Brigham and Women's Hospital Final - Jan 2024

Harvard Business School 9-792-095
Rev. March 30, 1993
The Brigham and Women's Hospital in 1992
The Brigham and Women's Hospital (BWH), located in Boston, Massachusetts, was one
of the world's foremost teaching and research institutions and a part of the renowned "Longwood
Avenue cluster" of acute care hospitals affiliated with Harvard University. Many firsts had
occurred at BWH or at its predecessors: the first use of anesthesia in a maternity hospital (1847),
the first in-vitro fertilization of a human ovum (1944), the first kidney transplant (1954), the first
implant of an artificial aortic valve (1954), and the first heart transplant in New England (1984).
During the late 1980s, patient volume at BWH grew at 3.6% per year, almost twice the
average for Massachusetts hospitals. Between 1984 and 1991, annual capital spending grew from
$9.9 million to $62.9 million, and unrestricted fund balances (the difference between assets and
liabilities) were up from about $82 million to about $205 million. Patients stayed an average of
5.9 days, down from 7.3 in 1985 and 8.3 in 1980. During 1991, BWH had realized an 11%
increase in patient revenues and an 11.5% increase in total revenue. Research awards had risen
from $60 million in 1989 to $96 million in 1991. Exhibit 1 shows the hospital's financial
statements.
In spite of the hospital's recent financial success, Dr. H. Richard Nesson, president and
CEO of the Brigham and Women's Hospital, was concerned as he considered the future. Like
other hospitals, BWH faced rising pressures for cost containment. In Massachusetts, new
regulation had just changed reimbursement from regulated prices to competitive price negotiation
with payers. Also like other hospitals, BWH faced a major challenge in dealing with increasing
concerns of doctors, nurses, and other employees about human immuno deficiency (HIV)
infection, protection, and testing. In addition, the Brigham faced competitive pressure from
several nearby hospitals' recent entry into services they had not previously offered, and BWH
anticipated internal challenges since four medical chiefs of service would retire in the near future
(see Exhibit 2). Dr. Nesson considered the challenge of crafting the hospital's strategy in this
uncertain environment and explained,
Professor Elizabeth Olmsted Teisberg prepared this case with assistance from Greg Brown, M.D., MBA '92, as the basis for
class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. It is an
updated version of an earlier case, "The Brigham and Women's Hospital in 1991" (No. 391-168) prepared by her and
Research Associate Eric J. Vayle.
Copyright © 1992 by the President and Fellows of Harvard College. To order copies, call (617) 495-6117 or write the
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stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical,
photocopying, recording, or otherwise—without the permission of Harvard Business School.
1
This document is authorized for use only in Prof.Aindrila Chatterjee; Prof. Satish Kannan's Strategic Management-III-2024 at Institute of Management Technology - Hyderabad from Dec 2023
to Apr 2024.
792-095 The Brigham and Women's Hospital in 1992
I can't tell you what's going to happen in terms of the federal or state payment
system or what the next great discovery will be, but I can tell you that we've built
a stronger foundation so that we're poised to take advantage of whatever is on
the horizon, and we're always seeking ways to do things better.
History
Brigham and Women's Hospital was the result of the merger of three Boston teaching
hospitals. Before the merger, the Peter Bent Brigham Hospital, the Robert Breck Brigham
Hospital, and the Boston Hospital for Women (itself a merger of two hospitals: the Boston Lying-
In Hospital and the Free Hospital for Women) were each recognized for specialties in different
areas of medicine: the PBBH for internal medicine and surgery, the RBBH for research and care
related to arthritis and orthopedic diseases, and the BHW for obstetrics, gynecology, and research
related to human reproduction.
During the late 1950s, a movement started among members of the Harvard Medical
School to amalgamate several small Harvard-affiliated hospitals into one large medical center that
would be more efficient and reduce some of the duplication of facilities and services in the
Longwood Medical area. For 20 years, managers hired to unite the hospitals into one institution
had little success dealing with staffs and board members of the individual hospitals. In the mid-
1970s, the Massachusetts Commissioner of Public Health refused to grant the hospitals regulatory
permission to expand facilities until they had a merger agreement and the local community's
approval of new building plans. Faced with the prospect of no expansion, the hospitals worked
diligently to produce a merger agreement in 1975. Later that year, they broke ground on the
construction of new facilities, funded by a $100 million real estate loan guaranteed by the Federal
Housing Authority. Without the federal guarantee, the new hospital would not have been
creditworthy enough to obtain a loan of that size. A separate agreement with local community
leaders prohibited the hospital from expanding onto neighboring property through 2015.
In 1980, construction was completed, and the Brigham and Women's Hospital was officially
created. During the first few years, management struggled with merging three hospitals that had
been entirely distinct entities with different cultures and priorities, as well as different suppliers,
unions, patient bases, business systems, and so on. Medical services from the three were combined
into 10 departments, each headed by a physician chief of service. The entire staffs of the three
predecessors were combined, and employees were ensured that no jobs would be cut as a result
of the merger.
