Dr. Thomas O'Donnell, chief executive of New England MedicalCenter, was not happy. O'Donnell had gotten wind that Children'sHospital across town had been trying to recruit several NEMCpediatricians. He picked up the phone and called David Weiner, chiefexecutive of Children's.
The conversation, which took place last summer, was terse andpointed. O'Donnell's message to Weiner was clear: Stay away from mypeople.
In corporate America, where elbows are sharp and anything goes,such a phone call is hardly noteworthy. But in the genteel world ofBoston academic medicine, the call was extraordinary, sendingwhispers through the corridors of major health care institutions.
It was an indication of a new era of ruthless competition amongBoston's pediatric hospitals. The managed care revolution that hasswept through health care has squeezed hospitals vying to serve sickchildren. The most visible result locally: a bare-knuckled contestbetween Children's, the 800-pound gorilla of local children'shospitals, and NEMC's Floating Hospital for Children, a much-smaller,struggling contender.
Weiner declined to comment for this story. But O'Donnell said hewas reacting to what he believes was an attempt to raid physicianswho work at Floating Hospital. Children's Hospital has emphaticallydenied the accusation.
'The question here is whether the strategy is to take as manyphysicians from us in order to weaken the Floating,' O'Donnell said.'It's obvious we have been targeted as their chief competitor.'
It's not just physicians that Children's has been accused oftargeting. Patients also are being aggressively pursued in anattempt to increase its share of a shrinking market.
To NEMC's dismay, Children's has been successful. Half a dozencommunity hospitals that once sent their patients to Floatingswitched their allegiances in the last 18 months. These defectionshave caused some health care observers to wonder how long Floatingcan continue to sustain such hits.
Floating and its plucky chief executive, O'Donnell, are fightingback. O'Donnell and others at NEMC publicly say Boston deserveschoice, that Floating should thrive alongside its rival, which isaffiliated with Harvard Medical School while Floating is affiliatedwith Tufts School of Medicine. A monopoly by Children's Hospitalwould not be in patients' interests, they say.
It remains to be seen, however, whether NEMC's argument willprevail, given the steep decline in demand for pediatric inpatientcare and the brutal economics of a shrinking market.
'How many pediatric programs can Boston sustain? I don't know,'said Dr. Alan Ezekowitz, chief of pediatrics at Massachusetts GeneralHospital. 'Economics will dictate that, quite frankly.'
On a Friday afternoon at Floating Hospital, a baby weighing 3 1/2pounds struggles for her life. She suffered a heart attack a monthago while still in her mother's womb and was born two monthsprematurely. Her condition, called fetal hydrops, also resulted inbloating so severe that she had difficulty breathing.
Economic concerns seem to be the last thing on the minds of thedoctors and nurses caring for her.
Across the way on Washington Street, however, NEMC administratorsknow economics are critical to Floating's future. Children havevanished from hospitals quicker than adults. While overall hospitaldischarges in the state fell 3.5 percent between 1995 and 1996,pediatric discharges fell a steep 13 percent, according to theMassachusetts Division of Health Care Finance and Policy.
The decline stems from a variety of factors, including medicaladvances that help keep children out of the hospital in the firstplace. Asthma and diabetes are two major illnesses that are nowbeing managed on an outpatient basis or at home, thanks to betterpreventive care and advanced technology. It is a trend encouraged byhealth maintenance organizations eager to find ways to trim expensivehospital care by keeping patients healthier, said Rick Siegrist,chief executive of HealthShare Technologies Inc. in Acton, whichtracks patient data.
There's another factor. Insurers looking to cut costs havecreated a new category of care, called 'observation care.' Childrenwho are admitted to the hospital and stay for less than 24 hours arenot counted as an inpatient discharge. Instead, they are counted asoutpatient visits even though they may get the same care as if theyhad stayed longer. But insurers generally reimburse less forobservation care than for inpatient care. The result, Ezekowitzsaid, is that hospitals often see more patients for shorter periodsof time and get less money for their services.
These factors have led to a 28 percent drop in the number ofpediatric programs in the United States between 1985 and 1995, eventhough there was a 7 percent increase in the population of children,according to Lawrence McAndrews, president of the NationalAssociation of Children's Hospitals. The association's surveyincluded only programs that have 65 or more beds.
To brace for leaner times, Children's Hospital in 1996 embarked ona plan to ensure its future as an independent pediatric hospital.Rather than merge with another institution,Children's establishedties with local community hospitals. Children's doctors wouldperform routine work in these community hospitals, and, in exchange,complex cases would be referred to Children's in Boston.
To support its community outreach, Children's began to recruitmore staff. In the past 12 months, Children's has hired 52physicians in 13 departments, according to Dinah Vaprin, spokeswomanfor Children's. Vaprin said the hospital intends to recruit morephysicians and support staff in the coming months.
