At Tufts Medical Center, pressure to cut costs in a city rich with hospitals

The first nurses' strike in Boston in more than 30 years took place Wednesday at Tufts Medical Center.Jessica Rinaldi/Globe Staff/Globe Staff

In many cities, for patients needing complex medical care, Tufts Medical Center would be the only destination in town.

But in Boston, a city rich with big hospitals, Tufts has long been overshadowed by larger competitors with more prestigious names and deeper pockets.

The disparities between Tufts and its competitors have been thrown into sharp relief by an ugly labor dispute. On Wednesday, more than 1,200 members of the Massachusetts Nurses Association went on strike after the union and the hospital failed to come to terms on staffing levels, wages, and retirement benefits.

Like all care providers, Tufts says it’s under pressure to control costs, especially as uncertainty about the future of the Affordable Care Act continues to loom.

But even as it has grown its network of doctors and formed new partnerships with other hospitals, the Tufts University-affiliated medical center lacks the market clout to demand the same level of payments from insurers as rivals such as Brigham and Women’s receive.

Tufts says it simply has less money to spend, and that’s why it can’t and won’t meet its nurses’ financial demands. The nonprofit hospital, along with its doctors network, ended its last fiscal year with a small operating loss of $2.6 million. It collected $974.5 million in revenue in the year ending Sept. 30, 2016.

“I think the root cause is that Tufts has to compete with the other academic medical centers in the city, and they don’t get the same level of reimbursement,” said David E. Williams, a consultant at Health Business Group in Boston. “The disparities of the payments actually cause friction in the labor market.”

Union officials don’t buy the argument that Tufts doesn’t have enough money to give its nurses better wages, benefits, and work conditions. They say that nurses deserve to be paid more competitively and that improved staffing would help the quality of care.

Tufts nurses walked out of work Wednesday for a 24-hour strike. Tufts plans to keep them out for another four days while using temporary workers.

“Money is not an issue . . . This is a power struggle,” said David Schildmeier, a spokesman for the union.

Schildmeier said nurses realize that Tufts is trying to cut costs, and the union has proposed a plan for nurse pensions that would help the hospital do just that.

“We have a proposal on the table that is going to save them millions of dollars,” Schildmeier said. “We’ve structured proposals that have acknowledged the reality of the situation and are totally fair and appropriate. They just don’t want to entertain that.”

The nurses association has threatened strikes at other Massachusetts hospitals.

Last summer, nurses planned a one-day walkout at Brigham and Women’s, which is owned by Partners HealthCare, the state’s largest health care network. The hospital and nurses ultimately reached a settlement and avoided a strike.

Last month, nurses at a small community hospital in Greenfield stayed off the job when a deal couldn’t be reached with owner Baystate Health, a dominant health care provider in Western Massachusetts.

Several factors are pressuring Tufts and other hospitals to control costs, including the huge expense of labor. As medical care advances, fewer patients are spending nights in hospitals, which means less revenue for hospitals. Additionally, the costs of drugs, medical devices, and hospital equipment have been rising faster than the rate at which hospitals are paid, said Robert Mechanic, a health care expert at the Heller School for Social Policy and Management at Brandeis University.

Adding to the pressure on payment rates is a Massachusetts state law that requires hospitals and insurers to contain their annual spending growth to 3.6 percent a year. This target is set to get tougher, falling to 3.1 percent in 2018.

And hospitals are watching nervously as Republicans in Congress seek to dismantle President Obama’s signature health care law, which could result in millions of Americans losing health coverage. That in turn could mean fewer patients with insurance seeking care at hospitals.

“It does make them concerned about investing new money in the short run,” Mechanic said, “and it also makes them think, if we are going to have a repeal or significant rollback, they have to start cutting costs now to be ready for that.”

Even Partners’ hospitals aren’t immune to financial pressures. The Brigham came up with money for a new contract last year, but it’s now in the process of cutting 1,600 employees to rein in expenses.

Tufts says its challenges are exacerbated by relatively low reimbursement rates. Tufts is paid 28 percent less than the Brigham for the same medical services, and 45 percent less than Boston Children’s Hospital, said Kristine Hanscom, chief financial officer at Tufts.

Additionally, about one-third of Tufts patients are covered by Medicaid, the government health program for low-income individuals and families. Medicaid pays hospitals less than commercial insurers pay for the same services.

“We need to think about the financial future of this organization,” Hanscom said. “It’s trade-offs. If we put more than is fiscally responsible into the nursing contract, then we will have to make decisions on other things.”