Tufts Medical Center is the number hospital in Boston, MA, leading the way in top quality care and education, but even the best university hospital isn’t without it’s problems.
Strategic Issues
The 1st issue is that Tufts-NEMC is lagging behind industry benchmarks in numerous financial measures – days in accounts receivable, accounts payable, average length of stay, operating margin, and cash on hand. This means that the hospital is taking too long to be paid, not paying their bills early enough, and having patients stay longer than they should.
The 2nd issue is the relative size of the academic medical center compared to its competitors in the Boston area, like Partners and CareGroup. For comparison, Tufts-NEMC had 450 beds and Partners had 2,000.
- This size hinders its fundraising ability. In 2005, Tufts-NEMC raised $10 million, while Partners raised $200 million.
- Its small size also makes it difficult to maintain a high level of services because it just doesn’t get the high volume of cases (and revenue) that its competitors get
The 3rd issue is brand recognition. Tufts-NEMC has not done a good job of promoting its brand in the Boston area. Brand recognition is more important than ever since Tufts is such a small competitor. People know individual doctors that work there, but wouldn’t associate the brand with them.
How did these come about?
The Boston area was home to several high-profile academic medical centers, and was world-renowned for its health care services. The hospitals employed 12.2% of the total labor pool and made up 11.7% of the gross state product. Because of the cutting edge research and high quality of services, health care in the Boston area was much more expensive on average in comparison to other states. Severe underfunding by federal and state government caused the hospitals to amass a large amount of debt when they upgraded their facilities and services. In 1991, hospital deregulation strived to get them to use more cost effective practices, while threatening their survival. In order to stay afloat, many hospitals began to merge. Eventually, there would be four major hospital systems: Partners, Caritas Christi, CareGroup, and Boston Medical Center. Tufts-NEMC stood alone as a much smaller, private hospital. Hoping to find a “rich uncle” Tufts merged with Lifespan Corporation, a non-profit hospital system; the main benefit of the merger to Tufts was Lifespan’s financial ability. However, the hospitals were very different, and the change occurred without much planning. The merge would eventually fail, which is when Ellen Zane stepped in as the first non-physician, permanent, female CEO.
What are the drivers of change?
The first driver of change was staff improvements. Within 2 weeks of starting, Zane fired the SVP of Strategy and the VP of Fundraising and Development; in total, she replaced half of the senior management team with new people that she thought fit to help her turn around the hospital. The new SVP was a networking building expert and the new VP had a proven track record of success.
The second driver of change was communication and outreach. Zane was fully transparent about the situation the hospital was in, what she planned to do to get the hospital out, and how the employees could help. One way she did this was by holding “town meetings” where she presented financial facts and identified initiatives the hospital could begin to spur its recovery and future growth. One of the key factors in the meetings was that Zane talked to every single employee, no matter what their job was; this ensured that everyone was included and their ideas and concerns were taken into account. Zane also sent out regular emails to her staff, updating them on the change on progress toward their goals.
The third driver of change was the identification of weak areas in the hospital’s performance and management. Zane identified failing financial measures, missed benchmarks, poor contracts, and a lack of network building, and then created a plan to fix each item.
What are the objectives?
The overarching objective of the change is to turn around the hospital by decreasing its debt and generating more revenue. (1) Zane wanted to improve each of the financial measures and benchmarks to get the hospital back to the average industry levels. (2) Zane wanted to increase insurance rates by reopening negotiations with major health plans; this would increase revenue dramatically. (3) Zane wanted to rekindle Tufts’ past affiliation to build a support network for the hospital and to enhance its current services.