Trustees Chose an Affiliation Partner
The Cooley Dickinson Board of Trustees voted Monday, Feb. 27 to negotiate an affiliation agreement with Massachusetts General Hospital, one of two strong finalists in the hospital’s search for the affiliation partner who will best help Cooley Dickinson ensure a strong health system for the community.
Both Mass General and finalist Baystate Medical Center of Springfield offered Cooley Dickinson the ability to achieve the goals the Trustees set for joining a larger system: to develop and expand care programs and increase revenue, reduce overhead costs, and help Cooley Dickinson thrive in the new era of population-based care delivery and payment.
However, the Trustees gave the edge to the Boston hospital because, “As one of the pre-eminent hospitals in the country, Massachusetts General has the financial resources and intellectual know-how to help Cooley Dickinson thrive as we navigate the fundamental restructuring of health care that is under way,” said Trustee Chair Matt Pitoniak. Read the affiliation press release here.
The Board put forward three goals in charging the Affiliation Task Force to identify a partner. The goals follow, along with examples of a how a partner would help achieve the goals.
1. Strengthen our position and revenue in our community by helping develop and expand care programs.
- Cooley Dickinson develops new programs, such as Geriatrics and Palliative Care, both added last year, to meet community needs. New programs require investment to recruit physicians and buy technology. We have also extensively invested in facilities (outpatient building, Childbirth Center, Kittredge Surgery Center, and single-room inpatient facility) to attract more patients and strengthen our positioning.
- We offer programs that are high-cost but have a low volume of patients, such as cardiac catheterization, robotic surgery, and inpatient pediatrics. These programs lose money and would be at risk of closing if we remained independent.
- Investment in new programs and aggressive recruiting of physicians and specialists helped Cooley Dickinson have patients choose us at or about 60 percent, even as other area hospitals lost patients. But, we have not seen growth, even with all of our investments. A partner will help us build programs for patients beyond our current reach.
2. Reduce overhead costs, helping us reduce prices.
- Prices at Cooley Dickinson historically have been higher than at other area hospitals. This has driven some patients away and upset residents who want to use their local hospital but can't afford to. We recently reduced outpatient prices to make care more affordable. We also dropped prices for Blue Cross Blue Shield of Massachusetts, so their members don't have to pay as much in co-pays to choose CDH. We are negotiating with additional insurers to reduce prices. An increased number of patients will help decrease the unit cost for a service, part of making care affordable.
- Lower prices demand lower costs. We have cut costs in recent years, e.g. our average admission costs
- 6 percent less than it did three years ago. This has happened in part, as you know, because we reduced staffing. There may be further opportunities to reduce operating costs, but not enough to cover the lower prices people need. Other insurers now demand decreases. Plus, Medicare and Medicaid payment will decline by $11 million in the next three years.
- A larger system will help reduce overhead expenses. For example, we need to refinance $62 million in bonds later this year. Our interest rate will be lower in a larger system than if we are independent. Expenses such as information systems and malpractice insurance would also be less.
3. Supplement our resources for entering the new era of population-based care.
- A larger system will help Cooley Dickinson manage population-based care as part of an accountable care organization (ACO). ACOs pay hospitals, physicians, and other providers a shared, global budget to manage the health of a population together. In the old world, everyone was paid a fee-for-service, or a sum for every test, office visit, hospital stay, or surgery, treating people's needs like "piecework." The more care we provided, the more dollars we received. An ACO pays providers a set amount per person to take care of people's needs, but also to keep people healthy, keep people who get a chronic illness healthier, and increase the quality of care. If the ACO's population is not well-managed, providers like Cooley Dickinson and our doctors could exceed those per capita payments and lose money.
- ACOs will be the norm sooner in Massachusetts than elsewhere. Gov. Deval Patrick and the Legislature's Commission on Payment Reform both name global payment and population based-care as priorities.
- Successful ACOs do well when patients stay within the system and providers are able to manage patients' care together. If a patient chooses care outside the system, it may not be as well coordinated (e.g. tests could be duplicated). Plus, the ACO is responsible for the cost of care a member gets outside the system. Some specialized care is beyond the capabilities of even the best community hospital. Cooley Dickinson needs a partner to collaborate with us to assure and coordinate the right care for patients at the right price when community members need care outside of CDH.
- ACOs and population-based care require very large investments, such as $5 million in start-up costs for a mid-sized hospital to buy needed information technology, followed by $6 million annually in operating costs. ACOs require investments such as electronic health records, connectedness between all providers' records, and patient portals to give people information to help manage their own health. Investment is also required for prevention specialists to keep people healthy and care managers to help chronically ill people stay as well as possible. A partner will help with this expense.
Why Will We Give Up Our Independence? Why Not Just Affiliate? This would not be the first time Cooley Dickinson was not independent. For 15 of its 125 years (1993–2008), Cooley Dickinson was owned by the Dartmouth-Hitchcock Alliance. The Trustees considered seeking a clinical affiliation, but concluded that would not be best for the community.
To achieve some of the benefits of affiliation, such as reduced financing costs, we have to merge with our partner and be part of the larger system. More importantly, if we had a loose clinical affiliation and ran into financial or quality problems, the affiliation partner could walk away. If we are in the system, we both own the success of our local care system.
The Process Leading to Trustee Choice of Affiliation Partner Next Week
The Cooley Dickinson Board of Trustees will decide Monday, Feb. 27, whether it will negotiate a merger agreement with Baystate Medical Center or Massachusetts General Hospital. The decision will culminate a process that began late in 2008. The choice will be based first and foremost on what is best for the community and what will ensure the future vitality and viability of Cooley Dickinson. Before we announce the choice of an affiliation partner, we want to share the thorough — with nearly 7,500 hours of meetings so far — and thoughtful process that led to this critically important decision.
