In the early 1990s, management of Brigham and Women's Hospital in Boston called together its physician and clinical support staff for what was then a revolutionary idea: to scrutinize how they used hospital resources to treat and cure patients.
Using an internally developed information system as an engine for analysis, Brigham organized interdisciplinary "care improvement teams" to focus on diseases that either were costly to treat or were prevalent in the Boston area, said Jeffrey Otten, chief executive officer of the teaching hospital.
Those 20 or so improvement efforts have been in place now for five years. More important, their results are credited with keeping the hospital's mortality and complication rates low while engineering productive and profitable operations in a market approaching 50% managed-care penetration.
The steady performance of the tertiary-care center is reflected in its marquee position as the only facility to make the HCIA/Mercer list of benchmark hospitals four years running. "They've really made a very big place very nimble," said Michael Blaszyk, senior principal in the Boston office of Mercer's healthcare consulting practice.
On most of the measures devised by Mercer/HCIA to judge performance, Brigham virtually mirrored the benchmark created by the 15 top-performing major teaching hospitals: a length of stay of five days, expenses of $5,030 per adjusted discharge, 26% of its patient revenues derived from outpatient sources, and a complication rate just under 1.
For both complication and mortality rates, the index used in the measures assigns a value of 1.0 to the level of complications or mortality expected given pre-existing patient conditions. An index of less than 1 represents the degree to which a hospital had fewer complications or deaths than expected. In other words, the lower the better.
Brigham's record on complications means it prevented more adverse consequences of illnesses than it could expect to prevent in an environment that already deals with higher-severity conditions.
But Brigham went one better than its peer group in preventing deaths. Its mortality rate of 0.73 not only outpaced the benchmark of 0.91 for major teaching hospitals but approached the benchmarks of top-performing community hospitals with generally lesser severity of illnesses to treat.
Among teaching hospitals, "Brigham was probably the first to make a commitment to managed care," Blaszyk said. In 1986, Harvard Community Health Plan closed its 90-bed hospital and contracted instead with Brigham.
Over the years, Brigham and Harvard Community developed a working relationship that instilled an internal discipline among Brigham physicians while distributing the clinical benefits of Brigham's academic and research activities to medical professionals in both organizations, Otten said.
Otten became CEO in July 1994 after joining Brigham in August 1993 as executive vice president and chief operating officer.
Harvard Community merged with Pilgrim Health Care two years ago to form Harvard Pilgrim Health Care. Patients from that managed-care organization account for 25% of Brigham admissions.
The Brigham and Harvard staffs both participated in the care improvement teams, developing a body of clinical knowledge combined with computer analysis to improve management of disease by reducing unproductive variations in care, Otten said. That resulted in a more standardized approach while still allowing clinicians to learn from their efforts, he said.
Instrumental in that approach was a team-building initiative between nurses and physicians led by Brigham's chief medical officer, George Thibault, M.D., and Mary Fay, vice president of nursing.
The process also drove down expenses and bolstered the bottom line, said Joseph Trainor, vice president for finance.
According to the HCIA/Mercer analysis, Brigham's cash-flow margin in 1995 was 16.5%, better than the 14% benchmark for major teaching hospitals and comfortably higher than the 10.5% for all hospitals in that category.
Cash-flow margin is a measure of overall hospital profitability, expressed as a percentage (See explanation of measures on p. 54).
A focus on business efficiency has reduced the hospital's accounts receivable average to 52 days, compared with the national average of 61.4, according to Zimmerman & Associates, a Hales Corners, Wis., consulting firm.
That effort involved nothing fancy, just "basic blocking and tackling" in the business department, Trainor said. But the result freed up cash for fund balances and helped produce compound growth in equity averaging 25% a year for each of the past three years-more than double the growth of major teaching hospitals as a group.
As a result, "Brigham is very well positioned to weather any storms in reimbursement and other market events," Trainor said.
That's important for an operation in which more than 80% of total patient revenues depend on a negotiated price up front, including Medicare flat rates and fee schedules, Trainor said.
But Otten emphasized that the hospital has never backed away from its commitment to research and teaching. In fact, research continues to help power both the clinical improvement and financial stability of Brigham, he said.
Managers have institutionalized a process of "transferring some of the things we're learning about healthcare . . . into running a good hospital," Otten said.
Research also is good to Brigham's bottom line, attracting $140 million in direct and indirect grant revenues, two-thirds of that from the National Institutes of Health. The hospital remains the single largest beneficiary of NIH funds, Trainor said.
Overall, research accounted for 21% of Brigham's fiscal 1996 operating budget of $670 million, he said.
Meanwhile, Brigham continues to maintain a 17% share of the obstetrics market in Massachusetts, holding steady at an annual 8,500 deliveries despite a declining birth rate.
And although the hospital complex is central to Brigham's tertiary care and research, ambulatory visits are growing at a rate of 5% a year, Trainor said.
The alignment of academic, research and clinical pursuits "makes us stronger in the marketplace because we're able to attract the best and brightest in medicine," he said.