Assignment: Organizational Theory and Structure in Action

Assignment: Organizational Theory and Structure in Action

 

Professors Michael E. Porter and Robert S. Huckman and Jeremy L. Friese (MBA 2008) prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2008 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

M I C H A E L E . P O R T E R

R O B E R T S . H U C K M A N

J E R E M Y L . F R I E S E

Brigham and Women’s Hospital: Shapiro Cardiovascular Center

In November 2007, Dr. Gary Gottlieb, president of Brigham and Women’s Hospital (BWH), could watch the steady progress of the new Carl J. and Ruth Shapiro Cardiovascular Center building each day as he arrived at work. BWH cardiovascular leaders had talked about creating a free-standing, integrated cardiovascular center as far back as 1984, and this vision was finally becoming a reality as the July 2008 opening of the center drew closer. The hospital’s Cardiovascular Council, created to plan the new Center, was clear in its conviction that co-locating BWH’s cardiology, cardiac surgery, vascular surgery, and cardiovascular radiology practices in a dedicated facility would result in better patient care and more efficient utilization of staff and facilities. The new Shapiro Center had generated strong interest in Boston’s highly competitive hospital community and among academic medical centers nationally.

Nevertheless, the goal of integrated cardiovascular care at BWH remained a work in process. The Center would create new relationships among BWH’s departments and divisions and affect the work of physicians and nurses. How the delivery of patient care would actually change, and the implications for physicians and for the rest of the hospital, were being actively debated and certain to evolve.

Brigham and Women’s Hospital Brigham & Women’s Hospital (BWH) was established in 1980 through the combination of three

specialty hospitals in the Longwood Medical Area of Boston, Massachusetts: Robert Breck Brigham, a hospital founded to serve patients with arthritis and other debilitating joint diseases, Boston Hospital for Women, a women’s and newborns’ hospital, and Peter Bent Brigham, which was founded to serve sick persons in indigent circumstances. The merger reflected intense competition from a large cross- town rival, Massachusetts General Hospital, and declining reimbursement from private and governmental payers. Over time, an intricate network of hallways and tunnels was built to connect two of the three hospitals, and a new Tower Building was constructed in 1980 to serve as the hub for medical and surgical inpatient care. While each hospital initially retained most of its operational autonomy, BWH had evolved over time into a unified financial entity with a single management structure.

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With 747 beds, BWH was among the nation’s elite hospitals, earning the number ten position in the 2007 rankings by US News and World Report. BWH offered clinical services ranging from primary care to virtually all medical and surgical sub-specialties with the exception of pediatric medicine. While BWH had a broad range of service offerings, revenues were concentrated in five designated centers of excellence: cancer, cardiovascular disease, neurosciences, orthopedics and arthritis, and women’s health. These five centers, which accounted for approximately 80% of BWH revenues, were a key focus of marketing efforts and were supported in the capital allocation process. Unlike other leading hospitals, such as Massachusetts General Hospital and Johns Hopkins, BWH had a limited endowment and relied on debt for most of its financing. (See Exhibit 1 for financial statements.)

BWH was a teaching hospital of Harvard Medical School (HMS) together with Massachusetts General Hospital (MGH), Beth Israel Deaconess Medical Center, Children’s Hospital of Boston, Dana- Farber Cancer Institute, and several other local hospitals. Through its affiliation with HMS, BWH played an active role in educating medical students and physicians-in-training (i.e., residents and fellows). BWH’s physician training programs were widely regarded as among the nation’s finest. As in many academic medical centers, most BWH physicians participated in scientific research as well as patient care. BWH’s research budget consisted of over $400 million, and the hospital was one of the leading recipients of government funding from the National Institutes of Health. BWH research had resulted in breakthroughs in patient care including the first human organ transplant (1954) and proof that cholesterol-lowering drugs lowered the risk for recurrent heart attack and death (1996).

In 2007, BWH had more than 12,000 employees, including 2,800 nurses, and 1,797 researchers. BWH employed 1,604 attending physicians and 1,012 residents and fellows in training. Geographically, BWH’s campus was tightly constrained, surrounded by local neighborhoods, other hospitals, and medical research facilities. In the past, BWH leaders had signed a pact with the city agreeing not to encroach on the surrounding residential community whose residents were concerned about traffic and loss of housing.

In response to growing pressure from third party payers, BWH had merged with MGH in 1994 to create the Partners HealthCare System. To facilitate physician buy-in to the merger, each institution was kept intact. Clinical and financial integration had proceeded slowly, although some administrative structures had been centralized including information systems, human resources, and finance. In 2007, both hospitals offered nearly identical clinical services, and the physician organizations at the two hospitals remained completely autonomous. Some progress had been made in integrating the electronic medical record systems of the two hospitals, so that physicians could view test results and clinical notes from outpatient visits across institutions, and they shared a set of quality and benchmarking programs. However, physician interaction across hospitals was limited.

In cancer care, BWH had a long relationship with the Dana-Farber Cancer Institute. Dana-Farber was a national leader in comprehensive outpatient cancer care for children and adults. In 1996, BWH and Dana-Farber agreed that they would remain separate corporate entities, but would work together and provide coordinated cancer care by creating the Dana-Farber/Brigham and Women’s Cancer Center. All medical oncology outpatient care took place at Dana-Farber facilities, located less than a block away from BWH. A bridge linked the two facilities. Outpatient surgical oncology was provided within the surgery clinics at the BWH. Outpatient radiation oncology took place in the basement of the Tower building. Some inpatient care was provided at the BWH on a dedicated floor of BWH’s Tower building that was renovated for inpatient cancer care in 1997 and licensed by Dana-Farber, while the majority of inpatient cancer care was provided on various other floors of the inpatient Tower in beds licensed by BWH. The Cancer Center offered multi-disciplinary care by specialist physicians from both organizations. Medical oncologists were employed by Dana-Farber, but also

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were members of the BWH Department of Medicine, while surgical oncologists were members of the BWH Department of Surgery.

As the Partners system evolved, BWH focused its network development activities on the southern and western regions of the Boston metropolitan area. BWH offered outpatient services at several locations in the Boston area. BWH owned two community health centers, which cared for the general health needs of the local community. Two BWH cardiologists offered general cardiology services at these sites. BWH operated a large ambulatory care center in Brookline, less than five miles away from the BWH campus. The center was staffed by primary care and specialist physicians, including cardiologists, all of whom were BWH employees. A new ambulatory center was being constructed in Foxborough, MA (about 30 miles from BWH) in conjunction with MGH and would offer primary and some specialty care, including cardiology services. Satellite locations had local site managers who had reporting relationships to BWH senior management. Each of the clinical departments at the sites reported up through their department chairs. All BWH sites and practices utilized the BWH electronic medical record.