At the same time that senior managers were integrating the staffs and facilities of the three
enterprises, they were also forced to work at integrating the goals and philosophies of the three
hospitals into one common mission. The board of trustees formed to oversee the merged
hospitals was described as being "like Noah's Ark," with a few representatives from each of the
predecessor hospitals, at-large representatives, and five local community representatives. Although
the new board existed, each of the former boards continued to meet. Each hospital considered
its original endowment its own and separate from the others (although the endowments had been
combined) and was concerned when money was spent on projects other than those that fit its
original mission. Departments from each of the predecessor hospitals jockeyed for office space
and equipment, attempting to maintain their identities.
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The Brigham and Women's Hospital in 1992 792-095
In early 1982, Dr. Nesson became president and CEO. Although the merger had been
completed, it was in many ways still unconsummated. Nesson faced the challenge of making the
hospitals work together as one entity. The challenge was complicated by financial difficulties;
among his early discoveries was that the firm hired to bill and perform computer operations had
not billed patients for ambulatory (outpatient) services at all in the first quarter. BWH's books
also included large, long-overdue receivables without sufficient offsetting reserves for losses.
Brigham and Women's suffered a $12 million loss in 1982.
The predecessor hospitals had been smaller and had faced regulatory settings that were
simpler than those facing BWH in the 1980s. They also had more limited missions than the new
BWH, which was striving to become a world-class teaching and research hospital. The small
hospitals had been managed by people with medical and public health backgrounds, but few of
them had the specialized management training or experience with large businesses that a hospital
of Brigham and Women's size and complexity suddenly required. Dr. Nesson replaced 22 senior
managers and administrators in 18 months, filling the rolls of CFO and COO himself for about
10 months while he began to rapidly restructure the hospital and build a top management team.
The predecessor boards continued to operate until 1983, when the board of trustees voted
to combine with them. The combined board then had 90 members, who met once a year; a dozen
members met once a month as the Executive Committee. After three years, the terms of most
members ran out, shrinking the board to 24 members.
In 1985, Nesson unveiled a new long-term contract with Harvard Community Health Plan
(HCHP), the largest Health Maintenance Organization (HMO) in Massachusetts. The contract
led to greater patient volume and more referrals to BWH physicians, but also meant that some
BWH beds previously used by the patients of specialists went to HCHP patients who were
attended by HCHP doctors (unless a specialist was needed). Administrators and physician chiefs
of staff increased efforts to reduce the average length of stay to accommodate the higher volume.
Between 1984 and 1991, BWH made about $140 million of capital investments. About
$30 million was on a new Ambulatory Services building and garage opened in 1987. The new
facility won an architectural award. Although management was criticized during construction for
building excess capacity, outpatient services reached capacity in about two years. The other capital
investments were divided evenly between renovation and new facilities. These capital expenditures
reduced the average plant age from 6.6 years in 1984 to 5.3 years in 1989. During the same
period, average plant age dropped across Boston teaching hospitals from nine to six years.
Clinical Care
Patients and Payers
In 1991, Brigham and Women's drew 85% of its patients from the local metropolitan area
(Boston, Brookline, Cambridge, Newton, and Needham). The rest traveled from other parts of
the state, country, and world for specialized treatment from top physicians in their fields. Brigham
and Women's did not advertise. Patient surveys indicated that doctors and nursing care were the
most important considerations to recently discharged patients.
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Brigham and Women's revenues came from a wide range of payers:
Payer Percent of Revenue
1990 1991
Medicare 28% 28%

Medicaid 9 10
Blue Cross (primarily indemnity) 19 18
Free Care 7 7
HMOs and Other1 37 37
Almost one quarter of BWH patients were referred by doctors at HCHP, which had about
433,000 members and a 35% market share of HMO subscribers in 1990. Brigham and Women's
was the main provider of adult hospital services for HCHP's Boston-area members. It also had
agreements with three of the next four largest HMOs in Massachusetts, allowing more than 75%
of the HMO population to use BWH. The other large HMO was Tufts Associated Health Plan,
which used hospitals affiliated with Tufts University Medical School.
Until December 1991, hospital prices had been regulated, but new Massachusetts hospital
reimbursement regulation gave all hospital payers freedom to negotiate unrestricted discounts.
Chief Operating Officer Elaine Smith explained, "With the stroke of a pen, state regulators
changed the world overnight from regulated prices to competitive negotiations." Whereas
previously hospitals had been able to serve any patient and bill the regulated price, now payers
could negotiate contracts or decide not to allow their patients to use specified hospitals. BWH
contracted with HMO Blue, the new HMO plan developed by Massachusetts Blue Cross, and
enrolled all BWH physicians as providers of HMO Blue. HMO Blue had elected not to negotiate
with Massachusetts General Hospital, effectively excluding it from providing care to any HMO
Blue patients except on an emergency basis. Smith continued, "Cost effective delivery of service
is coming home to us. The 1990s will be the decade of the health care streamlining and looking
at its efficiency and service the way other industries have already had to."
As part of the new negotiation process, payers were requiring increasing amounts of
"gatekeeping" by primary care physicians whose referrals were required for the insurer to pay the
bills of specialists. The gatekeeping concept was aimed at reducing overtreatment by specialists.
