Harlow


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Greater Boston's Caritas Christi Health System has had a rough couple of years -- fiscal difficulties at some of its hospitals and with its physician network, troubles with a former CEO, several failed attempts to sell itself to larger Catholic [Read More]


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