After a year of cracking at the seams, Boston's CareGroup health system began to crumble earlier this month. The Jan. 11 announcement that CareGroup will close one of its six hospitals was followed by news that its board is considering disbanding Massachusetts' second-largest healthcare system altogether.
CareGroup, in accordance with a new Massachusetts law, gave the state 90 days' notice that it plans to shut 199-bed Deaconess Waltham Hospital. The 116-year-old hospital has lost money for eight of the past 10 years, according to CareGroup officials. It lost $9 million in fiscal 2001, which ended Sept. 30, and is projected to lose the same amount this year.
"We can't continue to lose 9 to 10 million (dollars) a year, especially when the cash situation has become so difficult," said Patricia McGovern, executive vice president of CareGroup.
CareGroup lost $163 million over the past two years, according to system officials. Its flagship, 589-bed Beth Israel Deaconess Medical Center, may lose $102 million this year, according to estimates by a consultant it engaged to help design a turnaround plan. The hospital recently announced that it would lay off as many as 700 employees this month. Last year, the Harvard-affiliated teaching hospital put more than one-fifth of its campus up for sale in an effort to improve its financial situation.
Deaconess Waltham has suffered from declining patient volume, including about a 9% drop in inpatient volume from 2000 to 2001, McGovern said. The hospital gets less than 50% of the market share from the community of about 60,000 it serves.
"People from Waltham choose other hospitals," McGovern said.
But some say that CareGroup is sacrificing Deaconess Waltham in order to save Beth Israel Deaconess and the rest of the system.
"Now that they have to salvage their mother ship, which is Beth Israel (Deaconess), they are cutting loose Deaconess Waltham," said David Schildmeier, director of public communications for the 20,000-member Massachusetts Nurses Association. The MNA represents 220 nurses at Deaconess Waltham.
Schildmeier maintains that the community is very interested in keeping the hospital and points to local contributions of $1.3 million that helped the hospital build a new cancer center in 2001. "The community is very invested in them," he said.
The hospital's collapse stems from bad management both by its own administrators and Caregroup, said Richard Lyons, M.D., chief of emergency medicine at Deaconess Waltham and a member of the former board. He is convinced that a change in leadership could save the facility. "If (CareGroup) empowers us to do this turnaround, we can do it and preserve healthcare in this area," Lyons said.
Last week, nearly 1,000 people attended a rally held at the local junior high school to save Deaconess Waltham.
In making the decision to close the hospital, CareGroup replaced Deaconess Waltham's community board with one that included a majority of CareGroup appointees. The same day the new board was appointed, it announced that it would close the facility.
"It is very difficult for a local board to close a hospital," McGovern said. She said the hospital had only two months worth of cash left and could not reach agreement about closure, so CareGroup exercised its power to replace the board. "Somebody had to do something," she said.
Deaconess Waltham's president and chief executive officer, Dana Ramish, did not return calls from Modern Healthcare in the days immediately after the closing announcement. Last week, CareGroup said that Ramish had "asked to relinquish day-to-day operating responsibilities for the hospital," but would remain in an advisory capacity for the system.
Deaconess Waltham joined the Pathway Health Network in 1995; Pathway became CareGroup in 1996. In July 2001, CareGroup gave Ramish its approval to pull out of the system and possibly join another network. However, Deaconess Waltham failed to find a new partner.
In December 2001, CareGroup announced it had hired Salomon Smith Barney to try to sell the hospital but was unable to do so because of Deaconess Waltham's $23.7 million debt load. According to Lyons, Ardent Health Services and Essent Healthcare, both Nashville-based for-profit companies, made visits to the facility but eventually shied away.
"Though there was some interest in the hospital, we simply could not find a buyer willing to take on an institution with such significant debt," Ramish said in a written statement after the hospital closing was announced.
McGovern said CareGroup is not opting to save Beth Israel Deaconess at the cost of closing Deaconess Waltham, explaining that the flagship hospital's $300 million endowment provides a bigger cushion than what is available to Deaconess Waltham. "Each hospital is responsible for its own finances," she said.
Earlier this month, CareGroup said it had created a "restructuring committee" to assess the fate of the system. When asked if the committee was considering disbanding the system, a CareGroup spokeswoman said, "everything is on the table, but nothing has been decided."
Deaconess Waltham will become the first hospital closing to test the law passed by Massachusetts in 2000 that requires advance notice and a public hearing to close "essential services." The state's department of public health will hold the hearing Feb. 11 in Waltham. McGovern said CareGroup has begun work on a plan, which likely will be required by the state, for providing access to healthcare services in the community that will be lost with the hospital's closure.