8:51 AM
With the Attorney General granting Partners Healthcare System a long-term lease on life as the dominant provider in Eastern Massachusetts, we can now focus on the likely industry structure for the region.
The short version: Bad news for Tufts Medical Center and Steward Healthcare. Fair news for Lahey Clinic and BIDMC. Clear sailing for Partners.
There's nothing on the horizon that looks good for Tufts. Here's a recent summary of earnings from the Boston Business Journal. Excerpts:
The health sector’s fast-changing economics are inflicting an increasing degree of pain at Tufts Medical Center in Boston, the latest local care provider to report declines in key patient-related categories. The results are forcing care providers, including Tufts, to rejigger their operations and squeeze costs to offset an increasingly unpredictable and in some quarters shrinking revenue pie.
By all accounts it is proving a challenge to stay ahead of the trend.
Let me say out loud what people have said quietly for years: If Tufts were to disappear tomorrow, its patients could be adequately served by other places in town. I'm not suggesting this is a desirable outcome, but it is a plausible one. You can only slowly decapitalize for so long before people notice a deterioration in service and morale.
At Steward, the private equity owners are doing what PE folks do, i.e., extracting cash from the business and hoping to be able to sell it to "a greater fool." The problem is that no such fool has emerged yet. Indeed, potential buyers are likely biding their time, sure that the company's valuation will decline. The current or future owners will be forced to shutter some facilities. They may also seek to offer ownership of some hospitals to other parties in the region--and the then-current AG will hold his/her breath and allow Partners or one of the other systems to acquire hospitals to preserve the beds in the old industrial cities.
BIDMC and Lahey missed their big chance to merge and establish somewhat of a bookend to Partners. Now, each is proceeding along its own acquisition path, with catchment areas that overlap a bit but not totally. Observers wonder, though, what kinds of promises they have made to the community hospitals they are acquiring. The underlying question is whether those hospitals will be profit centers, helping the enterprise, or cost centers, drawing capital from the mother ships.
Through all this, the role of Atrius Health, as the state's largest multi-specialty practice, is key. By choosing where it will refer patients, Atrius can shift tens of millions of dollars in income between and among the tertiary hospitals. But there are signs of splintering within Atrius, and its effectiveness as a business enterprise can fall to petty jealousies and other disagreements among its constituent partners.
Partners is essentially immune from all these perturbations, and the slips and slides of other market participants will just serve to enhance its market presence. Massachusetts will continue to pay above-average health care costs.
The short version: Bad news for Tufts Medical Center and Steward Healthcare. Fair news for Lahey Clinic and BIDMC. Clear sailing for Partners.
There's nothing on the horizon that looks good for Tufts. Here's a recent summary of earnings from the Boston Business Journal. Excerpts:
The health sector’s fast-changing economics are inflicting an increasing degree of pain at Tufts Medical Center in Boston, the latest local care provider to report declines in key patient-related categories. The results are forcing care providers, including Tufts, to rejigger their operations and squeeze costs to offset an increasingly unpredictable and in some quarters shrinking revenue pie.
By all accounts it is proving a challenge to stay ahead of the trend.
Let me say out loud what people have said quietly for years: If Tufts were to disappear tomorrow, its patients could be adequately served by other places in town. I'm not suggesting this is a desirable outcome, but it is a plausible one. You can only slowly decapitalize for so long before people notice a deterioration in service and morale.
At Steward, the private equity owners are doing what PE folks do, i.e., extracting cash from the business and hoping to be able to sell it to "a greater fool." The problem is that no such fool has emerged yet. Indeed, potential buyers are likely biding their time, sure that the company's valuation will decline. The current or future owners will be forced to shutter some facilities. They may also seek to offer ownership of some hospitals to other parties in the region--and the then-current AG will hold his/her breath and allow Partners or one of the other systems to acquire hospitals to preserve the beds in the old industrial cities.
BIDMC and Lahey missed their big chance to merge and establish somewhat of a bookend to Partners. Now, each is proceeding along its own acquisition path, with catchment areas that overlap a bit but not totally. Observers wonder, though, what kinds of promises they have made to the community hospitals they are acquiring. The underlying question is whether those hospitals will be profit centers, helping the enterprise, or cost centers, drawing capital from the mother ships.
Through all this, the role of Atrius Health, as the state's largest multi-specialty practice, is key. By choosing where it will refer patients, Atrius can shift tens of millions of dollars in income between and among the tertiary hospitals. But there are signs of splintering within Atrius, and its effectiveness as a business enterprise can fall to petty jealousies and other disagreements among its constituent partners.
Partners is essentially immune from all these perturbations, and the slips and slides of other market participants will just serve to enhance its market presence. Massachusetts will continue to pay above-average health care costs.
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