Hospital changes expansion partner

Beth Israel Deaconess Medical Center has foiled Tufts-New England Medical Center's plan to build a $300 million suburban hospital with New England Baptist Hospital . Instead, New England Baptist and Beth Israel Deaconess will work together on suburban expansion.

The realignment highlights the fierce competition among city teaching hospitals eager to strengthen their positions in suburban healthcare markets.

New England Baptist, headquartered in Mission Hill, and Tufts-New England Medical Center, based in Chinatown, said in September that they planned to build a 190-bed hospital at an unspecified suburban site. Both institutions said they would keep their core operations in Boston but needed a campus that was more convenient for suburban patients. Under the plan, it would have taken five years to open the new facility.

Beth Israel Deaconess is now promising to make New England Baptist's suburban expansion faster and less expensive. The two hospitals signed an agreement that calls for spending up to six months exploring how to renovate and expand the campus of Beth Israel Deaconess Hospital Needham .

The cost and number of beds have not been disclosed, but construction would be completed in less than the time envisioned in the deal between Tufts-New England and New England Baptist, executives at both hospitals said. Details are yet to be negotiated.

"The Needham opportunity would allow us to be in the market sooner and at a lower capital cost," said New England Baptist chief executive Joseph D. Dionisio . "Given those factors, we felt compelled to explore the feasibility of a collaboration at Needham."

Dionisio said the plan launched last year to build a new hospital from the ground up with Tufts-New England Medical Center was proving to be more costly than expected. A site had not yet been selected. Dionisio said he was approached about forging an alternative deal with Beth Israel Deaconess by Dr. Stuart A. Rosenberg , president of the Beth Israel Deaconess physicians group. Rosenberg said he was partly motivated by the fact that New England Baptist and Beth Israel Deaconess are members of CareGroup , a healthcare network that shares debt.

"I just said, 'Why aren't we working together?' " Rosenberg said. "It wasn't to scuttle anything with NEMC."

Beth Israel Deaconess chief executive Paul Levy said yesterday he was unaware that Beth Israel Deaconess executives initiated the conversation about a project at the Needham campus. Beth Israel Deaconess did not seek to block the deal with Tufts-New England Medical Center, Levy said, although he speculated that it would have been prohibitively costly.

Dionisio told the Globe last year that he had approached Beth Israel Deaconess about building a suburban hospital and had been rebuffed. Levy confirmed at the time that he rejected the idea, saying he wanted to focus on enhancing the Needham campus, not building a new hospital.

But yesterday, Levy said the Needham opportunity could help both hospitals.

"We were pleased to hear from New England Baptist that they were interested in pursuing this with us at Needham," he said.

The early stages of negotiations will focus on how revenue from procedures performed at the suburban facility would be split between physicians at the two hospitals, Levy said. The next stage would involve determining the scope of the building project. Needham currently has 41 beds, and the hospital was already planning to add 20 more.

Other Boston teaching hospitals, including Massachusetts General Hospital and Children's Hospital Boston, are also opening facilities in the suburbs as they compete for patients reluctant to come to the city for medical care.

Tufts-New England Medical Center said it was not concerned that its deal with New England Baptist is not going forward. The hospital plans to pursue opening its own suburban campus, but also welcomes negotiations with potential partners. It has received proposals from developers for six undisclosed sites and has winnowed the options to three, said the hospital's chief executive, Ellen Zane . Tufts-New England Medical Center plans to raise money for the project by selling some of the buildings it owns around its Chinatown campus, Zane said.

The New England Baptist partnership, she said, "was not a critical element in our ability to go forward with this. It was always the cherry on the ice cream."

Expanding the hospital's markets outside of downtown is a key component of Zane's strategy. She engineered an economic turnaround at the struggling hospital in 2005, ending the year with a profit, but last year the hospital only broke even. Zane attributed the weaker performance to longer inpatient hospital stays during the summer, resulting in a patient-volume decline of about 2 percent for the year.

"There does seem to be interest in this project," she said. "We will evaluate potential partnerships, but our steady-at-the-helm approach is assuming there are not partners."

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