Partners HealthCare's incoming CEO Dr. David Torchiana will take control of an organization he describes as “chastened” by the public criticism and a fresh legal rebuke of its planned expansion and is faced with turning around a steep loss in its new health insurance arm.
On Thursday the Boston-based system named Torchiana as the successor to President and CEO Dr. Gary Gottlieb. Torchiana will inherit an organization grappling with losses from its entry into health insurance and embroiled in controversy over its suburban expansion. Partners HealthCare ended last year with an operating loss of $21 million on revenue of $10.9 billion.
The insurance losses contributed to a January downgrade from Moody's Investors Service. Also, a judge last week rejected an agreement between Partners and the Massachusetts attorney general's office to allow the system to acquire three hospitals.
Torchiana said in an interview that the system is reviewing its options in light of the court ruling. “It's a pretty unambiguous response,” he said. He described Partners as “chastened" by the decision and the opposition expressed by the state's new attorney general—who told the court she wasn't happy with her predecessor's agreement with the system and would work to block the acquisitions.
The system's planned expansion also drew opposition from other Massachusetts health systems. The consent agreement intended to resolve antitrust concerns was reached with then-Attorney General Martha Coakley before she left office. The judge questioned whether the state could enforce the terms, which included a pledge by Partners to keep prices at or below the rate of inflation through 2020.
“We understand the message and we got the message very clearly,” Torchiana said. “We need to step back and we need to look at the different pieces of the issues that were before the judge and before the attorney general and figure out what to do.”
The system's board chairman praised Torchiana for his political acumen in a news release announcing his appointment.
“Dr. Torchiana possesses the instincts and the political savvy to be an outstanding leader for Partners,” Edward Lawrence, chairman of the health system's board, said in a release announcing the appointment. “During times of uncertainty in the healthcare environment, Dr. Torchiana will be a leader who provides stability and lends a voice of assurance that Partners HealthCare wants to help address the challenges and be part of a solution,” Lawrence said.
Gottlieb, who was named Partners' fourth CEO in January 2010, announced his resignation in October. He is stepping down to become CEO of the not-for-profit Partners in Health, which provides medical care in Haiti, Peru and other countries.
Torchiana is CEO of the Massachusetts General Physician Organization, a Partners subsidiary that employs roughly 2,400 doctors working at Massachusetts General Hospital, a 999-bed Boston hospital with operating income of $186.8 million last year on revenue of $3.3 billion. His start date as Partners' CEO will be determined in March, the system said.
The incoming CEO said Partners will seek to turn around the insurance arm's poor financial performance in the coming year. Partners acquired the not-for-profit managed care company Neighborhood Health Plan in 2012 and markets plans to Medicaid, exchange and commercial enrollees.
The insurer covered roughly 330,300 people last year, up 25% from the prior year as the federal health law expanded Medicaid eligibility. Those new enrollees needed more costly medical care than expected, Torchiana said, which left the health plan with a loss that the system is working to address. “It's not a sustainable thing long-term if we can't get it to be fixed,” he said.
Partners, he said, also faces other challenges: health spending constraints under Massachusetts law and the compliance and regulatory burden of the industry's growing reporting requirements. More broadly, health systems are under pressure from governments and employers to hold down the healthcare costs that have swallowed ever-more of public and private budgets. “That's a picture that I don't see changing,” he said.
Efforts to address the recent damage to Partners' public image might take longer, he said. “We have definitely become a target for a fair amount of attention,” he said. “That is not a great, comfortable place to be.” He compared Partners' publicity to that of the New England Patriots, which was besmirched by negative coverage over inflated footballs in the AFC championship game as it advanced to the 2015 Super Bowl. The team performs well but is disliked because it's “perceived as outside the fold in the NFL,” he said. “We don't want to be perceived that way.”
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