The uncertainty created by the new reimbursement regulation was accentuated by

instability in the insurance market. This was a fairly consolidated market, with a few large HMO
players such as HCHP, HMO Blue, Baystate, and Pilgrim. Both HCHP and Baystate were
experiencing managerial turmoil fostered by member physicians.
The uncertainty about future health care regulatory reforms increased concern about how
to maintain the hospital's referral base. Chief Financial Officer Jay Pieper explained, "Since you
don't know how the world will shape up, you want to make sure that if the system evolves in a way
that makes relationships critical, direct affiliation or not, you will be part of the network."
1. Includes HCHP, Bay State, a dozen other groups, private insurance companies, and self-paying patients.
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Inpatient Care
In 1991, Brigham and Women's inpatient service was the second-largest of Greater
Boston's 44 acute care hospitals, with 726 of the area's approximately 12,000 beds and an
occupancy rate of 85%. Inpatient care included ten interrelated services; during a hospital stay,
most patients needed services from more than one department. BWH administrators explained
that insurers wanted to negotiate low rates across all services and offer their subscribers "one-stop
shopping."
Each medical department was headed by a chief of service, a physician who was a tenured
Harvard Medical School professor chosen for academic and leadership abilities. The chiefs set
the strategy for the department, oversaw clinical accountability, and created the climate in which
physicians worked. They met with Dr. Nesson and the senior vice presidents every other week and
discussed major trends and issues for the hospital. Collectively, the group came to agreements
on strategy and use of resources for service, research, and education. Specific programs were
refined and implemented by the administrative operating staff working with the medical staff.
Nesson anticipated expanding existing services for which demand was straining capacity,
and in areas in which the next technological and medical breakthroughs might occur. However,
a strong tension was created by expectations that leading research hospitals would simultaneously
contain costs and pioneer new, expensive, and uncertain treatments (such as gene therapies and
use of state-of-the-art equipment).
Medicine Together, the departments of Medicine and Surgery had increased admissions by
more than 30% since 1985. The Department of Medicine consisted of physicians who practiced
internal medicine as well as specialists such as cardiologists, oncologists, gastroenterologists,
hematologists, and nephrologists. Administrators explained that the department of medicine was
trying to add interdisciplinary programs to provide full coordinated service.
Demographic trends in the U.S. pointed to the increasing importance of research and
clinical treatment for "the two big Cs," cardiology and cancer. Historically, BWH had been strong
in cardiology, and hospital leaders hoped to build on this strength. In oncology, the hospital
planned to develop hematology/oncology (e.g., treatment of leukemia and cancer) because
research was advancing in this field, and the number of patients was growing.
Surgery The Department of Surgery was a "full spectrum" service which performed more than
26,000 operations in 11 specialties in 1991, and surgical admissions had increased 7% between
1990 and 1991. BWH was noted for its expertise in transplants, and it had performed more than
1,200 successful kidney transplant operations since the first one in 1954. Cardiothoracic surgeons
had performed 170 heart transplants since 1984 and more than 1,100 open heart operations
annually in the 1980s. In 1990, BWH became the first Boston hospital to transplant an adult lung,
and BWH emeritus Dr. Joseph E. Murray, who performed the 1954 kidney transplant, received
the Nobel prize in medicine. BWH planned to build an additional ten-bed surgical Intensive Care
Unit (ICU) because its increasing amount of high-risk surgery had filled its existing surgical ICU
beds. Hospital leaders hoped to expand its cardiac surgery service to about 1,500 operations per
year, roughly the same volume as the Massachusetts General Hospital. BWH had invested in the
dedicated resources (such as operating rooms) required for this volume.
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Orthopedic Surgery BWH was known throughout the world for its capabilities in orthopedic
surgery, especially on hips and knees. BWH orthopedic surgeons had developed innovations such
as the first replacement elbow, the "Brigham knee," and a process known as radiation synovectomy,
a treatment for rheumatoid arthritis involving injections of radioactive material directly into the
knee. BWH did not have a large sports medicine practice; Boston sports teams had affiliations
with other hospitals. This department was not as broad-based as its leaders would have liked, but
there was disagreement about what the next steps of change should be.
Obstetrics and Gynecology Obstetrics and gynecology had traditionally been Brigham and
Women's busiest service. BWH delivered 9,757 babies in 1991, sixth highest among U.S. hospital
deliveries and 40% of births in the city of Boston, including 30% of babies born to poor mothers.
The department was a regional center and national resource for high-risk obstetrics and
neonatology (newborn medicine); a large portion of patients referred to BWH from outside
Greater Boston were high-risk obstetrics patients. In 1991, the department accounted for 37%
of admissions, down from 48% in 1985. Demographics were driving down demand for obstetric
services, as women of the Baby Boom generation began to leave their reproductive years and
young families were living further from the city center. Nesson noted that in 1986 a demographer
consulting for the hospital had predicted both trends, but the report had been forgotten until
demand actually began to drop. In the 1990s, competition from other teaching hospitals as well
as community hospitals with new facilities had recently increased. Also, while HCHP had
traditionally accounted for about one-third of the BWH deliveries, HCHP's growing shortage of
Boston obstetricians had led them to redirect some of their patients to South Shore Hospital.
