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October 26, 2015

Saint V is region's most profitable hospital

In fiscal 2014, Saint Vincent Hospital was the most profitable outside of Greater Boston at $65.2 million.

Saint Vincent, which was repurchased by Dallas for-profit operator Tenet Healthcare in 2013, trailed only Lahey Hospital in Burlington, which made $67.2 million last year.

While other Central Massachusetts hospitals produced margins in the single positive digits, Saint Vincent's margin was 15.6 percent. UMass Memorial Medical Center had a much slimmer 1.3 percent total margin and posted a $19.8 million surplus last fiscal year.

In fiscal 2015, Saint Vincent maintains its lead. Through June 30, St. Vincent made $32.8 million while UMass Memorial made about $30 million, and the disparity is even larger considering St. Vincent was only six months through its fiscal year while UMass was nine months in.

CEO: It's about efficiency

Saint Vincent CEO Steven MacLauchlan said it's a game of efficiency. Its ownership by Tenet supplies robust management resources for lean strategies and control of purchasing costs.

MacLauchlan said in contracting with commercial insurance companies, Saint Vincent tends to agree to payments that are slightly lower than average, landing them in a lower-cost category for privately-insured people.

Pricing information is not publicly available. Tenet originally bought Saint Vincent from the Diocese of Worcester but then sold it to Vanguard Health System in 2004. Tenet then rebought the hospital, along with the MetroWest Medical Center in Framingham, in 2013.

The hospital also takes a conservative approach to expanding facilities and services, said MacLauchlan. That's been true since before the Tenet purchase in 2013. MacLauchlan, who joined the hospital as CEO around the same time, said there was a conservative expansion strategy under former owner Vanguard Health Systems, as well.

“We really spend a lot of time before deciding whether we're going to go into a program … because overhead is very expensive,” MacLauchlan said.

Some services Saint Vincent has entered into in recent years include minimally invasive heart surgery known as TAVR, oncology services at its new Cancer & Wellness Center, and orthopedic services.

The hospital also has some brand power that makes it the hospital of choice for many in Greater Worcester. At 120 years, the hospital has been a consistent provider for generations of local families, MacLauchlan said.

A bit of history

Dr. Mark Stoker, chair of surgical specialties at Worcester-based Reliant Medical Group, describes Saint Vincent as a hybrid between a community hospital and a large, academic medical center. It's large enough to offer sophisticated services, such as minimally-invasive surgery, but small enough to stay nimble.

Large academic medical centers are, by definition, relatively inefficient, Stoker said, and patients sometimes find them downright daunting.

Reliant and Saint Vincent were formerly affiliated when Reliant was known as Fallon Clinic, leading to a strong relationship between the two organizations. Stoker said Reliant doctors generate about half of Saint Vincent Hospital's patient volume. He recalled the time about two decades ago when Tenet took ownership of Saint Vincent for the first time from the Diocese of Worcester. At the time, the hospital infrastructure was ailing and other local hospitals were struggling and closing.

Stoker said there was a lot of angst about a for-profit takeover, but thinks Tenet has been a good steward of the hospital. He noted that representatives from the Worcester Diocese remain on the hospital board of directors, honoring the tradition of the church's relationship. The facility has Catholic leanings still today, such as not offering sterilization surgeries.

Union weighs in

Labor is an organization's biggest cost. Saint Vincent's nursing workforce is unionized with the Massachusetts Nurses Association (MNA), and hospital technicians voted this spring to unionize with the local Teamsters union, with which negotiations are ongoing.

This could impact costs for Tenet's Northeast region, according to a company filing, but MacLauchlan said he doubts that contract will have a major impact on costs.

Nurses, on the other hand, say they've enjoyed a cordial relationship in contract negotiations with Saint Vincent, especially in recent years. Marlena Pellegrino, co-chair of the MNA bargaining unit at Saint Vincent, said it took 14 months to settle the current contract in February, but talks were much more collaborative than they were in the early 2000s when Tenet owned Saint Vincent for the first time.

In 2011, the nurses ratified a contract with Vanguard that mandates staffing ratios of no more than one nurse to five patients anywhere in the hospital. ICU limits are capped at one nurse to two patients, as in other Massachusetts hospitals. Pellegrino said this allows nurses to take better care of patients, and that's a selling point for Saint Vincent.

MNA spokesman David Schildmeier said Saint Vincent is one of the only Massachusetts hospitals to have mandated staffing ratios set as a contractual obligation. Their profitability despite these ratios is evidence that hospitals can afford to cap patient loads, he said, despite arguments from other hospital leaders that mandated ratios aren't feasible.

“[Saint Vincent] seem to recognize that they have to work with unionized nurses, and they've negotiated some pretty good agreements with us,” Schildmeier said.

Some perspective

While Saint Vincent thrives, MetroWest Medical Center is digging out of a $6 million loss in fiscal 2014. The hospital, which has campuses in Framingham and Natick, has made progress. According to the state Center for Health Information and Analysis, MetroWest Medical Center turned a profit of $6.9 million in the first six months of fiscal 2015, ending June 30.

Tenet spokeswoman Teresa Prego said MetroWest is challenged because it's competing in the crowded Greater Boston market.

She said this year's improvement follows the hiring of a new management team, which has focused efforts on expanding the hospital's behavioral health services in Natick, as well as recruiting new surgeons and adding key services.

MacLauchlan, of Saint Vincent, said he expects the turnaround to continue.

“They've done a really nice job, and when you see next year's data come out, I think you'll see a much different picture,” he said.

Regarding Saint Vincent's closest competitor, UMass Memorial Medical Center in Worcester, the two hospitals appear to have structures and missions that are different enough to allow for coexistence. But it's not exactly a fair comparison. The cost structure of an academic medical center is much higher than that of a community hospital, or teaching hospital, like Saint Vincent. Another factor that drives up overhead for UMass Memorial is its Level 1 trauma center, the only one available in the region.

MacLauchlan said Saint Vincent isn't a world away, either. The two hospitals serve a similar demographic, and are deemed disproportionate share hospitals, meaning they care for a large number of indigent patients, which can impact the bottom line.

“At the end of the day, our payer mixes are probably pretty similar,” MacLauchlan said.

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