The health care environment in Massachusetts at the time Ellen Zane took over Tufts-NEMC was tenuous, at best. Boston was a hub of medical activity and thought to be one of the best in the nation when it came to advances in medicine and caring for patients. Unfortunately, there was more to the issue than just how well the hospitals cared for the patients they saw each day. There was trouble brewing underneath all the perceived joy of being able to save lives and protect patients, and that was something of which many hospital staffers were unaware. The only people who were "in the know" were those who were focused on the bottom line and who were high up in the hospitals and other medical facilities in Boston and throughout the entire state of Massachusetts. The biggest problem was that hospitals were treating patients but losing money. It was happening everywhere, and Tufts-NEMC was no exception to the rule of needing to bring in more money than it was paying out.
Hospitals can easily have financial difficulties (Bond & Bond, 1994; Tulenko, et al., 2009). Often, the problems come about because the hospitals see their costs rising and yet they are not getting the payments they are owed (D'Antonio, 2010). Some of that comes about from people who need treatment but then simply cannot pay for that treatment (D'Antonio, 2010). Other times it comes about because the hospitals do not receive the money they are actually owed from Medicare, Medicaid, and private insurance companies (D'Antonio, 2010). People who are not involved with medical institutions do not realize the deep significance of this issue, but those who are trying to keep medical entities financially afloat struggle with the problem every day (Simmons, 2009; Smith, 2002).
The Trouble with Tufts-NEMC
During the 1990s, Tufts-NEMC had serious problems. These included patient stays that were costing the hospital money, higher overall costs, an increased debt load, lack of payments from insurance, over-spending, and other issues. One of the biggest problems it faced was a deregulation of the medical industry by the state. When a state chooses to deregulate medicine, almost anything can happen (Simmons, 2009). In the case of Massachusetts, deregulation meant that there were all kinds of mergers and acquisitions between hospitals both in-state and out of the state. Everyone started to merge with everyone else in order to build large medical corporations and have more capital with which to work. On the surface that seemed like a good plan, but most of the hospitals that merged with others or acquired others were not that much better off than they were before the merger or acquisition took place. Tufts-NEMC resisted for awhile, but eventually decided to merge.
They got involved with a company from Rhode Island called Lifespan. It seemed as though Lifespan had much to offer, and there was serious consideration for the financial aspect of what it could bring to Tufts-NEMC. The one thing that Tufts-NEMC did not seem to consider or address properly is that Lifespan was a completely out-of-state hospital with no ties to the Massachusetts market. In many industries that might not matter, but health care has a "take care of one's own" mentality or credo in many cases. With that in mind, Tufts-NEMC was basically shunned because it was involved with an out-of-state company that may not have the best interests of those who live in Massachusetts at heart. That hurt the hospital significantly, and in a way in which Tufts-NEMC was not expecting. It provided a new level of problems in an area where the hospital thought it would see improvement.
In the merger with Lifespan, Tufts-NEMC discovered that it was facing even more financial difficulty than was previously expected. That, naturally, was not good news for a hospital that had merged mostly because it was failing and needed something to stop it from going under. Instead of building a future with Lifespan, Tufts-NEMC found itself ignored by those it felt it could trust and rely on in the past. Additionally, many of the operations that were previously handled at Tufts-NEMC, such as billing, were moved to a central location in Rhode Island. That might seem as though it would take some of the burden off of Tufts-NEMC, but that was not ultimately the case. Instead, people who had been working in those departments at Tufts-NEMC, often for many years, lost their jobs or were reassigned to departments where they had to start all over from the trainee stage. Additionally, many people in the community were angry at the hospital for "selling out" to a company in another state, so there was a personal and patient backlash with which to contend.
Possibly one of the biggest problems with the merger, however, is that health care costs in Rhode Island overall were not similar to health care costs in Boston, Massachusetts. The billing and payment departments, which were now in Rhode Island, failed to understand why the costs in Boston were so excessive. They frequently paid out far less than what was actually billed, because they did not feel that Massachusetts health care costs should be any different from those costs in Rhode Island. No amount of discussion appeared to be correcting that problem, which meant that Tufts-NEMC was continuing to simply lose money on the merger it made with Lifespan. Often, health care companies do not realize the need to discuss these kinds of market issues with companies with which they are thinking of merging (D'Antonio, 2010; Smith, 2002). That can mean serious trouble for the company or companies if they do not realize the market discrepancies and differences.
The Changes in 2002-2003
By 2002-2003, Tufts-NEMC was looking to get out of the merger with Lifespan. It had been a bad move from the beginning, and there were already too many years invested in it. It could not simply be undone, however, and getting free of Lifespan ended up costing Tufts-NEMC $30 million. The company also lost hundreds of millions of dollars in its fiscal year because of the issues with Lifespan. However, it was able to get free of the other company and start focusing on itself again. Still, the damage had been done and the hospital was losing millions of dollars every month. The only advantage that Tufts-NEMC really had in getting away from its merger with Lifespan was that it went from losing $6 million per month to "only" losing $3 million per month. Even for a large, multi-million dollar company with plenty of assets, that is too much to be losing on a consistent basis if there are any plans to stay afloat or to build the company and allow it to grow into something more significant and more valuable to the patient base and the community.
The cost of separation after a merger is generally very high, no matter what the company or industry (Smith, 2002; Tulenko, et al., 2009). Often, that is due to the fact that departments have been dismantled and consolidated. They now have to be recreated at one of the companies, and the other company has a high level of work to do in order to allow the first company to "take back" all of its information. When everything has been integrated it can be hard to take it apart and ensure that each company gets what it came in with plus everything related to it that has happened since the merger. Simply sorting out all the patient accounts can be an enormous and time consuming process for which the company wanting to dissolve the merger will generally need to pay.
Ellen Zane's Arrival
Ellen Zane came to Tufts-NEMC in 2003 and was made CEO. She was the first female, non-medical individual to ever hold that position at Tufts-NEMC, but she was welcomed. She had been in the business of saving hospitals and other medical facilities for more than 30 years, and the administration at Tufts believed in her ability to pull them out of their tailspin and ensure that they could keep their doors open and keep treating patients well into the future. During the first six months she was in charge, Zane did some specific things to take action and start making changes. While some of these changes were argued against at first, in the end it was easy to see why the decisions were made. Even those who had previously disagreed with her determined that she had done the right thing and that she knew what she was doing when she elected to make often unpopular decisions about the future of the medical facility and some of the staff and administration who worked there.
The first thing Zane did, and almost immediately, was to bring in a group of consultants hired by her personally. These consultants were to conduct what she called a "rapid diagnostic" of the problems…