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Vigorous recovery for Floating Hospital

Cost structure, patient influx lift Boston pediatric center

By Liz Kowalczyk
Globe Staff / February 9, 2011

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Seven years ago, the Floating Hospital for Children was in sad shape: It was losing patients and money — a perilous $1 million a month — and was facing possible closure as it struggled to compete with Harvard’s two renowned pediatric hospitals.

Now, fueled in part by growing alarm over high health care costs, the Boston hospital is experiencing a renaissance.

The number of patients checking into the cherished Boston institution, which began 117 years ago as a hospital ship sailing Boston Harbor, has risen 27 percent over three years. Thirty-five new physicians have taken jobs there, and it is expanding by winning agreements with six community hospitals to help run neonatal and pediatric services.

What prompted the turnaround? The Floating, as it is known, charges thousands of dollars less per case than its competitors, hospital officials say. Ellen Zane, chief executive of Tufts Medical Center, which includes the Floating, is casting the pediatric hospital as a good-quality, lower-cost alternative.

Zane’s timing could not be better. The state and federal governments, insurers, health providers, and employers are intensely focused on driving down costs, following years of punishing increases in health insurance premiums. Under a new kind of contract with the state’s largest insurance company, thousands of doctors in Massachusetts are working within a budget to care for their patients. And because they must pay for their patients’ hospital care out of that budget, physicians said they are suddenly scrutinizing the cost of where they refer them.

That is welcome news for the Floating, where the number of admissions grew from 2,976 in 2008 to 3,766 last year — faster than at Children’s Hospital Boston or MassGeneral Hospital for Children.

“The Floating is back,’’ Zane said in a recent interview. She said that last year’s financial results are not final, but that the medical center overall was profitable, and the Floating broke even or turned a small profit. Revenue from pediatric cases grew 8 percent from 2008 to 2009.

“The times are absolutely ripe’’ for a Floating resurgence, said Nancy Turnbull, an associate dean at the Harvard School of Public Health.

The new spotlight on costs has put pressure on Children’s Hospital, by far the city’s largest pediatric hospital, where executives said over the past two years they negotiated reduced rates with insurers and cut prices — for a total savings last year of about $80 million. Both Children’s and MassGeneral Hospital for Children, which are affiliated with Harvard Medical School, said their admissions are growing, too.

Some doctors who work under a fixed “global budget’’ through a contract with Blue Cross Blue Shield of Massachusetts, and are paying for hospital care out of that budget, said the Floating is still cheaper than Children’s while providing high quality care. The 1,500-physician network affiliated with Tufts estimates that last year it paid on average $6,000 more for an admission to Children’s than for a similar patient to receive treatment at the Floating. Children’s executives said they don’t believe the difference is that great.

Andrew Dreyfus, chief executive of Blue Cross, which has 6,300 doctors working under its global payment contract, said, “We have seen among some of those practices a modest movement from Children’s to the Floating.’’

In addition to capitalizing on the Floating’s relatively low prices, Zane has won over new community hospital partners by promising not to draw away patients who don’t really need to be transferred to a big Boston hospital. This has been relatively easy for her to do because the Floating has just 94 beds.

“Nobody wants to disrupt established relationships between patients and doctors,’’ said Dr. Jerry Wortzman, chief of pediatrics at MetroWest Medical Center, which ended a partnership with Children’s and signed on with the Floating to help run its pediatric units a year and a half ago. But “more of our patients are staying local and when they do need to go into Boston, we’re sending more patients to the Floating.’’

On one recent day, the Floating’s 10-bed intensive care unit — which soon will expand to accommodate 13 children — had just one empty bed. Two of 36 beds were unoccupied on the largest pediatric medical-surgical unit.

Azaria Adipietro, 10, was one of the patients there. Her mother had taken her to the emergency room at MetroWest the day before for a stomach problem, and doctors transferred her to the Floating for tests.

When they arrived, her bed was ready, her name was on the door, and her medical history was already in the computer. “It was seamless,’’ said her mother, Jeannie Adipietro.

“The Floating fell on hard times,’’ said Dr. John Schreiber, who left the top job at the University of Minnesota’s children’s hospital to become pediatrician-in-chief at the Floating three years ago. “Now it’s a cool place to work.’’

With an initial $5 million investment from Tufts Medical Center, Schreiber has hired top specialists like Dr. Johannes Wolff, a brain tumor specialist who came from the prestigious MD Anderson Cancer Center in Texas to head the Floating’s oncology center, and Dr. Michael de Moor, who left Massachusetts General Hospital to oversee cardiology. There is a new bone marrow transplant unit with adjoining apartments for parents, as well as a new cancer clinic. A state-of-the-art pediatric cardiac catheterization lab is under construction.

A nurses union has been critical of Tufts’ management, however. The Massachusetts Nurses Association says Zane is improving profitability by requiring Tufts and Floating nurses to care for more patients.

The Floating will never match Children’s Hospital’s size — 392 beds — or its research prowess. And Children’s and MassGeneral Hospital for Children — which is smaller with 80 beds but is part of Mass. General, the largest hospital in New England — both have community hospital partnerships too.

Because of their size and market power, Children’s and Mass. General have been able to demand higher prices from insurers than Tufts. According to an investigation last year by Attorney General Martha Coakley’s staff, in 2008 Children’s was paid nearly twice as much per patient as Tufts for similar care — though Children’s says it’s unfair to compare a pediatric hospital to a hospital like Tufts, whose average cost is reduced because it also treats less-expensive adult patients.

“We are working with physicians groups to meet their concerns around price,’’ said Wendy Warring, senior vice president of network development and strategic partnerships at Children’s. She said the hospital could not confirm the $6,000 differential cited by doctors because it does not have access to Blue Cross data. But, she said, 30 percent of Children’s patients are on Medicaid, which pays relatively low rates — rates that hospitals often try to make up for by charging more from private insurers.

Warring said Children’s admissions have grown 8 percent in the past three years. Dr. Peter Greenspan, medical director of MassGeneral Hospital for Children, said, “There is no question the Floating is growing,’’ but he said admissions at his hospital have increased too, by 5 percent since 2008.

Dr. Joseph Leader, founder of Woburn Pediatric Associates, said his very large practice is sending more patients to the Floating since the doctors group signed the Blue Cross contract a year ago. “I can argue to a patient that it’s in your financial interest to get the quality of care you need and desire at the best possible price because in the long run it will impact your insurance premiums and copayments,’’ he said.

Liz Kowalczyk can be reached at kowalczyk@globe.com.