In 1992, BWH planned to allow low-risk obstetrics patients to choose a style of obstetrical
coaching used by midwives in Ireland which had been shown to result in fewer Cesarean sections,
with equally good results regarding healthy babies. Nesson explained that the new approach could
become a prototype for other U.S. hospitals. The chief of service, Dr. Kenneth Ryan, shared this
hope. He explained that BWH needed a strong low-risk obstetrics practice to complement its
expertise in high-risk obstetrics, and to keep down the average cost of the service. Dr. Ryan had
announced his retirement, and an active search for a new chief was underway.
Neonatology (newborn medicine) The Department of Neonatology was a joint practice of

doctors, each of whom practiced at three hospitals: Brigham and Women's, Children's Hospital,
and Beth Israel Hospital. Medical care was provided in the hospital that delivered the baby,
unless more acute care facilities were needed. For example, BWH and Children's had Level 3
neonatal intensive care units (NICUs) with special equipment for acutely ill babies and 24-hour
neonatal medical coverage, whereas Beth Israel had only a Level 2 NICU. BWH's NICU was
filled with newborns from its own delivery rooms. Infants and newborns from other Boston
hospitals requiring Level 3 care were usually transferred to Children's Hospital. BWH handled
between 1,200 and 1,500 NICU cases per year, about 4% of its total admissions. Brigham and
Women's had no pediatric service after newborn care.
Radiology Before the mid-1980s, BWH had lagged behind its competitors in introducing high-
technology equipment for diagnostic imaging; in the late 1980s, it rapidly developed its diagnostic
imaging capabilities. In 1991, the numbers of computerized tomography (CT) scans and magnetic
resonance imaging (MRI) scans were growing more rapidly than diagnostic x-rays (see Exhibit 5).
A significant portion of the growth was in outpatient radiological procedures.
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Radiation Therapy Radiation therapy (for cancer treatment) was a joint practice shared with
four other Longwood Medical-area hospitals. It was initially formed to share the costs of capital
equipment when radiation therapy was a new field. Patients were referred between hospitals only
when particular medical equipment was needed for the prescribed course of treatment.
Pathology BWH's Pathology Department was more research oriented than those at most
teaching hospitals and was known for the wide variety of grants and projects available in vascular,
molecular, and renal pathology. In 1992, the field of pathology was rapidly changing from tissue
pathology to molecular pathology. Positions in BWH's department were highly sought after by
researchers and students because the department's strong research capabilities afforded BWH
pathologists unusual opportunities in a clinical setting.
Anesthesia Anesthesiologists at BWH were actively researching the new and growing interest
in chronic pain management. This department was in the process of recruiting a new chief
following the unexpected death of the prior chief in the spring of 1991.
Rheumatology and Immunology In the 1990s, rheumatology and immunology were fertile fields
for research. Demand for these services was expected to grow as the population aged and as
women's health received more attention. It was now primarily ambulatory.
Trauma Brigham and Women's participated in the Longwood Area Trauma Center, an
affiliation with Children's Hospital and Beth Israel Hospital. One of three in the Boston area and
staffed 24 hours a day, it specialized in burn injuries, neurosurgery (for head-injured patients), and
general trauma (such as car accident patients with numerous injuries and broken bones). After
treatment in the Trauma Center, pediatric patients went to Children's Hospital; others were sent
alternately to BWH and Beth Israel. Treating trauma patients was described as a "loser" in terms
of new revenue, but it was a critical part of a physician's clinical training and was therefore an
important service in teaching hospitals.
Ambulatory (Outpatient) Care
Through 55 general and specialized medical and surgical programs under its Department
of Ambulatory and Community Health, BWH served 542,000 outpatient visits in 1991. Of these,
428,000 were to hospital clinics or the group practices of hospital physicians. Of the balance,
about 46,000 were emergency room visits and 68,000 were visits to community health centers
providing primary care for patients who had no personal physician. Outpatient visits in 1991 were
more than twice the number of outpatient visits in 1982, and administrators anticipated continued
pressure from payers for outpatient treatment to replace inpatient treatment, due to the
presumption that outpatient care cost less.
In general, reimbursement rates set by Medicare and Blue Cross made procedures (i.e.,
endoscopy, minor surgery, radiation therapy, and others) the most profitable ambulatory services.
For each procedure, the hospital received a technical fee and the doctor a physician's service fee.
Within the hospital, Brigham Internal Medical Associates (BIMA) provided primary
medical care to patients whose personal physician was in BIMA, as well as to patients who came
to BIMA but did not have a personal physician. Historically, teaching hospitals had separated
private patients (paying patients, seen by hospital faculty doctors) and clinic patients (those
without coverage, seen by residents, doctors in training). BIMA merged the two practices into a
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single group of faculty physicians who saw patients and trained residents, with the goal of
providing top-quality, one-class care to all BIMA patients. Some Boston teaching hospitals had
larger primary care practices than BWH.
