Steward Health Care has proved a game changer for medicine in Massachusetts. The for-profit hospital system formed when private equity firm Cerberus Capital Management two years ago rescued a group of struggling Catholic hospitals, with St. Elizabeth’s and Carney Hospital at the helm. In Sunday’s Globe, reporter Robert Weisman took a long look at how Steward Health Care is reshaping medicine in Massachusetts.
“There’s a bubbling caldron of change going on in Massachusetts health care, and Steward is the single biggest part of it right now,” James Roosevelt Jr., chief executive of Tufts Health Plan, told Weisman.
A recent report from the attorney general’s office found that the system has lost tens of millions of dollars. But that’s not the whole story, Weisman writes:
Steward “has capital, and capital is the name of the game,” said Donald J. Thieme, executive director of the Massachusetts Council of Community Hospitals. “The new model seems to be bigger is better if you’re going to survive. Every hospital has to think about its place in the future.”
Over the past two years, Steward has added to its portfolio by buying four more community hospitals, wooed large groups of doctors from Harvard-affiliated rivals Beth Israel Deaconess and Partners HealthCare, taken over post-acute care provider New England Sinai Hospital in Stoughton, and struck eyebrow-raising pacts to send patients in need of more complex care from its community hospitals to Partners-owned Massachusetts General and Brigham and Women’s hospitals in Boston.
But it’s too early to say whether Steward’s model is more economical. The attorney general’s report found that while its hospitals are the low-cost providers in some communities, their prices are higher than those of competitors in other locales.
Paul Levy, former chief executive at Beth Israel Deaconess Medical Center, wondered aloud on his blog about how Steward doctors will fair in the long run, as the system signs contracts with Blue Cross Blue Shield of Massachusetts that return to providers a portion of what they save compared to a baseline in medical spending:
Even those provider groups with the most experience with risk contracts are now finding how difficult it is to generate surpluses. Does Steward have the care management system in place to be successful under this payment scheme? How does it control the costs of tertiary referrals now that St. Elizabeth’s really isn’t a high-end hospital and when its main clinical partner for those referrals is MGH?
One commenter on Weisman’s story raises an interesting point about whether Steward’s model meshes with the new model of health care created under state and federal health laws. Accountable care organizations also are designed to push hospitals and doctors to be more cautious in spending health care dollars by giving them a stake in potential savings.
The business model Steward is employing may have some benefits in terms of efficiencies and economies of scale, but its core mission—to provide value to its stockholders (which, by law, is the core mission of any for-profit enterprise)—is not consistent with an ACO model. ACO’s are all about managing the health (and illness) of a given populace, for a fixed amount of reimbursement. Although the Steward business model may help position them to become an ACO, the goal of ACOs is to keep patients healthy and OUT of hospitals. Buying up hospitals (rather than PCP practices) is not the path towards an ACO . . . unless you plan on closing them in the future as fee-for-service disappears.