The strategy has been costly. If it were not for a $38 millioncontribution from Children's parent company last year, the hospitalwould have posted an operating loss of $40 million in 1997, accordingto state filings. Children's insists that its real loss is only $2million 'enterprisewide,' including the $38 million infusion from itsparent company, the Children's Medical Center and Subsidiaries. ButVaprin declines to say whether the $38 million included nonoperatingincome, such as income from Children's financial investments,charitable donations, or any money from the $1 billion it has inendowments, cash, and investments. It is common practice forteaching hospitals to rely on these sources of income to subsidizeteaching, research, and free care.
Vaprin acknowledged that the hospital is in a 'higher expense modenow,' but she said those expenses 'will go down as our strategy movesforward.'
The strategy has begun to bear fruit. Children's share of theMassachusetts pediatric inpatient market grew from 28 percent in 1995to 31 percent in 1997, according to state figures.
Some of Children's gains have come at NEMC's expense. Pediatricinpatient discharges at NEMC dropped 43 percent between 1995 and1997. At the same time, its market share dwindled to 4.9 percentfrom 7.6 percent, the sharpest drop among major pediatric centers inBoston.
Much of the drop, NEMC officials say, is due to NEMC's loss of itscontract with Harvard Pilgrim Health Care, the state's biggest healthmaintenance organization. The contract was terminated in 1995 andreinstated in April. Meanwhile, NEMC's patients have gone toChildren's, MGH, and Boston Medical Center, all of which have hadHarvard Pilgrim contracts.
Also devastating was the exodus of Floating physicians toChildren's. Floating this year lost a team of five cardiologists toChildren's. Two geneticists, Drs. Mira Irons and Ellen Elias, andan orthopedic surgeon, Dr. Lawrence Karlin, have also left theFloating to join Children's in the past 12 months. So many ofFloating's 70 physicians were approached by Children's that NEMCdoctors joked about forming a support group for physicians who werenot recruited, one NEMC doctor said.
But it's black humor, since many at Floating feel betrayed bythose who leave. Dr. Ivan Frantz, chief of pediatrics at Floating,said many of his physicians were approached by Children's without hisknowledge. Frantz said that in academic medicine, it is proper tonotify the department chief before recruiting the department'sphysicians. He calls Children's recruiting efforts 'somewhatclandestine.' Children's insists it has not breached any protocolsin its recruiting practices.
Perhaps what galls NEMC executives most is the string of communityhospitals that have turned away from NEMC to form alliances withChildren's and MGH. NEMC had worked with many of those hospitals foryears, providing staff for their nurseries and specialists for theirpediatric clinics. Floating's first community cardiology clinic wasestablished in 1983 at North Shore Medical Center by Dr. DavidFulton, one of the cardiologists who left Floating earlier this yearto set up similar programs for Children's. North Shore two years agogave up its NEMC ties and linked up with MGH.
Beverly Hospital, Good Samaritan Hospital, and WinchesterHospital, all of which used to work with Floating, have recentlyestablished formal ties with Children's. St. Elizabeth's MedicalCenter, and CareGroup, which owns Beth Israel Deaconess MedicalCenter, have also recently agreed to work exclusively withChildren's. South Shore and Caritas Norwood hospitals arecontemplating the same move.
Dr. Richard Grand, chief of pediatric gastroenterology,hepatology, and nutrition at the Floating, said he received a calllast winter from Dr. Phil Pizzo, Children's physician-in-chief,asking Grand to consider moving his department to Children's. Pizzosaid Children's wanted to establish gastroenterology clinics atcommunity hospitals, Grand recalled.
'He said they would do it with us or without us,' Grand said. 'Iheard that as a declaration of war. And right after the New Year,they began a campaign to insinuate themselves into every site inwhich we had already established services for many, many years.'
Vaprin of Children's maintains that the hospital is simplycarrying out its growth strategy in order to stay independent.Vaprin noted that unlike NEMC, MGH, and other general teachinghospitals that also serve elderly populations, Children's does notget Medicare money, which helps pay for medical education.Children's also does not have nonpediatric revenue to support itsmission, Vaprin said.
NEMC isn't standing still while Children's expands. The Chinatownhospital has launched a major advertising campaign to promote theFloating. It is also tapping a vast network of pediatricians whotrained at Tufts School of Medicine. According to Frantz, about halfof the state's pediatricians have either trained at the Floating orattended Tufts.
NEMC is also making counterproposals at South Shore and CaritasNorwood in hopes of preserving those relationships. If that doesn'twork, NEMC may do what it did in Salem and Brockton, open its ownclinics next door to hospitals that used to send their patients toFloating.
O'Donnell said he made the phone call to Weiner last year to say,'We will protect our institution, our doctors, and our outsiderelationships with whatever appropriate means because we arecommitted to a fair and level playing field.'