In 1998, BWH merged with Faulkner Hospital, a community hospital located three miles away in Boston. Complex patients presenting at Faulkner were cared for on the main BWH campus, while some less-acute services from BWH were relocated to Faulkner. This included several specialties, among them cardiology, cancer, mental health, and gynecology. Faulkner also became the main center for ambulatory orthopedic surgery.

Faulkner offered a wide range of cardiology services including nuclear cardiology, cardiac rehabilitation, and general cardiology services. Attending physicians and physicians-in-training (i.e., residents) in some specialties, such as medicine and orthopedics, cared for patients at both hospitals. Physicians could access patients’ outpatient medical records, diagnostic test results, and radiology studies at either hospital through an integrated electronic medical record. The two hospitals used separate electronic medical record systems for inpatient care. Three Faulkner cardiologists were BWH employees, while the remainder was in private practice. BWH vascular surgeons also operated at Faulkner. No cardiac surgery or interventional cardiology services were offered at Faulkner, and patients needing these services were transferred to BWH. In 2007, BWH physicians performed over 5,100 surgeries at Faulkner Hospital—with ambulatory orthopedic surgery accounting for 65% of the total.

Finally, BWH had joint relationships with Milford Hospital (approximately 40 miles from BWH) to provide cancer care through the Dana-Farber/Brigham and Women’s Cancer Center, and with South Shore Hospital (approximately 15 miles from BWH) to provide a variety of specialty services including cancer care. While some physicians at the Milford and South Shore centers were BWH employees, most were in private practice and did not have admitting privileges at BWH.

Organizational Structure

The BWH organizational structure mirrored that of most academic medical centers in the U.S. Central administration consisted of physician and non-clinician personnel with responsibilities for strategy, mergers and acquisitions, budgeting, capital allocation, space allocation, information technology, marketing, and staffing and recruitment for non-physician staff. The hospital employed nurses, pharmacists, technicians and other professional and service staff.

Billing for all inpatient services and outpatient services performed in a hospital setting included two separate components: professional fees and technical fees. Professional fees were reimbursements to physicians for services rendered. Technical fees went to the hospital to cover facilities and non-physician services. Procedures and imaging services tended to be more highly

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compensated than cognitive-based activities, such as outpatient consultations. At BWH, professional fees were billed and collected by the respective departments. For services performed in the BWH department of surgery and reimbursed by government payers (i.e., Medicare and Medicaid), payers were billed a single global fee covering both professional and technical services. The surgeon captured this entire fee and paid BWH a monthly fee for use of BWH facilities and ancillary staff. For government-reimbursed services performed in the BWH department of medicine, payers were billed separately for professional and technical fees.

In 2000, a single Brigham and Women’s Physician Organization (BWPO) was created—despite significant political obstacles—through the merger of longstanding specialty physician groups that had previously been autonomous non-profit organizations. BWPO was a subsidiary of BWH and reported to Gottlieb. All BWH attending physicians were employed by BWPO. While BWH formally contracted for physician services with BWPO, each department continued to maintain its own system for administration and billing. Departments were beginning to streamline and combine administrative services, but progress was slow.

Each physician belonged to a department such as medicine, surgery, or radiology (Exhibit 2 shows an abbreviated organizational chart). Most departments consisted of several divisions (e.g., cardiology was a division of medicine, while cardiac surgery and vascular surgery were divisions of surgery). Cardiology was further divided into several sections, either based on medical condition (e.g., heart failure) or treatment modality (e.g., interventional or electrophysiology). Each department functioned as a stand-alone economic entity and had significant autonomy with respect to issues such as patient care and physician compensation. Each department also oversaw academic activities including research, teaching, and academic promotions. All physicians held an academic appointment at Harvard Medical School. Academic promotions were based primarily on research productivity, though the Medical School had also made several attempts to reward achievements as clinicians and educators as important criteria promotion. Departmental leadership teams consisted of a physician chair and non-clinical administrators who managed operations, personnel, and finances for clinical, research, and educational activities.

BWH physicians were considered national leaders in their fields with many holding leadership positions in their respective medical societies. According to Dr. Peter Libby, division chief of cardiovascular medicine, academic physicians were motivated by a combination of pride, concern for reputation, and desire for autonomy. While a management hierarchy was in place, change was more a matter of persuasion than exercising formal authority.

Each department and division had a unique culture. The department of medicine and the division of cardiovascular medicine were known for their emphasis on research and education. Most cardiologists spent only a small percentage of their time on clinical activities, and concentrated on research, education, and administration. BWH’s department of medicine accounted for more than half of BWH’s federally-funded National Institutes of Health (NIH) research dollars, and the division of cardiovascular medicine was a strong contributor. The divisions of cardiac surgery and vascular surgery were also active in research, but a greater proportion of their activity was dedicated to clinical care.

Each department and division had its own compensation structure. The department of medicine collected a portion of clinical revenues from each division to support the department’s infrastructure. The department of medicine negotiated with each division’s leaders to determine the appropriate percentage. Some divisions in medicine were not financially self-sustaining and were subsidized by collections from other divisions. For example, approximately one quarter of BWH cardiologists, primarily those involved in imaging or interventions, generated the majority of the division’s clinical revenues. In terms of salary, the cardiology division paid physicians a salary irrespective of clinical

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output. Salaries were competitive based on the market rate of each sub-specialty and the division’s overall financial status.

The divisions of cardiac surgery and vascular surgery compensated physicians on a fee-for-service basis. Each surgeon’s compensation was equal to his or her collected revenues minus predetermined overhead expenses for the use of office space and personnel. Radiologists were paid a base salary with yearly bonuses based on pooled department revenues.

Partners’ outpatient electronic medical record (EMR) linked all primary care physicians—and most specialists—throughout the BWH network. The EMR included all outpatient physician notes and some, though not all, inpatient notes. All inpatient and outpatient laboratory data and test results could be accessed through this system. Physician orders were entered via a separate system, which could also be used to retrieve laboratory and test results. A third Internet-enabled system allowed radiology images and reports to be viewed by any BWH physician or nurse. All of these systems could be accessed by physicians once inside the BWH firewall.

