The new CEO of Partners Healthcare system says bigger is not necessarily better, but then he says the network is going to expand:
“A real important part of our strategy if we’re restricted in the local market is we have to look regionally, nationally and internationally. So I’d say look at the globe and spin it around and we’re going to look everywhere.”
The thought makes my head spin, too. I just wish they would get better at delivering safer and higher quality care here. The system could start, for example, by adopting the many thoughtful and useful suggestions published by Atul Gawande, perhaps its most famous and widely admired faculty member.
But I guess our new Attorney General should feel all right about the corporation's lack of interest in local expansion, so let's put PHS aside for a moment and think about what other time bombs are ticking on her watch.
Steward Healthcare
The most important has to be the future of Steward Healthcare, the private equity-owned entity that purchased the former Caritas Christi chain of hospitals in the state. According to this story in Commonwealth Magazine, the CEO promised a health care network that would "provide high quality care at much lower cost than the big Boston teaching hospitals." In so doing, if it could "win over residents and businesses near the hospitals, it would not only turn a profit for Cerberus but lower health care costs overall." Well, there is no sign that is working.
But meanwhile, the company has engaged in commonly employed private equity approaches to remove cash from the business. As Commonwealth noted, for example:
In April, Steward granted 99-year leases on 13 of its medical office buildings to an Arizona real estate firm for an up-front payment of about $100 million. Steward is now renting those same buildings back from the Arizona firm under 12-year leases. The terms of Steward’s leases have not been disclosed. Steward has also not disclosed whether it kept the cash generated by the deal or the money went to New York and Cerberus’s investors.
There were equivalents to this kind of sale-leaseback deal elsewhere in the system. The labs, for example, were sold:
Quest Diagnostics (NYSE: DGX), the world's leading provider of diagnostic information services, and Steward Health Care System LLC (Steward), New England's largest community-based accountable care organization and one of the nation's largest Pioneer ACOs, today announced that Quest has acquired the remainder of Steward's outreach laboratory service operations. Under the arrangement, Quest will provide outreach laboratory testing services to physicians, nursing homes and other providers previously serviced by Steward.
This issue that could arise is what happens to the Steward hospitals if the system fails or falters, now that the hospitals are less resilient because a portion of their asset value has been sold off. It would probably be wise for the AG to conduct an analysis of the options before her if the private equity company decided to exit the Massachusetts market. The previous AG signed an agreement that gives the office considerable review authority over the company. How might that authority be used by the new AG? Is she able to track funds and see what money is actually being used in Massachusetts versus being delivered directly or indirectly to Cerberus investors? Is there more ability than was employed previously to ensure sufficient notice of possible closures? Apparently the former AG was surprised when Steward decided to close Quincy Medical Center.
When it comes to the second largest system in the state, it would be better to avoid surprises.
Blue Cross Blue Shield of Massachusetts
While virtually everyone offered an opinion to the judge in the case, the largest insurance company in the state was silent on whether the expansion of Partners should be approved. It also acted to increase the disparity in payments among hospital networks, even after those disparities were documented by the previous AG as being one of the major causes of health care inflation in the Massachusetts. A study commission is supposed to review this issue of disparities and make recommendations to narrow them. What's the AG's role in that process? Might she, for example, pursue a reference pricing approach that would require an insurer to justify payments rates outside of a normal band?
BCBS of MA has also persuaded the state to adopt a policy that shifts risks from the insurance company to doctors and hospitals but has made no adjustment to its capital structure to compensate for that savings. Will the AG consider clawing back excessive earnings given the company's new risk profile?
All other financial service industries have been able to reduce administrative and transaction costs over the years. What is it about this company that gives them a pass? As premiums rise, the percentage the company keeps for administration and profit stays the same. Here's another area worthy of attention by the new Attorney General. Shouldn't we expect some technological improvements and the resultant savings to passed along consumers?
“A real important part of our strategy if we’re restricted in the local market is we have to look regionally, nationally and internationally. So I’d say look at the globe and spin it around and we’re going to look everywhere.”
The thought makes my head spin, too. I just wish they would get better at delivering safer and higher quality care here. The system could start, for example, by adopting the many thoughtful and useful suggestions published by Atul Gawande, perhaps its most famous and widely admired faculty member.
But I guess our new Attorney General should feel all right about the corporation's lack of interest in local expansion, so let's put PHS aside for a moment and think about what other time bombs are ticking on her watch.
Steward Healthcare
The most important has to be the future of Steward Healthcare, the private equity-owned entity that purchased the former Caritas Christi chain of hospitals in the state. According to this story in Commonwealth Magazine, the CEO promised a health care network that would "provide high quality care at much lower cost than the big Boston teaching hospitals." In so doing, if it could "win over residents and businesses near the hospitals, it would not only turn a profit for Cerberus but lower health care costs overall." Well, there is no sign that is working.
But meanwhile, the company has engaged in commonly employed private equity approaches to remove cash from the business. As Commonwealth noted, for example:
In April, Steward granted 99-year leases on 13 of its medical office buildings to an Arizona real estate firm for an up-front payment of about $100 million. Steward is now renting those same buildings back from the Arizona firm under 12-year leases. The terms of Steward’s leases have not been disclosed. Steward has also not disclosed whether it kept the cash generated by the deal or the money went to New York and Cerberus’s investors.
There were equivalents to this kind of sale-leaseback deal elsewhere in the system. The labs, for example, were sold:
Quest Diagnostics (NYSE: DGX), the world's leading provider of diagnostic information services, and Steward Health Care System LLC (Steward), New England's largest community-based accountable care organization and one of the nation's largest Pioneer ACOs, today announced that Quest has acquired the remainder of Steward's outreach laboratory service operations. Under the arrangement, Quest will provide outreach laboratory testing services to physicians, nursing homes and other providers previously serviced by Steward.
This issue that could arise is what happens to the Steward hospitals if the system fails or falters, now that the hospitals are less resilient because a portion of their asset value has been sold off. It would probably be wise for the AG to conduct an analysis of the options before her if the private equity company decided to exit the Massachusetts market. The previous AG signed an agreement that gives the office considerable review authority over the company. How might that authority be used by the new AG? Is she able to track funds and see what money is actually being used in Massachusetts versus being delivered directly or indirectly to Cerberus investors? Is there more ability than was employed previously to ensure sufficient notice of possible closures? Apparently the former AG was surprised when Steward decided to close Quincy Medical Center.
When it comes to the second largest system in the state, it would be better to avoid surprises.
Blue Cross Blue Shield of Massachusetts
While virtually everyone offered an opinion to the judge in the case, the largest insurance company in the state was silent on whether the expansion of Partners should be approved. It also acted to increase the disparity in payments among hospital networks, even after those disparities were documented by the previous AG as being one of the major causes of health care inflation in the Massachusetts. A study commission is supposed to review this issue of disparities and make recommendations to narrow them. What's the AG's role in that process? Might she, for example, pursue a reference pricing approach that would require an insurer to justify payments rates outside of a normal band?
BCBS of MA has also persuaded the state to adopt a policy that shifts risks from the insurance company to doctors and hospitals but has made no adjustment to its capital structure to compensate for that savings. Will the AG consider clawing back excessive earnings given the company's new risk profile?
All other financial service industries have been able to reduce administrative and transaction costs over the years. What is it about this company that gives them a pass? As premiums rise, the percentage the company keeps for administration and profit stays the same. Here's another area worthy of attention by the new Attorney General. Shouldn't we expect some technological improvements and the resultant savings to passed along consumers?