Tufts Medical tries to find place among larger rivals

After failed merger, Tufts Medical, the smallest teaching hospital, looks beyond Boston

Tufts Medical Center is in a bind.

The recent collapse of merger talks with Boston Medical Center was the latest setback to its ambitions to find partners to help it compete with larger and more prestigious rivals. That has left Boston’s smallest teaching hospital reassessing its future in a health care industry where bigger is increasingly better.

“Tufts Medical Center is a precious institution in so many ways,” said Marc Bard, a Newton health care consultant, “but unless it can distinguish itself and build its footprint, it runs the risk of being eclipsed by the institutions that really do have that footprint.”

In almost any other city and state, Tufts Medical Center, with a strong following of doctors and patients, would be the dominant player. But in Boston, the 415-bed hospital in Chinatown hasn’t built the brand recognition enjoyed by its rivals, including Massachusetts General and Brigham and Women’s.

Tufts also straddles the ground between an elite academic medical center and a safety net hospital. Tufts surgeons, for example, perform more heart transplants than at any other hospital in the state. Still, about 60 percent of its patients are covered by the government insurance programs Medicare and Medicaid, a higher portion than at many other hospitals.

In Massachusetts and beyond, hospitals are merging into broader networks to take better care of large populations of patients and earn more in reimbursements from insurers. If Tufts fails to grow, it risks losing business to larger systems that can serve more patients and use their market clout to extract higher payments from insurers.

In the last three years, Tufts has pulled off just one of several deals it has attempted, the 2014 merger with Lowell General Hospital.

Tufts executives say the end of the BMC talks underscores that the hospital’s future lies beyond Boston, where they will seek to link up with other hospitals and expand their network of doctors. They point to the merger with Lowell General as a model.

Since the completion of that deal last October, Tufts has experienced a 33 percent increase in patients from the Lowell area — patients who previously went to competitor teaching hospitals, such as Mass. General and the Brigham in Boston, both owned by Partners HealthCare, or to Lahey Hospital and Medical Center in Burlington. Tufts, meanwhile, is sending its specialists to treat patients in Lowell.

“Our goal is not to be a big megamedical center in downtown Boston that would require pulling patients into Boston to basically fill the beds,” said Dr. Michael Wagner, chief executive of Tufts. “Our goal is to be a nimble, small, academic medical center that works in partnership with the community.”

As other health systems expanded their networks in recent years, Tufts remained mostly on the sidelines. In 2012, it launched an effort with the former Vanguard Health Systems, now Tenet Healthcare, to acquire other hospitals, but no deals ever materialized. It sought to acquire Jordan Hospital in Plymouth, but that hospital chose in 2013 to become part of Beth Israel Deaconess Medical Center instead.

Last year, Tufts began talking to Boston Medical about creating a new health system, but negotiations broke down in May, after leaders from both hospitals decided they couldn’t overcome differences in culture and strategy. Boston Medical focuses heavily on lower-income patients in Boston, while Tufts wants to expand its base of patients on private insurance not just in Boston, but across Eastern Massachusetts.

Tufts is not the only health care organization facing uncertainties in a changing market or to see merger proposals fall apart. Partners earlier this year gave up its bid to acquire South Shore Hospital under pressure from a state judge and the attorney general. Last year, merger talks broke down between Beth Israel Deaconess, Lahey Health, and the doctors group Atrius Health.

Tufts officials say their deal with Lowell General, and the creation of a new parent company, called Wellforce, will serve as a launch pad for further growth.

Wagner and his counterpart at Lowell General said they are offering an attractive model to doctors and hospitals wanting to join a larger system, but continue to operate under local boards, executives, and brand names. This is different from the top-down approach of Partners and Beth Israel Deaconess, for example, which have rebranded community hospitals they’ve acquired and set systemwide policies in Boston, said Normand E. Deschene, CEO of Wellforce and Lowell General.

“We’ve tried to create a system with flexibility,” Deschene said. “We sought to create something unique, that was not the traditional academic medical center subsuming a bunch of community hospitals, but really focus on what’s going to be important in the future: low cost, high quality, easy access.”

“Our goal is to be a nimble, small, academic medical center that works in partnership with the community,” said Dr. Michael Wagner, Tufts chief executive.David L Ryan, Globe Staff/Globe Staff

Wellforce has yet to draw other hospitals to its network. Executives said their plan is to create a system of lower-cost providers that can prosper as insurers adopt payment contracts rewarding care that is high quality and low cost, rather than merely reimbursing doctors and hospitals for every service and procedure.

“Tufts’ model may well prove to be an effective model in this time of health care reconfiguration,” said Ellen Lutch Bender, chief executive of the Newton consultancy Bender Strategies LLC.

Analysts say another strength for Tufts is its large doctors network, the New England Quality Care Alliance. The group includes about 1,800 physicians from the New Hampshire border to Cape Cod. That network serves as an important source of referrals to Tufts.

And while Tufts lacks the deep pockets of some of its competitors, its financial stability has improved. It has more than doubled its cash reserves to $370 million in the past five years. It earned $8.6 million on operations in the last fiscal year, which ended Sept. 30, compared to $13.9 million the previous year. The hospital said its earnings were lower last year because of a one-time charge for consultants hired to help cut costs and improve efficiency.

“Every time people have said, ‘They’re the smallest teaching hospital, they won’t make it,’ ” Bender said, “they pull a rabbit out of a hat.”

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