Cardiovascular Care Cardiovascular disease included abnormalities of the heart, its blood vessels, and peripheral blood

vessels (arteries and veins). (See Appendix for a glossary of terms.) In 2007, the American Heart Association estimated that cardiovascular disease cost Americans over $280 billion in direct costs for a total of $430 billion including lost productivity. Heart diseases accounted for approximately 64% of the total.1 Common heart diseases included high blood pressure, heart failure, coronary artery disease, and cardiac rhythm problems. Electrophysiology was a growing cardiology subspecialty that dealt with abnormal rhythms, such as atrial fibrillation. Improved care for heart attacks had led to higher survival rates, which increased the subsequent incidence of heart failure and rhythm problems.

Primary care physicians (PCPs), cardiologists, interventional cardiologists, cardiac surgeons, vascular surgeons, diagnostic radiologists, and interventional radiologists all participated in the care of cardiovascular patients (see Exhibit 3 for description of cardiovascular disease and specialization).

Primary care physicians (PCPs) participated in the diagnosis and care of cardiovascular patients but referred most cases beyond easily controlled hypertension to specialists. PCPs would often resume care for patients once a specialist had provided a diagnosis and defined a care plan. If issues arose, the PCP would then refer the patient back to the specialist.

Cardiologists were physicians trained in internal medicine who obtained additional training to diagnose and treat virtually all cardiovascular diseases. They cared for patients in both hospital and outpatient clinic settings. Approximately 2% of U.S. cardiologists worked at an academic medical center, 64% worked in private practice, and the balance worked at government centers or various other types of group practices.2 Cardiologists maintained continuity of care for most of their patients through routine outpatient appointments. Diagnoses combined clinical acumen and sophisticated diagnostic tests, such as nuclear imaging—a way to evaluate heart activity using radiotracers injected into the vein. Some cardiologists interpreted imaging studies of the heart and blood vessels. Most treatment by cardiologists involved pharmaceuticals.

Interventional cardiologists were specialized cardiologists who performed minimally-invasive procedures using imaging equipment to diagnose and treat cardiovascular disease. Angiography (i.e., x-ray of blood vessels after the injection of contrast dye directly into the vessel), angioplasty (i.e., balloon dilatation of vessels) and the insertion of metal stents were techniques used by interventional

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cardiologists in the heart and extremities. The impact of rapidly improving imaging technologies such as CT angiography on the volume of diagnostic angiograms was uncertain. Conventional wisdom suggested the need for angiograms would decline.

Electrophysiologists were sub-specialized cardiologists who diagnosed and treated abnormal heart rhythms (i.e., arrhythmias) caused by electrical problems of the heart. They performed a variety of minimally-invasive procedures including pacemaker placement and ablation of abnormal heart tissue.

Cardiac surgeons were surgeons who specialized in the heart, heart valves, and heart vessels. They used traditional and minimally-invasive surgery to treat disease. Coronary artery bypass graft (CABG) and heart valve replacements were the two most common surgeries they performed. Vascular surgeons performed surgery on all blood vessels except heart vessels. Bypass surgeries and carotid endarterectomies (i.e., surgery to clear blockages in carotid artery in the neck) were their two most common surgeries. They also used angioplasty and metal stents to open narrowed arteries of the extremities and performed minimally-invasive procedures to repair enlarged arteries (aneurysms) by placing grafts within the artery. Improvements in angioplasty and stent technology had led to a slight decline in cardiac bypass graft surgeries.

In radiology, diagnostic radiologists were involved in the diagnosis of cardiovascular disease using advanced imaging techniques such as ultrasound, computed tomography (CT), magnetic resonance imaging (MRI), and nuclear imaging. Some radiologists specialized only in cardiovascular imaging, while others interpreted imaging studies of various body systems. Imaging the heart required specialized techniques and technologies to correct for heart motion.

Interventional radiologists were radiologists sub-specialized in minimally-invasive procedures using imaging equipment to diagnose and treat a wide range of diseases, including diseases of the peripheral vessels, liver, and kidneys. They did not care for patients with coronary artery disease or heart problems. They used angioplasty and metal stents to open narrowed arteries and veins and performed minimally-invasive procedures to repair enlarged arteries (aneurysms) by placing grafts from within the artery.

Other specialists involved in cardiovascular care included anesthesiologists, who provided sedation or anesthesia during surgical and minimally-invasive procedures, and pathologists, who evaluated heart and vessel specimens.

The 1980s marked the beginning of a significant evolution of cardiovascular care. The proliferation of pharmaceutical treatment options made it difficult for surgeons to oversee the totality of their patients’ care, as had been common practice. Instead, surgeons began to rely on cardiologists to manage the medical issues while they focused on surgical intervention. This symbiotic relationship created a natural union between the two specialties.

During the same period, interventional radiologists and cardiologists began to pioneer minimally- invasive techniques (i.e., angiography and angioplasty) that could be used to treat the same diseases of the heart historically handled by cardiac surgeons and diseases of the peripheral vessels handled by vascular surgeons. Cardiologists then developed a new sub-specialty of interventional cardiology and began performing angioplasty of heart vessels themselves. As research proved the effectiveness of angioplasty—and because patients preferred the shorter hospital stays and recovery times relative to those for surgery—the volume of both cardiac and vascular surgeries declined. This prompted vascular surgeons to begin performing angioplasty in the late 1990s. Simultaneously, interventional cardiologists began expanding their treatment capabilities to include angioplasty of peripheral vessels.

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In cardiovascular care, numerous studies had shown that increasing procedural volumes resulted in reduced complications and costs for cardiovascular patients. A landmark New York study, for example, showed that hospitals performing fewer than 600 annual heart angioplasties had significantly higher rates of procedure-related deaths.3 Other studies also revealed volume-related reductions in cost due to increased capacity utilization and decreased time per procedure.

Cardiovascular disease was typically a major source of revenue for medical centers, and BWH was no exception. However, changes in reimbursement and new technology had resulted in flat to slightly declining cardiovascular revenues. Recognizing that cardiovascular disease was its largest cost area, the Centers for Medicare and Medicaid Services (CMS) began decreasing reimbursements for cardiovascular care in the mid 2000s. Meanwhile, improved stent and pharmaceutical technology had decreased the need for both open surgeries and repeat angioplasties. However, the number of patients with heart failure or electrical problems was increasing, which compensated in part for the above declines.

Cardiovascular Services at BWH In 2007, BWH was considered a national leader in cardiovascular care, ranking third nationally in

the US News and World Report.4 With over 25,000 outpatient visits, BWH’s cardiovascular patient volume was among the largest in the nation (Exhibit 4 provides the volume of cardiovascular services at BWH from 2003 to 2006). Nearly 100 physicians cared for cardiovascular patients including 56 cardiologists, 11 interventional cardiologists, 10 cardiac surgeons, eight vascular surgeons, seven cardiovascular diagnostic radiologists, and seven interventional radiologists. Each physician’s clinical volume varied depending on his or her respective involvement in research, education, and administration. For example, in 2006, the number of outpatients seen per vascular surgeon at BWH ranged from 40 to 1,631.

