Eight Boston teaching hospitals, Blue Cross and Blue Shield of Massachusetts, and the state's largest HMO have formed a collective to infuse capital into the healthcare centers serving the city's poorer neighborhoods.
A commitment of $13.7 million in loan guarantees will be used as backing for loans to rebuild and upgrade the largely independent network of health centers.
The 25 centers could carry the primary-care burden in the city's most needy areas under healthcare reform, but they're not creditworthy or capitalized enough to get in shape for such demands. That was the centers' self-assessment as contained in a report they prepared for the Conference of Boston Teaching Hospitals on the most pressing needs for the hospitals to tackle in the neighborhoods.
The loan pool and a loan-decision structure represent a year's worth of negotiations among hospitals in the conference to determine the best way to work more closely with the health centers, said J. Richard Gaintner, M.D., the group's chairman and New England Deaconess Hospital's president and chief executive officer.
The goals were ironed out early, but details of how to set up the fund took most of the time, Dr. Gaintner said. The group created an oversight agency, the Community Health Center Capital Fund, to make independent decisions on how to lend the money pledged by the participating institutions, he said.
The pledges would be "the equivalent of letters of credit that would stand behind the loans," which would be floated by the Massachusetts Health and Educational Facilities Authority.
Pledging $1.5 million each were Beth Israel Hospital, Boston University Medical Center, Brigham and Women's Hospital, Children's Hospital, Deaconess, New England Medical Center, and Massachusetts General Hospital. The Massachusetts Eye and Ear Infirmary pledged $200,000. Harvard Community Health Plan, a 550,000-enrollee HMO based in Brookline, and the Massachusetts Blues also contributed $1.5 million each.
The lending coalition is looking for more pledges from businesses and charitable foundations "now that it's clearly credible to do this" as a way of mobilizing financial support, Dr. Gaintner said.
But loan guarantees alone won't be enough. "It's a step in the right direction but not a solution," he said. "Some centers will not be in a position to pay back the loans" and will need outright grants.
Of the city's health centers, 14 are independently licensed and four are licensed by publicly supported Boston City Hospital. Seven are affiliated with individual Boston teaching hospitals.
A recent report for Boston's new mayor, Thomas Menino, said operating margins at freestanding centers have been dropping but are the primary source of funds for investment in plants and equipment.
The report recommended that the centers pursue consolidations that would elevate the size of their operations to at least 100,000 visits a year. The current independence of centers limits their ability to raise capital as well as recruit physicians and negotiate with health plans and hospitals, the report said.
There's also not enough loan capacity in the Community Health Center Capital Fund for all of the centers, and Dr. Gaintner acknowledged there would be tough choices ahead for the fund's board.
Though the choices will result in support for some centers and not others, "there's certainly no attempt on the part of the teaching hospitals to pick the winners and losers" in the neighborhoods, he said.
The health-center initiative is one of several community-assistance projects that the teaching-hospital group is formulating, but there's no connection between that and a report critical of the teaching hospitals issued a year ago by the city's Department of Health and Hospitals, said the group's director, Julie Rosen.
The report criticized the teaching hospitals for building up cash surpluses instead of plowing income back into charitable services (May 17, 1993, p. 8).