Cut, consolidate, innovate: How one health system turned its hospitals around in four short years

System more than tripled its number of primary care physicians in recent years

In 2011, Steward Health Care was operating at a $59 million loss, and most of its hospitals were struggling financially. Jessica Bartlett reports for the Boston Business Journal on the steps the system has taken to drastically improve its bottom line.

Four years ago, four of the six hospitals acquired by the newly formed health system were operating in the red. And since then, Steward acquired an additional four acute-care hospitals with "languishing" finances, Bartlett writes.

But now, the system says it posted $40.7 million in operating gains for fiscal year 2014, as only two of its nine hospitals operated at a loss.

Here's how officials say they turned things around.

Investments paying off. Steward Hospitals President Mark Girard says the system invested about $100 million in IT systems over the past four years, added a new surgery center at one hospital, and updated EDs at four of its facilities.

Girard says the system is now using analytics to predict patient demand down to a specific season and day of the week, which has helped it better account for staff and other resource needs. "It’s allowed us to achieve an operational history that is unmatched," he says.

Adding providers. Between 2010 and 2015, the system also increased its number of primary care physicians from 300 to 700, and its number of specialists from 1,000 to 2,300. Girard says that while some of the doctors came from acquisitions, most came from adding large physician organizations to its network.

"We acquired an at-home network and embraced alternative payment methods to integrate across the continuum and provide quality and convenience and access," Girard says. "It's a deliberate plan."

And the integration between the physician practices and the system's hospitals has helped direct patients to lower-cost facilities, such as urgent care centers and doctors' offices, Girard says.

Cutting, consolidating. Steward last year also consolidated Merrimack Valley Hospital—which it acquired in 2011 but had posted operating losses annually for five straight years—into Steward Holy Family Hospital.

Plus, the system closed down one hospital in December 2014: Quincy Medical Center, which saw its operating losses rise from $17.3 million in fiscal year 2011 to $39.1 million in fiscal year 2014.

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Other efforts. According to Girard, Steward has also reduced length of stay at its hospitals, and has improved its management of labor costs. And now, officials say Steward had a $50.2 million operating income in the first six months of 2015, higher than the system's operating income for all of 2014.

"We've turned around the financial side and improved quality dramatically," Girard says. "And that's what has made the system profitable" (Bartlett, "Health Care Inc." Boston Business Journal, 9/1; Brino, Healthcare Finance News, 4/17).

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