Approximately 26% of new cardiology patients were referred by non-BWH physicians, 42% by BWH primary care physicians or other specialists, and 32% were self-referred. Most patients that saw a cardiac surgeon or vascular surgeon would have previously seen a BWH cardiologist, but this was not always the case. Some patients were referred to a particular physician, while others were referred to a division (e.g., cardiology) that selected a physician for the patient. Well-established physicians with strong reputations typically operated at capacity based on direct referrals, while junior physicians relied on referrals from their division.

Coordination of the initial physician consultation was handled differently by each specialty. Cardiologists relied on a central cardiology office to phone the patient or referring physician to have outside medical records faxed to the cardiology office. The central office would also coordinate preliminary tests prior to the visit. Records were not typically reviewed by the cardiologist until the patient visit. In cardiac surgery and vascular surgery, each surgeon had an administrative assistant who performed these tasks. Surgeons preferred this method to deal with the many referrals directly to their individual practices. Patients were referred to radiology for imaging of the heart or blood vessels by their primary care physicians, cardiovascular specialists, or other specialists.

Outpatient clinic offices for cardiology and cardiac surgery were co-located on the second floor of the Ambulatory Services Building (ASB), while those for vascular surgery were on the third floor (see Exhibits 5 and 6 for locations of cardiovascular services prior to the opening of the Shapiro Center). Outpatient offices for interventional radiology were in the basement of the Tower building. Private offices for cardiologists were divided among the Tower and Peter Bent Brigham A and B buildings, while those for cardiac and vascular surgeons were located in the Peter Bent Brigham building.

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Cardiologists and vascular surgeons set aside dedicated blocks of time for evaluating outpatients, while cardiac surgeons often saw outpatients in between scheduled operations. Up to 50% of cardiac surgeons’ outpatient visits occurred in their private offices and not in outpatient clinics. Interventional radiologists mostly performed procedures and evaluated relatively few outpatients, doing so in their clinic located in the basement of the Tower building.

Laboratory tests and additional diagnostic tests were routinely required following an initial outpatient consultation. The waiting time for tests varied from the same day for blood tests to up to two weeks for an echocardiogram. Echocardiograms, which were ultrasound images of the beating heart, were obtained for most new cardiology patients and read by cardiologists on the third floor of the Tower building. Stress-test nuclear imaging, a non-invasive evaluation of heart function using radioisotopes, was jointly interpreted by radiologists and cardiologists and was located in the basement of the Tower building.

Cardiovascular imaging performed by radiologists was located in the basement and second floor of the ASB. BWH had dedicated an MRI scanner to cardiovascular imaging from 6 a.m. until 7 p.m. During the overnight hours it was used by radiologists for emergency department patients. In November 2007, BWH was one of two U.S. hospitals to begin offering cardiac imaging on a 320-slice CT scanner, utilized 50% for cardiac imaging and the remainder for other anatomical areas such as the chest and abdomen. Seven other CT scanners were used for cardiovascular imaging; each was utilized approximately 15% for this purpose.

Within days to weeks of completing all necessary tests, a patient would return for an outpatient visit to discuss the course of action with his or her physician. Depending on the complexity and severity of disease, an additional referral to another specialist—either another cardiologist or a surgeon—could be necessary. Waiting times to be seen as an outpatient by vascular surgery ranged from one to two weeks for elective referrals to less than one day for emergencies. Cardiac surgery waiting times averaged five days for elective referrals and less than one day for emergencies. Following an outpatient consultation, surgery typically occurred within one to two weeks for elective procedures and one to three days for urgent procedures.

Operating rooms for cardiac surgery and vascular surgery were located in the basement of the Tower building. Interventional cardiology, electrophysiology, vascular surgery and interventional radiology all performed minimally-invasive procedures in laboratories on the second floor basement of the Tower building, which shared a common recovery room and family waiting room. Approximately half of these minimally-invasive procedures were conducted on an outpatient basis.

All inpatient cardiovascular units at BWH were located in the Tower building, which consisted of floors divided into four separate but connected pods. Nearly all surgical patients were admitted to the hospital. Patients with advanced heart disease were admitted when acute care was necessary. Cardiology patients were admitted to one of three dedicated pods on the 12th floor, with the fourth pod on that floor being a coronary care unit (CCU) for cardiovascular and other patients. Inpatient interventional cardiology patients shared a pod on the 10th floor with other medical patients. Cardiac surgery patients filled the entire eighth floor, which included a cardiac surgical ICU. Vascular surgery and interventional radiology inpatients were spread throughout the Tower building. When these patients required imaging, procedures, or other diagnostic tests, they were transported to the respective location within the BWH campus.

Nurses played a pivotal role in managing inpatient care. Although nurses were trained to deliver care for a wide range of clinical conditions, they tended to be assigned to a specific unit in the Tower. As a result, they concentrated either on general care or ICU care within a given clinical specialty.

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Following their inpatient stay, patients returned for outpatient visits to monitor progress with BWH physicians or, in some cases, with their referring physicians in the community. The frequency of follow-up visits varied from monthly to yearly, depending on the complexity and severity of disease. For some cardiologists, return visits occupied their entire office schedule.

Communication among the various cardiovascular specialties generally occurred around the needs of a specific patient. Most interaction occurred through email or phone conversations. Physicians also interacted at weekly conferences for each specialty.

While each condition and patient required different care, the patient experience for non- emergency coronary artery bypass graft (CABG) surgery was fairly typical for cardiovascular patients at BWH. A referring primary care physician would request a cardiology outpatient visit after completing some preliminary blood work and an electrocardiogram (ECG). The cardiology office staff would compile the outside medical records and schedule the patient for the next available opening, typically with a wait of two weeks. After the cardiology consultation in the ASB, the patient would return up to two weeks later for a stress test and echocardiogram. The cardiologist would review the results with the patient during a second outpatient visit several days later. If these initial tests suggested the possibility of coronary disease, the cardiologist would refer the patient for an angiogram, a diagnostic imaging procedure that detected blockages in coronary vessels.

