Ellen Zane Faced a Significant

Ellen Zane faced a significant challenge in initiating change at Tufts-NEMC. The health care environment in Massachusetts was characterized by frequent change. The state had long been known for its leadership position in health care, and the industry is big business in the state, accounting for 11.7% of the gross state product. The situation facing providers, however, is challenging. Providers are able to charge more for their services to individuals and insurance companies because of the state's reputation for high quality care, but payments from government plans Medicare and Medicaid have not kept up with the cost of delivering health care. The industry requires constant investment in new technology and equipment, and this has left providers in a situation where costs are increasing faster than revenues. In the past four years, acute care hospitals in Massachusetts have begun to experience negative operating margins.

The demographics also appear to be changing. Discharges to home care and to nursing homes have increased substantially since 1990, indicating that patients are older than previous. Most of these patients come from managed care, however, as that category of revenues has increased significantly. As a result of these challenges, the industry has undergone a period of consolidation of late. Health care plans consolidated into three major competitors, so providers needed to be aligned with one of these in order to generate patient volumes. It was also becoming difficult for providers to attract quality staff, and there was rampant poaching in the industry. Rising numbers of uninsured and underinsured were also creating debt issues for providers. All of these challenges required providers to reform themselves in order to meet the challenges of the 21st century, and Tufts-NEMC is no exception.

2) In the 1990s, amid industry deregulation and consolidation, Tufts-NEMC faced a turbulent external environment that was mirrored by changes in the internal environment as well. The company struggled through much of the decade, posting gains mainly when assets were written down as opposed to gains from operations. Debt was increasing due to increased capital investments, increased difficulty in collections and decreased payments from government providers. The company was losing physicians in the difficult employment environment as well. Tufts-NEMC had been taken out of the Harvard Pilgrim network, reducing patient volumes further.

Tufts-NEMC attempted to solve these problems by partnering with Lifespan, a Rhode Island provider looking to gain further access to the New England market. The merger failed, however, as the benefits of the merger failed to materialize and there were issues with regulators as well. The merger cost the company talent, customers and social capital in the Massachusetts market. Ellen Zane concluded that the merger was ill-conceived and ill-executed.

As a result of these troubles, Tufts-NEMC exited the 1990s not only in worse position than it had started the decade, but worse off than the already poor position it had been in for most of the decade as well.

3. By 2002-2003, the situation at Tufts-NEMC was dire. The company was losing significant amounts of money, and those losses were escalating. The challenging business conditions had remained, and the company had done little to address them. Worse, the merger created more problems and Tufts-NEMC had failed to extricate itself from the merger either. This left the company a shell of its former self, possibly even without the staff to deal with the problems it faced.

Faced with heavy losses, the company was having difficult with its financing. The state attorney general had stepped into the situation to ensure that Tufts-NEMC could meet its bond covenants. It would be reasonable to expect that securing future financing would be either impossible or difficult. The company was in the process of re-creating the administrative departments that it had lost as a result of the merger. Some cost-saving improvements were on the table that would hopefully bridge much of the losses, but at this point the company is still slated to lose money in 2003 even if all projections materialize at their most positive. Staff reductions are also underway, which is a risky proposition. It brings the company out of its financial difficulties, but reduces operating capabilities. The hospital is also looking to sell some of its real estate. Again, this generates income in the short run but does nothing to solve the hospital's ongoing problems and it hampers the ability of the hospital to expand in the future.

4. There were a number of steps that Ellen Zane undertook in her first six months on the job as part of the organization change and rebuilding process at Tufts-NEMC. The hospital had effectively lost touch with the political leaders as a result of its merger with Lifespan, so the first step for Zane was to reconnect with the political leaders in order to improve the political environment for the hospital. This required spending substantial amounts of time with city and state leaders, networking and rebuilding the name and image of the hospital locally.

At the same time, Zane brought in a team of consultants to help diagnose the problems at the hospital. With so many problems, they needed to be understood clearly and prioritized so that they could be addressed in the most efficient and effective manner. This information gathering process allowed Zane to take action quickly, but without compromising effectiveness. Once she knew what to do, she had the connections to make the necessary changes happen.