In 1991, BWH was space constrained, so it leased space for a multispecialty practice center
in a western suburb three miles from the hospital and made a $5 million investment in lease-hold
improvements in the property. It was not freestanding; patients would have to go to the main
hospital for some speciality services, such as catscans or MRIs. The off-site location was an
experiment for BWH, which did not want to build off-site facilities until it was more certain of
whether patients and providers would like the location. BWH managers felt heartened that the
initial response of patients and clinicians was very positive and were considering whether to expand
on the concept, including emphasizing services to women.
BWH also had two full-service community health centers in the Jamaica Plain section of
Boston. A large number of the patients, tending to be non-English-speaking or elderly, were
impoverished.
Physicians
Brigham and Women's professional staff consisted of 1,200 active physicians who admitted
patients, were required to have Harvard University appointments, and were expected to supervise
the work of residents and medical students and tend to their clinical responsibilities. More than
90% of the staff were certified by the board of registration in a specialty. In addition to quality
patient care, most of these academic physicians devoted substantial effort to laboratory and clinical
research.
In 1991, the active staff physicians were distributed among the departments as follows:
Department Active Staff Pct. of Staff
Medicine 584 50.4%

Obstetrics/Gynecology 121 10.4%
Surgery 111 9.6%
Neonatology 107 9.2%
Radiology 50 4.3%
Anesthesia 61 5.3%
Pathology 46 4.0%
Orthopedic Surgery 32 2.7%
Rheumatology and Immunology 29 2.5%
Radiation Therapy 18 1.6%
________ _________
1,159 100%
Almost all of the departments were organized into group practices whose doctors were
salaried and practiced exclusively at BWH. This arrangement, common at teaching hospitals,
increased the influence of the chief of service; administrators were concerned that a department
would have trouble recruiting and retaining physicians during the years when its chief's retirement
was expected. At BWH, Obstetrics was the only department with a large number of active part-
time staff with private practices. The reason for this difference was historical; the Boston Hospital
for Women had had a large affiliated staff. HCHP physicians were granted privileges to admit
and practice at BWH contingent on their affiliation with HCHP.
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The new competitive price negotiations, effective in 1992, between payers and hospitals
created a new need for partnership of physicians with administrators. If the hospital failed to
contract with significant payers, doctors could find themselves unable to admit their patients to
their hospital. Doctors expected to lose patients if this situation occurred. On the other hand,
since contracts often included discounts or changes in service, physicians had to be willing to
accept these conditions for the negotiations to succeed.
Nursing Services
Almost 2,000 nurses (1,700 full-time equivalents) cared for patients at Brigham and
Women's Hospital, predominantly registered nurses (RNs), with smaller numbers of licensed
practical nurses (who had less training than RNs) and nurses' aides. RNs provided about 90% of
the nursing at the hospital because of the complexity of care for patients of specialized doctors
and the acuity of illness. Although a nursing unit on a floor could typically oversee 20 general care
patients efficiently, each unit at BWH had 15 or 16 patients (because the building design had five
semiprivate and five private rooms per unit), making the nurse-to-patient ratio higher than at
competing hospitals.
BWH nurses were the highest paid in the United States, although their salary increases
were usually quickly matched by the hospital's closest competitors. In 1988, Brigham and
Women's adopted the primary nursing concept, for which Beth Israel had been a model for a
decade. Unlike several competing hospitals, nurses at BWH were unionized, but BWH had never
had a work stoppage. Ironically, recent protracted and difficult contract negotiations had focused
on health care benefits and the issue of how much the hospital would contribute to nurses' health
insurance.
Patient Care Support and Administrative Services
The hospital employed more than 3,000 people responsible for patient care support and
"hotel services." Patient care support included services such as the bloodbank, labs, social work
services, nutrition service, and the pharmacy. Hotel services included food services, purchasing,
maintenance, engineering, utilities, security, waste management, radiation safety, housekeeping,
linen, mail, patient escort, parking, and design and construction of new facilities. None of these
services were unionized.
Information Systems The information technology developed at BWH was among the most
sophisticated in the industry; the system maintained clinical records on patients, including medical
histories and doctors' treatment orders from ambulatory clinics as well as laboratory and diagnostic
imaging results for all patients. While other hospitals had similar visions for information systems,
BWH's implementation was rare. The system in 1991 handled 28,000 sign-ons daily through 1,700
terminals, although it was not yet accessible in all of the hospital's departments. Doctors retrieved
clinical lab results from the system about once every 15 seconds, and 100 on-line literature
searches were performed daily. At other hospitals, information retrieval was typically much more
limited.
The system had been being developed since 1983 at a cost of about $19 million.
Development efforts in 1992 focused on expansion of the database to include patients in
departments not yet included, and pioneering work in treatment evaluation. Dr. Nesson
explained that doctors would have to enter treatment orders into the on-line system and the
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system would heuristically evaluate treatment plans and inform the physician of relevant
information such as alternative treatment success rates or possible drug interactions; however, he
emphasized that doctors would not be required to change orders or treatments based on this
information. Once fully developed, this system also would permit the hospital to analyze costs
and outcomes. Nesson was enthusiastic about the capabilities and potential of the system and
saw it as a means of enhancing both the educational mission of BWH and improving the quality
of patient care.