Angiograms were performed by an interventional cardiologist in the basement of the Tower Building and would occur up to one week later. If the patient was a candidate for angioplasty, it would be performed immediately. If not, the cardiologist would arrange for a cardiac surgery consultation, on average five days later, either in the outpatient clinic in the ASB or the surgeon’s private office in the Peter Bent Brigham building. The surgeon’s assistant would organize the pertinent patient records for the surgeon to review. After the surgery consultation, the patient would return to the Tower building within one to two days to be cleared for surgery by an anesthesiologist. Clearance consisted of a medical evaluation and additional tests to ensure that the patient could safely undergo surgery.

CABG surgery was performed in the basement of the Tower within one to five days following clearance, depending on the patient’s condition. After surgery, the patient would be transferred to the cardiac surgery ICU on the eighth floor of the Tower and eventually moved to a general care room in a different pod on the same floor. Following discharge from the hospital, the patient would generally return to the surgeon once or twice for post-operative care. The frequency and duration of follow-up visits with a BWH cardiologist varied greatly. If the patient’s symptoms resolved and she did well post operatively, the patient would receive future care from her primary physician, returning to cardiology or cardiac surgery only if symptoms recurred or problems arose.

BWH had organized a disease management program for congestive heart failure (CHF) patients that had resulted in a doubling of their survival rate. Patients were referred to a cardiologist specialized in CHF who organized all of their outpatient cardiovascular care. Patients requiring hospitalization were cared for by a dedicated CHF team consisting of an attending cardiologist and resident physicians. Upon discharge, the patient’s primary cardiologist was responsible for care. The heart failure section also worked together with cardiac transplant surgeons to coordinate care for heart failure patients qualifying for transplant.

BWH had recently begun publishing outcomes data for cardiovascular care at the hospital on its public website. It published data on select procedures and diagnoses, including coronary artery bypass graft (CABG) surgery, heart failure, and coronary angioplasty and stenting. Published data were those already collected and reported to various groups, including the State of Massachusetts and the American College of Cardiology. Mortality and process data were reported for BWH and

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compared to national benchmarks when appropriate. Inpatient satisfaction surveys were also published. On nearly all measures, BWH performed better than national averages.

Competition for Cardiovascular Care BWH faced intense competition in the Boston region in cardiovascular care. Beth Israel Deaconess

Medical Center (BIDMC), located across the street from BWH, was a full-line, Harvard-affiliated hospital with an excellent reputation for service. In the summer of 2007, BIDMC announced that fifty of its cardiologists, vascular surgeons, and cardiac surgeons were forming an independent corporation. The new entity was actively recruiting additional specialists from the community to join them in working at a new BIDMC Cardiovascular Institute in the Longwood Medical Area. Physicians would be compensated based on a new revenue sharing model for both technical and professional fees. Affiliated community physicians would also share in this revenue pool. Details of the revenue sharing model were not available.

Massachusetts General Hospital (MGH) was ranked fifth in cardiovascular care nationally by U.S. News and World Report. MGH offered nearly identical cardiovascular services to BWH on its campus less than four miles away. BWH and MGH offered combined cardiac transplant services. The MGH organizational structure was very similar to that of BWH, with a physicians organization, departmental chairs and an administrative structure. Boston Medical Center, affiliated with Boston University, and New England Medical Center, affiliated with Tufts University, also offered a full range of advanced cardiovascular care.

Among Massachusetts hospitals, BWH enjoyed the leading market share of cardiac surgery patients with 19%. It ranked third, behind MGH and BIDMC, in vascular surgery, with 9%. Southcoast Health System, a consortium of community hospitals in southern Massachusetts, cared for the most cardiology patients (8%), followed by BWH (5%). MGH performed the most interventional cardiology procedures (15%) with BWH second with 12%. (See Exhibit 7 for 2006 Massachusetts market share data.) Lahey Clinic, a regional multi-specialty group practice, cared for the most international patients seeking cardiovascular care in Massachusetts, followed by MGH and BWH.

Massachusetts hospitals had experienced steadily declining inpatient volumes for cardiology services since 2002. Interventional cardiology and cardiac surgery had also seen slight declines. Academic medical centers, including BWH, MGH, and BIDMC, all experienced declining interventional cardiology and cardiac surgery volumes, while several community hospitals had increased volumes and market share. Gottlieb expected yearly declines of 1%–2% statewide in these services through 2015, while electrophysiology procedures were expected to grow 1% yearly over the same period. Heart failure was also expected to grow with an aging population and increased survival from heart attacks and other cardiac events.

Several national competitors either already had some form of integrated cardiovascular care or were launching new efforts to do so. The Cleveland Clinic, ranked first in cardiovascular care by U.S. News & World Report, had operated a multidisciplinary Heart and Vascular Institute for many years in dedicated facilities. In 2007, the Clinic admitted over 12,500 inpatients in its 333 cardiovascular inpatient beds.5 In 2008, the Clinic was in the process of eliminating its specialty-based department structure and replacing it with a structure of institutes based on organ systems. Physicians from all cardiovascular specialties would report to the head of the Institute, who would be in charge of all physicians and activitiesin the Institute, including compensation and academic promotion. A new, larger Heart and Vascular Institute building was under construction and slated to open in 2008.6

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The University of Michigan Cardiovascular Center (UMCVC) opened in June 2007. At 350,000 square feet, UMCVC significantly increased the space allocated to cardiovascular care. In addition to seeing patients, all physicians involved in cardiovascular care relocated their personal offices to the new center. Four physician leaders divided managerial responsibilities for: clinical care, medical education, research, and philanthropy. An executive committee, consisting of the five department chairs whose specialties cared for cardiovascular patients, the dean of the medical school, the hospital COO and CFO, and the chief of nursing, provided overall oversight, allocated capital, and hired physician staff jointly with the representative departments. UMCVC housed nearly all cardiovascular outpatient clinics, diagnostic facilities, operating and procedure rooms. It also included cardiovascular research facilities and two floors of inpatient beds. The remainder of inpatient care occurred in the main hospital building physically connected to the center. UMCVC was coordinating some inpatient and outpatient services with providers in the local Ann Arbor community. Financially, the center had an agreement with the hospital in which operating income above the center’s budgeted income would remain in the center.7

The Mayo Clinic, headquartered in Rochester, Minnesota, was the largest multi-specialty group practice in the country. All outpatient cardiovascular care was located in the Gonda Building, a 1.5 million square foot outpatient center costing $441 million. One floor served as the Vascular Center, in which virtually all physician appointments and diagnostic tests for diseases of blood vessels were conducted. The Vascular Center had its own administrative structure, but physicians still belonged to specialty-based departments that controlled compensation and the allocation of physician time across clinical and research activities. All other outpatient cardiac care and testing, except angiograms of the heart, was organized by specialty and took place at separate locations in the Gonda Building. Inpatient care occurred in the Clinic’s hospital one mile away. Inpatients were primarily grouped by specialty.8

The Johns Hopkins Hospital, located in Baltimore, Maryland, had created a Heart Institute in 2004. A new Cardiovascular and Critical Care Building was slated to open in 2008 and aimed to co- locate high acuity patient care, including cardiovascular care. The Heart Institute would be located in the new building and would include most outpatient cardiac care and testing, grouped by specialty. Inpatient care and procedure rooms would be located elsewhere in the new building. The departmental organizational structure of physicians would remain intact.

