In only 18 months on the job, the chief operating officer of Brigham and Women’s Hospital had weathered relentless and unforeseen events that battered the elite Harvard-affiliated medical center.
A record snowfall had paralyzed Boston and stanched admissions for a month. Installation of a $400 million electronic health record system had obscured a fall-off in patient volume. And the hospital had lost $24 million preparing for a threatened nurses strike.
But by July 2016, with the hospital’s finances improving, Dr. Ron Walls was upbeat. “I had this moment,” he recalled, “when I said, they can’t possibly throw anything more at me now.”
The moment didn’t last.
The hospital’s new chief financial officer poked his head in Walls’s office. “Got a quick minute?” he asked.
He was there to sound an alarm: In the 2017 fiscal year that was about to start, he told Walls, operating income wouldn’t cover the hospital’s expenses; 2018 would be in the red as well.
“Chris, how do the numbers come back up?” Walls said he asked. The CFO, Christopher Dunleavy, was ready with a solution: Cut $50 million from the hospital’s $2.6 billion in annual spending.
That conversation set in motion an unprecedented cost-cutting drive that would affect the jobs of hundreds of the hospital’s 18,000 employees and reach into every corner of the institution — even overriding nurses’ choice of mattress pads. It also led to an aggressive push to boost revenues 4 percent a year.
Over the past three months, the Brigham provided STAT unusual access to meetings of its top management and internal deliberations and documents. This inside look shows how one of the nation’s leading hospitals is confronting the daunting financial and marketplace forces buffeting academic medical centers across the U.S.
“This wasn’t about ordinary cost-cutting,” Walls said. “It was very clear we had to become a much leaner, more efficient organization.”
The heart of the Brigham’s austerity plan was a buyout offered this past June to more than 1,000 senior employees, including more than 400 veteran nurses. Some 800 workers decided to retire, including 7 percent of the nursing staff — a remarkably high acceptance rate. Many of them are leaving this week.
While hundreds of new nurses are being hired at substantially lower entry-level pay, the large exodus underscores a critical challenge for the Brigham’s leadership: how to cut costs without harming patient care.
One of the departing nurses, Hallie Greenberg, called the buyout generous but worried that the hospital will miss their collective experience and knowledge. “The senior folks teach the junior folks,” she said. “There is so much about every profession that is unwritten law.”
Academic medical centers are expensive to run: They deploy an army of specialists and sophisticated technology to treat the sickest patients. They’re the backbone of the nation’s biomedical research enterprise. And they train new doctors.
But they’re now caught in a vise.
Private and government insurers are tightening reimbursements as the cost of drugs and other essential elements of care are on the rise. An aging population with chronic diseases is seeking more complex, and costly, care, while routine and often more profitable cases — delivering babies or replacing knees — are increasingly shifting to community hospitals.
And in Washington, uncertainty over research funding for the National Institutes of Health and the futures of Medicaid and the Affordable Care Act clouds the reliability of key hospital revenue streams.
“This is a pivotal moment for academic medicine,” said Dr. Betsy Nabel, president of the Brigham. “The nation needs academic medical centers to train the next generation of physicians and scientists and drive discovery and innovation in medicine.”
After the Brigham launched its push to slash spending, it got more bad news from its parent company, Partners HealthCare, the big integrated health system that includes Massachusetts General Hospital. After years of criticism that it charges higher prices than most of its competitors, Partners announced a plan to cut about $500 million over the next three years. The Brigham’s share is about $150 million, meaning its own 2018 effort is just a start.
The Brigham isn’t calling any of this a crisis. Some of the financial pinch reflects payments for major capital projects, including the medical record installation and the recently opened $600 million Building for Transformative Medicine, a combined outpatient care and research facility from which the hospital expects a return.
For all the cost-cutting now, the hospital has long been a powerful economic engine, racking up $2.7 billion in revenue last year while operating in the black. On average, 94 percent of its beds are occupied and patients are routinely backed up in the emergency room or in recovery after surgery, awaiting an open bed.
Still, Walls knew that a cash-flow crunch is a worrisome financial indicator, potentially affecting the hospital’s ability to borrow money to invest in the technology and facilities required to maintain its top standing.
Dunleavy’s warning would have been more disconcerting, however, if Walls hadn’t immersed himself in the nitty-gritty required to pull the hospital out of its tailspin the previous year. He figured his team could handle anything after mastering the arcane world of operating room scheduling.
