The recession has not been kind to most businesses but hospitals have fared worse. Although healthcare costs have gone up 10 percent per year in recent years, shooting national costs to 17 percent of GDP, up to one-third of total hospital costs are said to be wasted or spent inefficiently. Many patients in poorer areas cannot afford necessary treatment and others are deferring elective procedures. Then there is the vexing problem of collecting payments from third-party payers, not to mention government programs such as Medicare and Medicaid. In addition, many hospitals have too many beds chasing too few patients, forcing some to consolidate.
Ralph de la Torre, 43, a cardiac surgeon who studied biomedical engineering as an undergraduate at Duke University before earning graduate degrees from Harvard Medical School and Massachusetts Institute of Technology, thinks he has a solution – or at least a part of one. In April 2008, he was picked by the Catholic Archdiocese of Boston to become president and CEO of Newton – based nonprofit Caritas Christi Health Care, New England’s largest network of community-based hospitals, with an annual revenue base of $1.5 billion. With 12,000 employees, Caritas Christi is also the 11th largest employer in Massachusetts.
Despite not having formal management training or experience, de la Torre had an immediate impact. Caritas was a chronically weak and financially struggling operation that lost $26 million in the fiscal year ending in September 2008. However, for the quarter that ended in March 2009 it reported a profit of $10 million and its operating margin for the quarter reached 4 percent – compared to the Massachusetts norm of less than 1 percent. In addition, the group added another $50 million to the seven-hospital group’s bottom line.
Even before turning in his scrubs for pinstripes, de la Torre had his own ideas about how hospitals could be run more efficiently. From Boston Medical Center, he moved to Beth Israel Deaconess Medical Center, where after four years he became chief of cardiac surgery. Later, he expanded that role to run the cardiovascular institute there. (He had performed about 300 heart surgeries a year before taking the Caritas job as president and CEO.) His basic strategy was simple: Cut operating costs by 4 percent by outsourcing such operations as billing, claims, processing and lab work. In addition, he instituted tighter control over inventory and purchasing, and reduced unnecessary headcount in Caritas’ then 13,000-employee system. But anyone can cut costs. He also wanted to use new medical and information technology to close the efficiency and quality gap with bigger research hospitals that tend to be the marquee brand leaders. (Caritas serves working communities in six towns surrounding Boston.)
One of his initiatives was a two-and-half-year $70 million IT project to make Caritas entirely paperless – the holy grail of many healthcare operations. Computerized records are now the norm in two of its six hospitals and about one-fourth of the doctors overall are writing electronic prescriptions. In restructuring senior management, he also leveraged his personal reputation to bring in talent from outside and recruited 113 new physicians, such as Harry Tuerk, one of the foremost robotic urologic surgeons in the world, and Joe Carozza, an interventional cardiologist who is now Caritas’ new chief of cardiology. In addition, he instituted systemwide metrics to measure quality and improve patient care.
So far the effort is paying off. In comparing Caritas Christi’s eight individual service lines to the University HealthSystem Consortium (UHC) database of independently estimated costs compared to charges for various services, each one is below the median UHC patient cost. Also, the group’s cost per case-adjusted discharge – the Case Mix Index (CMI) – has come down significantly. Adjusted discharges for the quarter ended March 2009 was $6,097 compared to $6,317 during the same period in 2008, with a year-to-date figure of $6,201.
But rationalizing operations in healthcare is unlike any other endeavor in one key respect. “If you own a Ford dealership and the economy collapses, you just don’t sell cars, but in healthcare, people come to you and say, ‘You got to give the cars away now,’” de la Torre observes. “When people go from being employed and insured to unemployed and not insured, you still have to take care of them. You just don’t get paid.”
The son of Cuban parents – his father was also a doctor – de la Torre grew up in Gainesville and Jacksonville, FL, and always wanted to become a physician. Although he has never visited his parents’ homeland, he scoffs at the notion that Cuba’s system of national health care is worthy of emulation. “Cuba has great access to primary care; that’s very different from having great healthcare,” he says. “For example, they don’t have access to higher level antibiotics or even to high level immunizations. There is a reason that every time a Cuban diplomat needs surgery he needs to travel outside the country.”
Some observers note that de la Torre may be destined for more visible roles in the healthcare industry in the future. Already he has been approached for board positions. Does he have ideas about national reform? “Our current fee-for-service model doesn’t work. Nor does the model where we have to provide all care to anybody who wants it at any level,” he says. “We are not talking about rationing care but someone deciding how utilization should be charged.”
Any reform, he argues, should trigger a national debate about access. “What does ‘for all’ mean? Is it only U.S. citizens? Is it anyone who is a U.S. resident – anybody on our shores? Is it immigrants? Visitors? What does healthcare for all mean? Define that population. If you tell me to design a system with absolutely the best access in the world, don’t worry about the cost of product, that’s easy, and if you tell me to design one with the highest quality in the world, but don’t worry about cost for access, that’s also easy. But people forget that it’s really the combination of all three that’s involved. One can’t talk about universal healthcare without addressing this.”