In addition to centers and institutes, there were several specialty cardiovascular hospitals in the U.S. as of 2005. These had been formed by entrepreneurial physicians and were primarily located in midwestern, western, and southern states. Growth in such privately-owned specialty hospitals was increasing after what was effectively a federal ban on such facilities was lifted in 2006.9 No specialty cardiovascular hospitals were present in Massachusetts in 2007.

Efforts at Integrated Care at BWH The Shapiro Center was not the first effort to integrate care across specialties at BWH. In 1985, the

departments of radiology and obstetrics/gynecology ended a turf war by forming a partnership to interpret high risk obstetrical ultrasounds. A new center was created and staffed equally from the two departments, with professional fees collected by the interpreting physician’s department. Initially, the departments precisely reconciled revenues at the end of the year to ensure equality, but this had evolved into a more informal understanding by 2007.

In 1984, cardiology, vascular surgery and interventional radiology decided to co-locate procedure rooms and outpatient clinics in the Tower Building in an effort to improve coordination among

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specialists. Billing and professional fee revenues were handled separately by each department. Dr. Andrew Whittemore, a vascular surgeon and now BWH chief medical officer, explained:

At the time, this arrangement was ground-breaking. Patient care was expedited because physicians could easily communicate. This arrangement built trust and a sense of community among specialists. Patients no longer had to coordinate their own care, and each received a detailed care plan which was also communicated to their referring physician.

In 1986, a diagnostic vascular laboratory was established in which cardiologists, vascular surgeons and radiologists jointly interpreted non-invasive diagnostic tests related to the peripheral vascular system. Professional fees were allocated to the department with which the interpreting physician was affiliated. This arrangement continued in 2007.

By the late 1990s, rapidly growing demand for minimally-invasive procedures such as angioplasty required more space than available in the Tower building. The formerly co-located cardiology, vascular surgery, and interventional radiology outpatient units were thus forced to relocate to diverse sites in 1999. Despite efforts to maintain lines of communication, relationships among the three specialties deteriorated and even became combative at times. Cardiology chair Libby noted:

Competition among cardiovascular specialists runs deep and is far from unique to BWH. Interventional radiology had revolutionized cardiovascular care and drew patients away from surgeons. Vascular surgeons and interventional cardiologists, who controlled the patients, began to learn the skills perfected by the radiologists and took the business back. Over the years, this dynamic resulted in a fend-for-yourself attitude.

Concerned about the turf wars and motivated by a desire to improve patient care, Libby and Dr. Steven Seltzer, department chair of radiology, initiated informal discussions in 1998 to consider ways to integrate cardiovascular care better at BWH. A preliminary business plan and organizational chart was developed, but despite some initial momentum, little progress was made.

In 2002, Libby rekindled discussions about integration by offering to share interventional cardiology procedure rooms with vascular surgery and interventional radiology, which performed similar procedures in identical rooms elsewhere on the BWH campus. At the time, cardiologists and vascular surgeons were beginning to perform angioplasty of peripheral vessels, which had previously been the domain of interventional radiology. Vascular surgery accepted Libby’s invitation, but interventional radiology chose to remain separate. Under the agreement, cardiology maintained control of day-to-day operations of the shared procedure rooms and cardiologists and vascular surgeons maintained independent referral patterns and billed separately for procedures they performed.

In 2002, BWH received a sizable donation from the Shapiro family to be used for infrastructure improvements on the BWH campus. Plans began to take shape for a major new building, which was initially planned as an ambulatory care building. Gottlieb, newly appointed as president, decided that BWH should not expand less-acute care on the main campus. Instead, the space would go to one of BWH’s centers of excellence and help refocus the campus on patient-centered care. Because of current and projected inpatient census and demand, the choice came down to cardiovascular care or cancer. In the end, Gottlieb chose cardiovascular care because of the projected growth in high-acuity treatment and its need for intensive care. Following completion of the cardiovascular center, Gottlieb planned to renovate and redesign several floors in the Tower building. BWH agreed to minimize the building’s impact on the community and relocate several residences that would be affected by the construction.

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Simultaneously, BWH continued efforts to integrate cancer care within existing facilities. The partnership with Dana-Farber Cancer Institute was solidified through further clinical integration, joint reporting relationships, and the development of disease-specific centers involving clinical and research staff at both the Dana-Farber and the BWH. Future plans included the renovation and dedication of four floors in the Tower to inpatient oncology services.

The Shapiro Cardiovascular Center To plan the new building, Gottlieb formed the Cardiovascular Council, which provided

leadership and advice as the project progressed but had no formal authority. The Council consisted of Whittemore, Seltzer, Dr. Michael Belkin (division chief of vascular surgery), Dr. Morton Bolman (division chief of cardiac surgery), Dr. Ken Baughman (section head of heart failure within cardiology), Elizabeth Glaser (vice president), and other key staff including representatives from nursing. Baughman had recently joined BWH from Johns Hopkins, where he helped lead a similar but ultimately unsuccessful effort to integrate cardiovascular care. Whittemore and Baughman were named co-chairs of the Council, which was charged with evaluating the current delivery of cardiovascular care at BWH and designing a building that would allow integrated, patient-centered care. Whittemore explained:

Our old system was designed by physicians for physicians who had a tendency to focus on treating the disease and not the patient. When we designed Shapiro, we wanted the patient to be the central focus. We wanted an inviting space where patients would feel comfortable and attended to. The building needed to facilitate patient flow through the system and minimize waiting times. We hoped to make it possible for patients to be able to schedule all of their visits and tests through a single telephone number.

Baughman summarized the vision for the center:

Our goal was to provide one-stop shopping for comprehensive treatment of cardiovascular disease. A high priority was placed on offering an outpatient visit and all pertinent testing within one day of a patient’s initial referral to Shapiro.

The Council hoped that the extra space would reduce crowding and provide the necessary capacity buffer to accommodate demand swings. Physicians from various specialties would occupy outpatient clinics in close proximity to each other to facilitate communication. Council members hoped this proximity would allow consulting physicians to evaluate their colleague’s patients without forcing those patients to change rooms or return at a later date.