Surgeons are a key power center of a hospital, and their operating room schedules are considered sacrosanct — so essential to their jobs that the days and times are often set out in a hiring letter.
“Surgeons own that time,” Walls said. “You don’t mess with a surgeon’s block time just like you don’t mess with a person’s payroll.”
But Walls and his team messed with it anyway.
Just two months into the 2016 fiscal year, they discovered that the hospital’s operating margins were already running $27 million under the budgeted amount. They had relied on faulty estimates of their 2015 patient volume — thanks to data lost during the transition to the new Epic electronic records system — and set targets for 2016 that were too optimistic.
Walls wondered whether he had “steered the ship off the rocks onto an iceberg.”
He concluded that the Brigham, like many hospitals, wasn’t vigilant enough in ensuring that assets such as operating rooms and MRI scanners were being used efficiently. So he directed his senior VPs to create and actively monitor a set of “vital signs” of hospital performance — everything from the number of surgeries to how many patients walk out of the emergency room before getting treatment.
They ran an analysis of OR occupancy each hour of the day and plotted the results on a graph. It resembled a wedding cake, with a red line, representing the number of ORs with patients in them, cutting through it.
The “cake,” as Walls began calling it, starkly showed how many ORs were staffed and available at any given hour but idle because no cases were scheduled — and why OR use was running in the low 70 percent range.
Brigham surgeons are assigned OR rooms in four-hour blocks. The practice was that if a surgeon hadn’t booked a slot 10 days in advance, it would be allocated to other surgeons in his or her division. The division could hold on to the times until 48 hours in advance before releasing them to other surgical specialties. That left little time to book a new case.
The main reason surgeons hang onto their blocks, Walls said, was fear of not having a room available for a last-minute case. So armed with the cake analysis, Walls, with the support of Dr. Gerard Doherty, the Brigham’s chair of surgery, devised a new plan: The surgeons and their divisions would release any unbooked slots 10 days in advance to the entire surgical community. In return, they were guaranteed an OR if they needed one at the last minute.
“My guys are going to kill me,” one surgeon told Walls, “but I think this might work.”
Doherty helped sell it. “We had to ask for a little trust in the beginning,” he said. The hypothesis was, it would make more times available for surgeons. “If Dr. Smith has a Tuesday slot blocked, nobody else can get in there,” he said.
“It lifted the mood of the whole room,” Walls said.
It also lifted surgery volume. By May, partly due to this success, the hospital had fully recovered from the $27 million shortfall.
That experience helped prepare Walls for this year’s round of cuts, when he again messed with the Brigham’s traditional ways of doing business.
The saga of the mattress pads:
Of all that Walls had to worry about, mattress pads may have seemed the least obvious.
But the subject arose at a meeting this past June, called to wring $10 million in savings from the hospital’s huge medical supplies budget. A Partners executive had come up with only a $3 million trim, exasperating Walls.
Have we turned over every stone, he asked the executive. Surely a company the size of Partners could leverage its purchasing power to come up with more savings.
When the executive responded with “mattress pads,” Walls had no idea what she was talking about.
She explained that a few years earlier, Partners hospitals had collaborated on a test of several rival pads to determine whether they could agree on one and negotiate a volume discount. The best pads are highly absorbent and resist wrinkling underneath patients, which can increase the risk of bed ulcers.
That choice, the executive added, cost the hospital an extra $400,000 a year.
For a moment, the room was silent. “Are you serious?” Walls finally asked.
If every other hospital in the system thinks the new pad is OK, it should be OK with the Brigham, he said, turning to the hospital’s head nurse. Without compelling evidence that it would affect patient care, he told her, the decision would have to be reversed.
The issue was kicked to the hospital’s new products committee, where Dorothy Bradley, program director for nursing simulation, ran a quick absorbency test. Spreading the two pads on the floor, she poured water on them and concluded there wasn’t an important difference. She also called a Mass. General wound care nurse, who told her they hadn’t seen any increase in pressure ulcers with the winner from the earlier trial.
With that information, the committee quickly acquiesced in shifting to the Partners pad, which was one-third the price.
“People always like the one they’re used to,” Bradley said as a way of explaining the initial decision. “I don’t believe we knew we were the only outliers.”
In Walls’s view, the original decision “was about allowing an individual part of the system the autonomy to opt out just because it wanted to.” The hospital no longer can tolerate that approach, he said: “Those are the kinds of things we have tightened down.”