How the Need for Affiliation Was Identified (2008–2009)
When the Dartmouth-Hitchcock Alliance disbanded in December 2008, Cooley Dickinson became independent again after 15 years in the Dartmouth system. The Trustees established a Strategic Planning Task Force composed of trustees, physicians, and senior administrators, who, in June 2009, identified key strategic issues affecting the ability of Cooley Dickinson to thrive:
- The recession and deterioration of the economy
- That an Accountable Care Organization (ACO) model of care delivery and payment would become law
- The ability to provide quality care, given falling revenues
- The possibility that affiliation with a larger partner would be needed
Planning and information gathering, including 22 focus groups with physicians, filled the first six months of 2010. The extensive planning process resulted in the conclusion that going it alone was no longer an option.
Leaders conducted the first series — there would be at least four series by February 2012 — of Affiliation Town Hall meetings with physicians and staff to explain the need for a partner. The Joint Conference Committee (JCC), made up of trustees and physicians, expanded to include more physicians. Cooley Dickinson hired an advisor with extensive experience in guiding hospital affiliations and mergers.
The Search for a Partner, with Seven Prospects, Gets Under Way (2010)
Seven potential affiliation partners were interested in Cooley Dickinson because of our high quality of care and financial strength. They were Baystate Medical Center, Beth Israel Deaconess Medical Center, Brigham and Women’s Hospital, Lahey Clinic, Massachusetts General Hospital, University of Massachusetts Medical Center, and Vanguard Health. After initial review, the Joint Conference Committee dropped Brigham and Women’s, Lahey, and Beth Israel Deaconess.
Affiliation Task Force Created, Develops Criteria (January–April 2011)
The Joint Conference Committee expanded again in January 2011 and became the Affiliation Task Force (ATF), now made up of six trustees, nine members of the medical staff, and one CEO. Four senior staff leaders and the affiliation advisor, an attorney, backed the group. The Task Force met with representatives from the four remaining potential partners: Baystate, Mass General, UMass, and Vanguard.
By April, the Affiliation Task Force tested its criteria for selecting a partner through a series of forums/Town Hall meetings with trustees, physicians, and employees. The criteria: 1. “Value” for the Community, 2. “Robust” Local Care System, 3. Resources and Commitment, 4. Culture, 5. Local Role in Governance.
Trustee Chair Matt Pitoniak, Medical Staff President Margaret Russo, and CEO Craig Melin in February published the first of 12 Affiliation Update newsletters for Cooley Dickinson trustees, physicians, employees, and volunteers. Throughout the process, affiliation is discussed at every meeting of the Board of Trustees.
Affiliation Coordinating Committee Created, RFIs Sent to Four Potential Partners (May–August 2011)
The Affiliation Task Force was too large a group to negotiate with potential partners. In May 2011, the Board named an Affiliation Coordinating Committee of three physicians, three trustees, and the CEO (all were ATF members) to conduct negotiations. The Board also concluded that a clinical affiliation alone would not be enough to ensure future success: we would need to join, or merge with, a larger system.
Baystate, Mass General, and Vanguard responded to a Request for Information. UMass withdrew from the process; it was interested only in clinical affiliation. The Coordinating Committee met again with the potential partners. Cooley Dickinson examined potential antitrust law implications. In August, the Coordinating Committee reported the meeting results and what was learned about antitrust to the Affiliation Task Force.
Third Round of Partner Meetings, Choice Narrowed, Teams Expanded (September–November 2011)
In September and October, the Coordinating Committee met with the three potential affiliates a third time. To ensure that the diverse types of physicians (e.g. employed, in private practice) at CDH were included in the deliberations toward a partner, more physicians were added. The Coordinating Committee now had five physicians, three trustees, and two senior leaders. The Task Force: 14 physicians, six trustees, six senior leaders.
The Trustees voted in October to accept the recommendation of the Coordinating Committee and Task Force to narrow to MGH and Baystate because each has a tertiary hospital with which CDH could integrate care.
Finalists Submit Proposals, Fourth Meetings, Internal Forums (December 2011–January 2012)
Baystate and Mass General submitted formal, written responses to the Affiliation teams’ Request for Proposals in December. The Coordinating Committee met with both organizations a fourth time, in January, to hear responses to questions that the replies to the RFP generated.
The Coordinating Committee and Task Force concluded that much information from affiliation meetings with Baystate and Mass General did not need to remain subject to confidentiality agreements. Margaret, Matt, and Craig presented information about the Baystate and Mass General proposals at forums for employees, physicians, and community committees and at the Physician-Hospital Organization annual meeting.
Final Negotiations, Interviews with Counterparts, Special Board Meetings (February 2012)
Even as Affiliation Coordinating Committee members continued to negotiate terms of an affiliation with Baystate and Mass General, Task Force members interviewed their counterparts at Baystate and Mass General, as well as those at community hospitals each owns, to learn about the cultures of the organizations and test how well the larger organization executed on promises to community hospitals that joined their systems.
The Board of Trustees held a special meeting in early February to learn about the status of negotiations and hear what trustees and physicians were learning about culture in their interviews. The findings of the Affiliation Task Force and the terms of the agreement negotiated by the Affiliation Coordinating Committee with Baystate and Mass General were presented this week at a second special meeting of the Board of Trustees.