The preliminary plans for the Shapiro building, a $352 million 10-story facility located across the street from the main BWH campus, began to take shape starting in 2005 (see Exhibit 8). It would house all outpatient, inpatient, laboratory, and testing facilities needed to manage cardiovascular disease. At nearly 350,000 square feet, Shapiro was expected to be one of the largest cardiovascular centers in the country and would represent the biggest capacity expansion in the history of BWH. All cardiovascular services currently offered at BWH would be offered at Shapiro—and selected services including electrophysiology and imaging would be expanded—without adding additional physician or allied health personnel. BWH’s total inpatient hospital beds would remain relatively unchanged, as much of the Tower would be converted to private rooms.

The Center would contain 16 state-of-the-art operating suites, each able to accommodate next- generation minimally invasive technology, including robotic surgery and image-guided therapies. Six rooms dedicated to cardiac and vascular surgery would form a pod. The remaining operating rooms

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would be used by other surgical specialties. Current cardiovascular operating rooms at BWH would be refitted for different uses. The new operating rooms would be on the first basement level and would be contiguous with existing operating rooms under the Tower building.

Inpatient rooms, consisting of 136 ICU-adaptable beds, would span the top five floors and occupy 23% of the building. The Massachusetts Department of Public Health required hospitals to classify their inpatient beds as ICU or general care. ICU-adaptable beds were not yet offered at any other Massachusetts hospital. Initially, the Council chose to classify 32 rooms as ICU rooms and 104 as private inpatient rooms, all designed to provide additional space for families including sleeping accommodations for one member. Inpatient floors would be arranged by specialty with cardiac surgery on the sixth (general care and ICU) and seventh (general care) floors, vascular surgery on the eighth floor, and cardiology on the tenth floor. The ninth floor would be reserved for patients with severe cardiac failure who required either general care or ICU care. While each floor had been classified for a specific use, an inpatient coordinator had been appointed who would allocate cardiovascular patients to unused rooms to maximize bed utilization.

Nurses at BWH were assigned to a specific hospital floor and concentrated either on general care or ICU care. At Shapiro, the Council hoped nurses would eventually be cross-trained and care for both general care and ICU patients. Changing the practice paradigm for inpatient nursing would require additional staff training. Nursing leaders had been wary of these changes, and the issue was expected to surface in upcoming labor negotiations in 2008.

Outpatient clinics for cardiology, cardiac surgery, vascular radiology and vascular surgery would be located on the second and third floors, occupying 9% of the total square footage in the building. Laboratory and some cardiovascular testing facilities would be located on second and third floors and occupy 12% of the total space. Cardiovascular diagnostic radiology and nuclear imaging would be on the second lower level.

Cardiovascular imaging was identified as an area with a high likelihood of successful integration. Imaging was highly reimbursed relative to other cardiovascular services, and Libby and Seltzer believed that economies of scale could be gained by joining forces between radiology and cardiology, resulting in higher throughput and better utilization of scanners.

Under the new structure, cardiologists and radiologists would interpret studies independently in a shared reading room. The plan was to alleviate competition by allocating studies equally between radiology and cardiology and allocating professional fees based on the specialty of the physician interpreting the study. Technical fees would go to BWH.

Patients would benefit from the combined expertise of both departments, while the departments would benefit from better coordination and more efficient utilization of capacity. Libby and Seltzer believed that radiology offered imaging and IT expertise while cardiology had relationships with patients and understood cardiovascular pathophysiology. In 2006, an international search was initiated to hire a director of cardiovascular imaging for the Shapiro Center, culminating in the hiring of Dr. Marcelo DiCarli, who was then co-director of cardiovascular imaging in the BWH department of radiology.

The Shapiro building was designed to improve patient flow and care integration. Outpatient clinics would be co-located. All physicians would share a centralized “physician only” work space on days when they saw patients at Shapiro. A few physicians’ academic offices would be located on the fifth floor. These would be allocated to physicians in all cardiovascular services who were active in patient care provided in Shapiro. Most physicians would maintain their private offices and administrative staff in their original locations in the Ambulatory Services and Peter Bent Brigham

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buildings. In Shapiro, state-of-the-art laboratory and diagnostic testing facilities would all be located within two floors of the outpatient clinics. Interventional procedure rooms and operating rooms would be in close proximity to recovery rooms and family waiting areas. These would be shared by all cardiovascular specialties. Scheduling for interventional cardiology, interventional radiology and electrophysiology procedures would be handled by a single administrative staff.

Gottlieb anticipated strong demand for services at Shapiro. Initially, the center was to open in phases. Based on projected demand, however, Gottlieb and the Cardiovascular Council decided to open all floors in July 2008. Gottlieb and some members the Council differed regarding how to respond if Shapiro capacity was not fully utilized. Gottlieb believed that inpatient beds should be filled with overflow from the Tower buildings, while Council members believed the beds should be protected for cardiovascular patients to provide capacity to allow BWH to accept cardiovascular referrals on a timely basis.

Interventional cardiology would continue to perform angioplasty of the heart and peripheral vessels; vascular surgery and interventional radiology would continue to perform angioplasty of the peripheral vessels. Patients would be directed to a given specialty through the same channels that existed prior to Shapiro and compensation structures would remain unchanged.

Given the growth anticipated in electrophysiology, an additional two electrophysiology procedure rooms were included as part of the Shapiro construction. The electrophysiology lab would continue to share its recovery room with interventional cardiology and interventional radiology. The remaining space was allocated to ancillary services such as admitting, a patient/family center, and other patient services. (See Exhibit 9 for the space allocation for the Shapiro Center and Exhibit 10 for a schematic map of the building.)

Patients would enter the system by physician or self referral. Cardiology, cardiac surgery, and vascular surgery would continue their current approaches to organizing patients’ medical records and scheduling. After the initial cardiology consultation, however, the patient could obtain an immediate echocardiogram performed on the same floor. If the patient needed a nuclear cardiology test, he or she would likely need to return on another day. Council members hoped that a follow-up outpatient visit with cardiology could be completed that same day.

Patients requiring an angiogram would return to Shapiro one to five days later to have an interventional cardiologist perform the procedure. One to five days after that, they would visit the cardiac surgeon. Clearance for surgery would be granted by an anesthesiologist in the Tower building based on an additional visit.