Capital investments As the 1980s ended, BWH was "landlocked" by its no-expansion agreement
with the local community. It spent about $38 million on the Longwood Medical Research Center
in 1990. In a separate project, BWH received a Determination of Need in April 1991 to replace
an older building adjacent to its facilities with a new structure. When completed, the $48 million
Center for Women and Newborns would house offices and facilities for a labor and delivery
service, neonatal intensive care, an obstetrics clinic, obstetrical support services, respiratory
therapy, and noninvasive cardiology. The new facility would also be a response to patient and
physician complaints about basement locations of obstetrics and neonatal services, providing
instead modern facilities above ground level. It would be nine stories tall, but only five floors
would be used immediately. BWH issued $150 million of bonds in 1991 to finance the new
building and to secure funding for future projects while the terms were good.
Procurement The hospital spent about $50 million per year on supplies from a variety of
pharmaceutical and hospital suppliers and distributors. In 1990, the hospital began restructuring
procurement, consolidating purchases from 27 sources to 10 and renegotiating contracts to specify
no price increases for several years. BWH also participated in several group purchasing
organizations. BWH began moving to a stockless inventory system in a partnership with Baxter
Health Care International. The arrangement, to be implemented over several years, was that
Baxter would provide state-of-the-art service for medical/surgical supplies including computerized
ordering and just-in-time deliveries to specific departments and operating rooms, and in return
was able to demonstrate the system to other potential Baxter customers. The hospital's materials
management services were underdeveloped relative to the clinical information systems.
Education
As one of five major teaching affiliates of Harvard Medical School, Brigham and Women's
Hospital trained more than 1,000 health professionals each year, including medical students,
residents, research fellows, nurses, and technicians. Given the variety and quantity of educational
programs, hospital administrators liked to think of BWH as a small university. The hospital had
about 490 resident physicians and 565 fellows (physicians obtaining additional specialized clinical
training or conducting post-residency research).
In the United States, graduating medical students requested and were assigned to teaching
hospitals through a system called "the match," in which they ranked the various hospitals and
departments where they wanted to undertake their internships and residencies. Hospitals similarly
ranked students, and a computer system matched the two. In 1989, 4,500 graduating U.S. medical
school students applied for residencies in internal medicine; 1,500 of them applied for BWH's 35
open positions. The most popular programs at BWH were in internal medicine, surgery, and
pathology; in other residency programs, it also usually got its top candidates.
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Approximately 75 of 300 Harvard Medical School third- and fourth-year students and
seven Harvard Dental School students trained at Brigham and Women's annually. The hospital
also conducted a one-year internship in dietetics for 16 students and offered clinical training in
fields such as nursing, social work, pharmacy, and nuclear medicine technology to hundreds of
other professionals from five other Boston-area colleges.
Research
Major research areas at BWH included cardiology, cancer, epidemiology, pathophysiology

of the endothelium (lining of blood vessels), hypertension, diagnostic radiology, infectious diseases,
arthritis, HIV and related retroviruses, and pulmonary diseases. Brigham and Women's also
operated the Clinical Research Center, a 15-bed facility used specifically for clinical studies in
areas such as hematology, cardiology, endocrinology, neurology, and pharmacology.
More than 500 physicians and Ph.D.s worked in research and were usually paid by research
grants, which also paid the salaries of nonphysician researchers and assistants and the costs of
necessary equipment as well as partial laboratory overhead costs. Research was important to
Brigham and Women's reputation and to the advancement of medicine. Research did not cover
its own expenses.
About 50% of NIH (National Institutes of Health) hospital funding was allocated to
projects at Boston hospitals. In addition to clinical trials, research at Boston-area teaching
hospitals included basic science and medical research. At most other U.S. teaching hospitals, basic
science research was usually done at the university affiliated with the teaching hospital.
Approximately 85% of BWH's $96 million of research grants was funded by grants from
the NIH, from which BWH received more funds than any other independent hospital in the
nation. The balance of Brigham and Women's research expenditures were funded by private
foundations, corporations, and subcontracts from other hospitals and educational institutions. In
addition, the hospital received approximately $4 million from corporate sponsors of clinical trials.
Federal budget cutbacks in 1991 raised concern about future project funding from public sources.
In 1986, the hospital established a Research and Ventures Office with two full-time staff
members. The office was responsible for initiating relationships with corporate research sponsors,
providing a conduit for BWH scientists and physicians to commercialize research results, and
developing new businesses related to the hospital. From 1986 to 1990, the Research and Ventures
Office raised more than $21 million in research funds and had the potential to earn $16 million
in fees if all research milestones were realized, although the expected fees were somewhat lower.
Several procedures designed by Brigham and Women's researchers had also been licensed for
worldwide use.
