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Brigham and Women’s trims costs

Hospital aims to cut $35m in front of new regulations

By Robert Gavin
Globe Staff / April 24, 2010

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Brigham and Women’s Hospital is seeking to cut millions of dollars from next year’s budget as part of an effort to reduce health care costs and respond to what it says are uncertain economic and regulatory environments.

Department managers are being told to submit financial plans for the fiscal year starting Oct. 1 that trim spending by about 3 percent, roughly $35 million of the hospital’s $1.8 billion budget.

Executives at the Harvard University-affiliated teaching hospital have put in place a short-term “hiring pause’’ as they formulate the budget, but no layoffs are planned. It implemented a similar hold on hiring for two weeks last year.

Officials said the proposed budget reductions are unrelated to the decision by Harvard Vanguard Medical Associates, the state’s largest independent doctors group, to curtail referrals to Brigham and Women’s. Patient volume remains unchanged since that decision earlier this year, with other patients filling slots left open by fewer Harvard Vanguard referrals, said Michael Reney, the Boston hospital’s chief financial officer.

Reney said the hospital is attempting to reduce spending to put it in line with state and national efforts to control escalating health care costs. For example, Brigham and Women’s expects some Medicare payments to be reduced.

“There is the need to examine health care costs across the hospital,’’ Reney said. “We want to participate in that process and be part of the solution.’’

Such cutbacks will become common among hospitals as the recently enacted federal health care overhaul law is phased in over the next few years, said Marc A. Bard, a doctor and Needham health care consultant.

“Payments to hospitals are going to diminish,’’ Bard said. “Every hospital in the country, they’re all trying to get unnecessary costs out of the system.’’

Brigham and Women’s, which has about 13,000 employees, is part of Partners HealthCare System Inc., the network of doctors and hospitals that includes Massachusetts General Hospital, another Harvard affiliate. Partners, the state’s largest health care provider, has come under scrutiny in recent months because it receives higher insurance reimbursements than other hospitals for providing the same services.

In February, Harvard Vanguard Medical Associates and its parent, Atrius Health, said they would make fewer referrals to Brigham and Women’s as a way to better coordinate patient care and reduce costs, and began sending more patients to Beth Israel Deaconess Medical Center.

“We have developed a very robust system of shared access to electronic medical records, which, of course, is one of the most important ways health care quality will be improved and costs controlled in the future,’’ said Stan Lewis, Beth Israel’s senior vice president of network integration. “That access has been particularly helpful to Atrius physicians in caring for their patients and underscores our organizations’ shared view of providing the right care in the right place at the right time.’’

Beth Israel declined to comment on whether its patient volume has increased as a result of Harvard Vanguard and Atrius referrals.

Those referrals accounted for about 16 percent of Brigham and Women’s medical and surgical volume, said hospital officials. They expect the referrals to decline by half by October 2011.

But the hospital, which admits about 50,000 patients a year, said it is operating near capacity, with demand for services often exceeding available rooms.

Robert Gavin can be reached at rgavin@globe.com.