Partners pressures hospital group

Partners HealthCare, the parent corporation of Massachusetts General Hospital and Brigham and Women's Hospital, is using its market clout to pressure a North Shore hospital group and its 300 doctors to send patients to Partners facilities, including to a hospital in Salem that is losing money.

Partners executives have notified Northeast Health System, which operates hospitals in Beverly and Gloucester, that it will be cut out of a lucrative affiliation agreement unless it cooperates more fully in Partners' vision for a regional healthcare network.

The reason for the ultimatum: Northeast Health has been referring some patients requiring advanced care to hospitals outside the Partners network. Once patients are sent elsewhere, Partners says, it is unable to monitor the quality of their care.

''The leadership at Northeast Health System has elected to develop and participate in a number of clinical programs that are inconsistent with those in place elsewhere in the network," Dr. Thomas H. Lee, chief executive of Partners Community HealthCare, the contracting entity for about 4,500 Partners physicians, said in an internal e-mail last month. ''The more that care leaves our system, the less likely we are to be able to improve it."

If Partners ends the affiliation, Northeast Health would no longer benefit from the high-compensation contracts Partners is able to negotiate with insurance companies because of its size. That could cost doctors associated with Northeast Health 10 to 20 percent of their income, or tens of thousands of dollars annually.

The showdown between New England's largest healthcare network and the much smaller Northeast Health exposes the tough economics of healthcare and renews debate about Partners' size and position in the Boston market. The nonprofit operates five acute-care hospitals and has a physicians group of 4,500 doctors. It has not released performance figures for 2005, but in 2004 total operating revenues were nearly $5 billion.

Northeast Health owns the 227-bed Beverly Hospital and the 58-bed Addison Gilbert Hospital in Gloucester. Partners says the move is necessary to improve clinical care for patients on the North Shore. Critics say it is motivated by business considerations.

''We were saddened by their decision," said Northeast Health System chief executive Stephen R. Laverty. ''We thought that providing a great environment for patients and physicians was what it's all about. Apparently, it's about something else."

But Laverty also praised the ''lofty status" of the Partners core institutions, Mass. General and Brigham and Women's, which are two of Harvard Medical School's teaching institutions. ''I'm going to continue to hope that their intentions are noble here," he added.

Paul Levy, chief executive of Beth Israel Deaconess Medical Center, a major Partners competitor that has benefited from Northeast Health System's independence, was skeptical of Partners' claims that it is acting out of clinical interest.

In 2004, Northeast Health System developed an oncology program with Beth Israel, as well as a cardiology program with the Lahey Clinic in Burlington. Those collaborations have ''upset" Partners, Levy said.

''This is a heavy-handed assault on a high-quality, independent hospital," he said. ''This is part of a clearly conceived plan by Partners to obtain even more market dominance in the North Shore region."

Partners officials have been trying to stem financial losses at the Partners-owned North Shore Medical Center in Salem, which lost $29 million in fiscal year 2005. Northeast Health's performance has been better: It ended the year with a $3.2 million surplus.

Lee said having patients treated in Partners-affiliated institutions allows it to reduce the chance of medical errors and is also necessary to meet the requirements of ''pay-for-performance" contracts with insurance companies. He called Levy's allegation that Partners wanted to take control of the North Shore market ''preposterous."

''This isn't about retaliation about a modest number of referrals, this is about integration of care," Lee said.

The competition between a hospital affiliated with Partners and another one owned by Partners is creating problems, he said. ''We think the right thing for patients up there and the region is for us to really collaborate or really compete. The middle ground where we have both things going on at the same time is getting increasingly uncomfortable for physicians, and it's not safe for patients."

Partners has set an April 30 deadline to produce a new affiliation agreement. If the deadline is not met, the affiliation will end in December 2006. Laverty did not rule out the possibility of negotiations, although he did appeal to insurance companies to provide comparable payments to his member physicians in the event of a split from Partners.

Paul Ginsberg, executive director of the Center for Studying Health System Change, a nonprofit policy group in Washington, D.C., that studies healthcare markets in a dozen metropolitan areas including Boston, said the move is consistent with recent Partners pledges to tighten its network.

''Northeast Health System really isn't playing the role that Partners is looking for as part of its system out in the Beverly area," Ginsberg said. ''I don't think I'd characterize this just as a power play. Partners really is seeking more integration among its hospitals."

State Senator Bruce E. Tarr, who represents communities along the North Shore, said he has been closely watching healthcare competition in the area. ''There remains a lot of tension between community hospitals and major Boston-based hospitals," he said. ''This kind of action is reflective of that tension, a limiting of sharing the wealth between the Boston-based hospitals and the outlying hospitals."

Offering financial inducements to physicians for referrals is illegal under federal law. There also are prohibitions against forcing physicians to refer patients to particular institutions, said William J. Spratt Jr., a healthcare lawyer in the Miami office of Kirkpatrick & Lockhart Nicholson Graham LLP.

But there are exceptions to the rules when the motivation for shaping referral patterns is an effort to improve clinical care through networks like Partners, Spratt said.

''It's a balancing test of weighing the independent medical judgment of a physician against perhaps the benefit that might be derived from the clinical integration," he said.

The competition between Northeast Health System and North Shore Medical Center has been intensifying. Partners is planning to build a $60 million outpatient care center in an old light-bulb factory in Danvers, which would compete directly with an outpatient center that Northeast Health System said it is building on the grounds of the former Danvers State Hospital.

Christopher Rowland can be reached at crowland@globe.com.