The Research and Ventures Office also initiated several unrelated businesses (on which
it paid taxes), including a fitness center in the Longwood Avenue Medical Area (for BWH
employees and others in the neighborhood) and a partnership with a national weight loss program
that owned and operated a weight reduction clinic. Critics of the weight reduction clinic
partnership said that BWH should not lend its name and credibility to for-profit businesses.
Although it was breaking even ahead of schedule in 1990, Nesson explained that he would not
involve the hospital with the weight reduction clinic again because it met only some of his criteria
11
to Apr 2024.
for good ventures for BWH. Although it fulfilled an important medical need for good, well-
thought-out programs for seriously obese people, he felt it was too peripheral to BWH's basic
businesses, adding, "it is better for real entrepreneurs than for us."
Organization
Exhibit 2 shows BWH's administrative organization. The hospital was governed by a 24-
member board of trustees, made up of Boston-area business and community leaders. It met a few
times a year. Thirteen board members constituted an executive committee that met every other
month. The chairman of the board and chairman of the executive committee was John H.
McArthur, Dean of the Harvard Business School. Two executive committee members were
internal hospital personnel; Nesson (the president and chief executive officer), and one of the
chiefs of service (which chief rotated annually).
Nesson was an active leader whose personal influence was important in management of
the hospital. He met every two weeks with the COO, the CFO, and the senior VP for research
and the department chiefs; this group dealt with major issues facing the hospital. Several
administrators noted that the relationships between the medical leaders and the senior managers
were unusually good at BWH.
Dr. Nesson had repeatedly broken the mold of typical hospital management practice. He
had hired Elaine Smith, president of a small University of Toronto teaching hospital, to be COO,
contrary to accepted wisdom that familiarity with U.S. federal and state reimbursement systems
was the critical success factor in hospital management. He hired the CFO, Jay Pieper, with prior
experience in the brewing and glass bottles industries, to bring experience in consumer products
and marketing into the hospital's senior management team. While most hospitals had chairmen
of each of numerous clinical specialty departments, Nesson created a group of only eight clinical
chiefs, which was able to work together more closely.
Nesson also provided leadership in the community and in the hospital community on
issues such as HIV infection and infant mortality. He had designed a policy for all Harvard
hospitals that would provide insurance for any health care provider who contracted HIV, but
convincing and coordinating all of the hospitals was proving to be difficult. In 1991, the BWH
had started a program for prenatal care provided through the hospital and community health
centers.
Competitors
There were more than 40 acute care hospitals in the Greater Boston Health Service Area
in 1992, including 19 teaching hospitals affiliated with the city's three medical schools: Harvard,
Tufts, and Boston University. (See Exhibits 3 and 4 for comparative statistics.) Whereas most
offered general acute care, several hospitals focused care and research on specific health areas,
such as particular diseases (e.g., cancer) or population sections (e.g., children).
Competition was both on a departmental and a hospital level. While the Longwood area
hospitals cooperated on an academic basis through their affiliation with Harvard Medical School,
12
to Apr 2024.
they competed fiercely for patients and physicians, and with deregulation were now competing for
third party payers.
Massachusetts General (MGH) Massachusetts General Hospital, the largest and oldest hospital
in the greater Boston area, treated its first inpatient in 1821 and its three-millionth in 1988. Its
endowment of more than $300 million was far greater than that of any other general hospital in
Boston.
MGH was reputed to be Boston's premier hospital for complex medical or surgical
procedures, particularly those involving intensive care. It had almost 100 beds for intensive care
patients in eight areas, including surgery, respiratory, and neurology/neurosurgery. It was also a
major center for cardiac surgery. MGH had a pediatrics department and a seven-bed pediatric
intensive care unit (ICU).
Ambulatory care facilities in the hospital included an emergency room, an outpatient

center, and an outpatient cancer center. The cancer center provided a magnetic resonance
imaging complex that reduced the waiting period for diagnostic imaging. Also, the hospital had
three off-site community health centers in nearby communities.
MGH was a leader in biomedical research. Research facilities under its auspices included
a neuroscience center, a center for cutaneous biology, and a cardiovascular center. MGH had
been particularly successful in negotiating agreements with private capital sources, including
Hoechst-Celanese (a European pharmaceutical manufacturer), Shiseido Ltd. (a Japanese cosmetics
and chemical manufacturer), and Bristol-Myers Squibb (an American pharmaceutical concern),
to fund research projects.
In 1991, MGH completed a $150 million three-stage plan to construct additional facilities
for inpatient and ambulatory patient care and to acquire additional research space, in order to
"complete [its] transformation into a twenty-first-century medical complex." Part of the project
involved the purchase and renovation of space for research laboratories in Charlestown,
Massachusetts, about 10 minutes from MGH. The hospital also planned to tear down several
older buildings and build two new high-rise towers to replace them, bringing patient rooms up to
current standards and providing new outpatient treatment facilities.
Observers outside of MGH did not know exactly why Blue Cross decided not to negotiate
with MGH in 1992, the first year of competitive pricing; they noted that MGH decided at that
time to move aggressively to become more of a "full-service" hospital. MGH planned to introduce
an obstetric service and increase its primary care capabilities. The "wake-up call" from Blue Cross
made MGH more proactive in developing relationships with payers. One tangible outcome was
an agreement with the Tufts Associated Health Plan.