Surgery, if needed, would be scheduled and performed at Shapiro within one to five days, depending on the patient’s condition. Following surgery, the patient would be transferred upstairs to the cardiac surgery ICU and then to a private general care room on the same floor. All subsequent follow-up care with cardiology and surgery would be performed at Shapiro. Some patients admitted to BWH with other health problems as their primary diagnosis also required cardiovascular care. Libby and Baughman estimated that 70% of cardiovascular care provided by cardiologists would take place at Shapiro and 30% elsewhere at BWH. They anticipated that the majority of circumstances would require Shapiro physicians and technicians to travel to other parts of the campus, but some services would require BWH patients to travel to Shapiro. Gottlieb commented:

Brigham and Women’s and Shapiro are part of one hospital. We have the benefit that all our campus facilities are interconnected. Our physicians can easily care for patients anywhere on our campus. Today, for example, if a patient in our women’s center develops an infection, our infectious disease specialists can go to the center and care for her.

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The measurement and publication of outcomes for cardiovascular patients at Shapiro was a topic of intense discussion. The Council was actively involved in determining which additional clinical and services measures would be monitored as a result of the new care structure. Administration was working to develop an approach to gathering data given the lack of a comprehensive electronic inpatient record and the presence of several different operating systems.

Discussions regarding the financial relationships between physician divisions had been challenging. The objective was to develop a financial model that would support the integrated care model that had been designed for the new building. How best to accomplish this was unclear given that there were no specific assurances that divisions and their physician members would preserve their revenues as the new practice model was put in place. An additional complicating factor was the difference in market salaries. For example, while both cardiologists and radiologists interpreted cardiovascular images, there was a significant difference in compensation between the specialties. Federal anti-kickback laws prohibited or complicated the sharing of hospital technical fees with physicians for Medicare and Medicaid patients, while the so-called Stark laws limited self-referral— the practice of physician referral to a medical facility in which he or she had a financial interest. These regulations complicated the process of sharing of revenue across specialties or between the hospital and physicians.

Each department’s financial statements were treated as highly confidential. As of late 2007, the financial structure at Shapiro would remain unchanged from the current BWH model. Departments would remain autonomous and would collect revenues for their physicians’ services.

Dr. Joseph Loscalzo, department chair of medicine, explained:

Physicians are skeptical of financial integration. Departments fear losing revenue to competing specialties. Surgeons fear losing patients to colleagues in their specialty. Physicians will need to see that working together will not be detrimental financially before they are willing to try.

Members of the Cardiovascular Council were taking the long view on financial integration. After the first year of operation, they planned to prepare hypothetical financial statements as if Shapiro were a stand-alone unit in an effort to help department leaders understand the potential of new approaches to financial management. In the future, Baughman, in particular, hoped that the Shapiro Center would serve as a stand-alone business unit where physicians would be paid by the Center and would be solely accountable to its leadership.

Recent Challenges During the summer of 2007, a proposal was made to relocate and expand a well-respected internal

medicine physician practice into the Shapiro building, supplanting the 12 echocardiography rooms. Internal medicine leaders had questioned the demand assumptions for echocardiography and advocated expanded primary care services to foster better coordination with the cardiovascular services provided at the Center. Gottlieb had to resolve this issue. In addition, it was believed that space for echocardiography testing could be accommodated in the existing floor plate of the clinics or on the second basement level of the Shapiro building.

There were also concerns about the care of patients admitted to BWH’s main campus with non- cardiovascular primary diagnoses who required cardiovascular services outside the Shapiro building. Finally, some physicians were unsure whether the new approach to cardiovascular care would adversely affect the hospital’s ability to attract, educate and develop young physicians.

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Gottlieb wondered if integration was occurring rapidly enough given BWH’s aspirations. He knew that, as a national leader in cardiovascular care, BWH’s efforts would be watched closely.

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Exhibit 1 Brigham & Women’s/Faulkner Hospitals Financial Statements

Balance Sheet (Fiscal years ending September 30, in thousands of dollars)

Assets 2006 2005 2004 2003 2002 Cash and investments 294,705 253,153 220,052 192,168 170,408 Current portion of investments limited as to use 157,146 119,362 137,968 154,404 114,010 Patient accounts receivable 209,229 176,840 175,812 173,186 169,562 Other current assets* 114,869 138,344 126,111 96,560 74,458 Total current assets 775,949 687,699 659,943 616,318 528,438

Investments limited as to use** 411,442 369,937 292,818 245,018 224,269 Long-term investments*** 143,021 121,030 100,280 87,192 71,065 Property and equipment, net 735,347 684,093 616,944 594,339 577,467 Other assets**** 67,125 55,112 43,100 48,759 40,927

Total assets 2,132,884$ 1,917,871$ 1,713,085$ 1,591,626$ 1,442,166$

Liabilities and Net Assets Accounts payable and accrued expenses 250,777 247,486 236,559 241,078 221,997 Current portion of accrual for settlements with 3rd party payers 1,304 23,213 26,608 26,280 18,281 Unexpended funds of research grants 52,091 49,689 42,639 33,140 32,004 Total current liabilities 304,172 320,388 305,806 300,498 272,282

Other long-term liabilities 89,734 117,434 140,844 146,432 149,825 Long-term debt 463,169 413,305 375,624 360,678 370,720 Net assets 1,275,809 1,066,744 890,811 784,018 649,339

Total liabilities and net assets 2,132,884$ 1,917,871$ 1,713,085$ 1,591,626$ 1,442,166$

* Non-patient accounts receivables, current portion of pledges received, inventory, prepaid expenses ** Board designated funds, professional liability trust fund *** Investments with Partners **** Pension

Income Statement Fiscal years ending September 30 (in thousands of dollars )

Revenues 2006 2005 2004 2003 2002 Net patient revenues 1,595,416 1,462,262 1,321,048 1,192,877 1,124,644 Other operating revenues* 515,589 463,108 435,407 421,125 371,899 Total revenues 2,111,005 1,925,370 1,756,455 1,614,002 1,496,543

Expenses Employee compensation, benefits, supplies, and other 1,878,005 1,696,866 1,553,653 1,428,274 1,299,234 Depreciation and amortization 87,677 83,644 85,189 79,652 76,133 Provision for bad debt 39,381 38,773 51,522 30,495 43,740 Interest 20,827 18,342 16,362 15,796 17,285 Total operating expenses 2,025,890 1,837,625 1,706,726 1,554,217 1,436,392

Income/(loss) from operations 85,115$ 87,745$ 49,729$ 59,785$ 60,151$

* Indirect research revenue, trust/endowment income, cafeteria, parking, royalty income

Source: Brigham & Women’s Hospital Annual Reports.

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