Tufts medical center to sever links with other hospitals

The Tufts New England Medical Center (T-NMEC) and the Lifespan Alliance, a regional hospital and physician network, have announced that they will end their formal relationship after five years of cooperation.

Its relationship with the Lifespan Alliance was intended to increase referrals to the hospital, the main teaching facility of the University's Medical School. But executives at the T-NEMC criticized functional aspects of the relationship, The Boston Globe reported, and were especially disappointed with the lack of referrals to T-NMEC by doctors in Lifespan hospitals. The hospitals within the Lifespan alliance, however, cross-referred patients and maintained equal rates.

Citing financial disappointment with the relationship, the T-NEMC decided to sever its ties to the Lifespan Alliance this summer and develop relationships with individual Massachusetts hospitals instead. The decision is pending approval by state health officials here and in Rhode Island, where Lifespan is based.

The dissolution of the T-NMEC-Lifespan relationship is a hospital-to-hospital decision that will not affect Tufts medical students, Dean of the Medical School Dr. John Harrington said. A spokeswoman for the Medical School refused to comment further.

Since it joined Lifespan in 1997, the T-NEMC has paid $40 million a year in exchange for legal advice, malpractice insurance, computer services, laundry, human resources, and contract negotiations with insurance companies. Lifespan paid T-NEMC $8.5 million annually to finance large projects, including the purchase of medical equipment.

Disappointment in the financial relationship was evident when the T-NEMC ran a $10 million operating loss last year, the Globe reported. The T-NEMC was not receiving much in return from Lifespan, Craig Kornett, a senior director of the bond-rating agency Fitch, told the Globe.

When T-NEMC and Lifespan first joined forces, there was a widespread expectation that health care financing would eventually be consolidated, resulting in multinational systems, which would provide all necessary care. Industry insiders predicted the future domination of "capitation," whereby a single patient reimbursement would be used for all hospitals.

Early predictions that the healthcare market would tend towards capitation resulted in over a thousand mergers and affiliations in the early 1990s. When the T-NEMC joined Lifespan in 1997, it was believed that the consolidations were necessary to increase the influence of health care providers in negotiating better rates with health insurance companies.

But the failure of reaching profitability through capitation resulted in the termination of more than 80 percent of health care mergers.

T-NEMC's attempt to consolidate also resulted in disappointment. T-NEMC's connection to Lifespan actually prevented the Medical Center from developing local relationships, according to T-NEMC executives.

"There has been a perception that we're not Massachusetts-controlled," T-NEMC chief executive Thomas O'Donnell, Jr. told the Globe. Although the Medical Center has enjoyed some benefits from its five-year relationship with Lifespan, according to a T-NEMC press release "from the beginning, [the T-NEMC] recognized the importance of developing relationships with other Massachusetts hospitals."

The termination of the alliance between the T-NEMC and Lifespan will allow the T-NEMC to negotiate its own contracts and form alliances with other Massachusetts-based hospitals. Medical School administrators believe that future alliance formations will be accomplished with greater ease and a higher level of satisfaction.

As part of the severance deal, T-NEMC will pay $30 million to Lifespan for equipment the alliance purchased that has benefited the T-NEMC.

Although Lifespan Massachusetts will no longer control T-NEMC, certain aspects of the relationship between the two hospitals will be retained. The T-NEMC will still pay Lifespan an undisclosed amount for laundry, information technology and insurance services and partnerships in liver and heart transplantation and radiation oncology projects between the two organizations will remain intact.

Lifespan member hospitals include Rhode Island Hospital, its Hasbro Children's Hospital, the Miriam Hospital, Emma Pendleton Bradley Hospital, and Newport Hospital.