A game plan for turning Tufts Medicine around

Management has much to do, but so does the state

Second of two parts. Read the first part here.

IF TUFTS MEDICINE is going to turn around financially, clearly there are short-term issues for management focus, but there are also intermediate and long-term ones as well, some of which may require state intervention.

For me, there is no question that Tufts Medicine’s survival and vibrancy for many years to come is important for the good of health care affordability in Massachusetts. There are also intertwined medical education opportunities and concerns as well. Though legally separate, the future of Tufts Medical School and its ability to offer adequate clinical clerkship experiences to the majority of its students is potentially impacted by what happens to Tufts Medicine and especially to Tufts Medical Center.

Tufts Medicine’s first hurdle is to meet bond covenant requirements when its finances are audited after the close of the fiscal year on September 30.. Arguably, its next milestone will be to reach a breakeven-or-better operating performance over the next year or so and begin to rebuild its net assets. I am cautiously optimistic that both things can happen, but Tufts Medicine will have to act on issues under its control and receive some help dealing with those issues that are not.

Controlling its expenses and attracting sufficient patient volume are two initiatives that Tufts Medicine’s management team has already been at work trying to improve these past months.

It seems that the worst of contract labor expenses, which spiked in 2022, are under much better control—but this remains a key area for vigilance. Last January, Tufts Medicine cut a number of administrative positions, and just this week, the system announced that it will save on labor and other expenses tied to its recent decision to sell its outreach lab business.

The costly implementation of the hospital system’s Epic patient management system also seems complete. Hopefully, management can use the system to improve revenue cycle collections, support providers in care management, and enhance patient experiences.

Outpatient growth is important and seems to be a key area for management’s attention—both fully utilizing current sites as well as expanding into others. On the inpatient side, the closure of Tufts Children’s Hospital—though politically painful—should in upcoming months provide Tufts Medical Center with an ability to open up some new adult ICU beds and gain additional inpatient revenues.

One promising sign is that patient revenue growth right now is growing at a rate than patient expense—a key factor to getting to breakeven. To help with that, Tufts Medicine has taken over management of Metrowest Medical Center’s Cancer Center, and just this past week announced a new, locally-focused arrangement with Attleboro-based Sturdy Health to offer cardiac services.

Even as Tufts Medicine works to address its financial challenges, it needs help.

The Legislature a few weeks ago appropriated money to help financially challenged hospitals, and Tufts Medicine’s acute care facilities should gain some additional support from a $58.5 million pool that has been identified to help support hospitals serving higher proportions of Medicaid patients. Some COVID-related federal funds now in the process of being distributed to hospitals could also help.

Over the longer term, Tufts Medicine requires sufficient revenues from Medicare, Medicaid, and private payers to be able to serve the diverse economic, racial, and ethnic groups it does now. I would hope that Tufts Medicine’s commercial and Medicaid rates can be adjusted upward so it can cover its expenses and compete effectively in the marketplace.

Starting from a place of having the second lowest relative commercial prices among the state’s academic medical centers, even some modest upward adjustments would not thwart Tufts Medicine’s identity “as the high value, affordable alternative to more expensive systems” that former Blue Cross CEO Andrew Dreyfus recently called it in the Boston Globe.  My hope is that Andrew’s colleagues, whether his successor at Blue Cross, Sarah Iselin, or Point 32 CEO Cain Hayes, would see things in a similar light, and at least in the short term make some adjustments in their contracting approach to Tufts Medicine and its various provider groups.

Of course, we should all greatly prefer that those additional insurer dollars could come from slightly reducing regular increases paid to some of our state’s overpaid providers—and not be raised in a way that results in premium payers just paying more. The state’s Health Policy Commission has for a number of years been asking the Legislature to pass a law that at least tries to temper some of the market dysfunction in private price negotiations.   Whether it is absolute price caps or caps on price growth, finding a way for total state health care cost growth to remain under control while paying providers like Tufts Medicine more fairly in the private payment market seems like it will require government intervention to happen in a sustained way.

In a similar fashion, some tweaks to Tufts Medicine’s Medicaid rates seem only fair. Its payer mix has moved away from commercial towards greater Medicaid proportions in recent years, but it does not receive the sort of enhancements that Boston Medical Center or the Cambridge Health Alliance obtain for serving Medicaid patients.

An appropriate question down the road, perhaps after a few years of the organization building its net assets, could be whether Tufts Medicine and the patients it serves would be better off  if it were in a strategic partnership with some other health system to gain overhead savings or optimize clinical services integration.

It was only eight years ago that Tufts Medicine (then named Wellforce) explored a possible merger with Boston Medical Center. Ultimately, both parties backed off, but I wonder if a few years from now, with a more stable Tufts Medicine in place, a merger with BMC or some other provider could be revisited.

It is sad that Tufts Medicine has gotten to this more challenging place financially, but its turnaround is something that can certainly happen and without major dislocations. It will take management vigilance and a team effort involving its medical staff and broader workforce. External payers–both commercial ones and the state–should also see a need to make some adjustments in their payment levels short term.

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Longer term, it will likely take legislative involvement to craft a set of rules that either incorporate a global budget system, or guide a private market negotiation system that can result in fairer prices being paid to high value providers like Tufts Medicine.

Paul A. Hattis is a senior fellow at the Lown Institute.