New England Medical Center (NEMC) NEMC concentrated its clinical and research resources
on cardiology, oncology, pediatrics, and neurology/neurosurgery, which it characterized as
exceptionally complex areas of medicine. About 25% of NEMC's beds were dedicated to pediatric
care; the hospital operated a 28-bed neonatal ICU and a 10-bed pediatric ICU, and it served as
a regional trauma center for patients in 12 pediatric subspecialties. NEMC had also recently
decided to introduce obstetric services.
13
to Apr 2024.
Nearly all of the hospital's medical staff were full-time salaried employees of one of two
group practices affiliated with NEMC, and most physicians were based at the hospital full time.
The majority of adult ambulatory services were housed in a separate building at NEMC's main
facility. The hospital also had a Day Surgery Center, which performed orthopedic, gynecologic,
and urologic surgical procedures that could be done on an outpatient basis. In 1989, the Day
Surgery Center handled 3,500 procedures, 40% more than it had handled in 1985, its first year
of operation.
During the 1980s, NEMC had developed strong relationships with referring community
hospitals. It served as the coordinator of academic programs for Tufts medical students at 10
community hospitals in the Greater Boston area. NEMC was also affiliated with two local
community hospitals at which its physicians oversaw the development and operation of cardiac
catheterization laboratories (cath labs), normally facilities located exclusively at teaching hospitals.
As part of this affiliation, it stood ready to accept patients from the community hospital cath labs
on an emergency basis. Additionally, NEMC was involved in some training for a majority of the
160 Tufts medical students in each class, and it offered programs for almost 500 residents and for
both research and clinical fellows.
NEMC placed a strong emphasis on developing contracts with HMOs, which supplied it
with a substantial percentage of patient volume. The hospital had a diverse network of
relationships with 18 managed care plans in Massachusetts, most of which contracted with the
hospital to provide specialized care at negotiated rates. NEMC organized an Independent
Practice Association HMO called the Tufts Associated Health Plan. In 1990, this HMO had
127,500 members, for which NEMC and its affiliated community hospitals provided almost all
hospital care. In 1991, NEMC administrators began to negotiate with some nongovernment
payers to provide new types of payment plans for some high-cost illnesses. Under these new
"whole episode" plans, the payer agreed to have NEMC provide all aspects of care, from diagnosis
to hospitalization to medication, and paid a flat fee at the beginning of the episode. While
episode plans were a small part of NEMC's business in 1992, the hospital said these plans allowed
more cost effective high quality care, and thus planned to expand the number of illness covered
this way.
Beth Israel (BI) Beth Israel Hospital had 10 clinical departments and provided specialized care
in all major subspecialties. It was particularly known for leadership in cardiac-related surgery and
procedures and treatment for cancer, renal disease, and gastroenterological and endocrine
afflictions. It had the second-largest obstetrical service in Boston, and in 1991 opened a new off-
site obstetrical practice very near BWH's new off-site multispecialty center. Beth Israel Healthcare
Associates (BIHCA) offered primary care services on both a scheduled and a no-appointment
basis at a walk-in center adjacent to the hospital, with additional services offered in a physicians'
office building located a block away from BI. The walk-in center provided some emergency
services, which complemented the hospital's emergency room.
Beth Israel's research program was small relative to competitor teaching hospitals in the
Boston area until the 1980s. By 1991, research support had reached more than $30 million, up
from about $12 million in 1984. About 50% of funds were received from the NIH, with the
balance from private sources.
Historically Boston's premier hospital for the Jewish community, BI enjoyed the unique
benefit of loyal patronage and strong financial support due to its religious roots. In the 1970s
14
to Apr 2024.
and 1980s, Beth Israel was widely known for creative management efforts, including several
programs to create a service-oriented image. Starting in 1972, it issued a document known as the
"Statement on the Rights of Patients" to each patient upon hospitalization. The document
outlined patients' rights to courteous care, full information about their treatment, and privacy
during their stay. The hospital pioneered the concept of primary nursing, which was adopted—to
varying degrees—by virtually all of Boston's major teaching hospitals and by a large percentage
of hospitals nationwide. It also introduced a program known as Prepare/21, under which all
employees could contribute ideas to improve occupational routines or procedures that were
handled inefficiently or ineffectively.
In 1991, Beth Israel Hospital developed relationships with surrounding hospitals in hopes
of gaining a steady stream of referrals. They had formed an alliance, for instance, with
Framingham Union Hospital, in which BI helped Framingham Union learn to do cardiac surgery
in return for other cardiac referrals. The alliance enabled Framingham Union to describe itself
as a Harvard-affiliated hospital. In 1992, it was not yet clear whether the affiliation would
encourage significant increases in referrals to BI.
Children's Hospital Children's Hospital, endowed with about $300 million and providing a full
range of medical services for both newborns and children, was the largest medical center in the
United States dedicated solely to the care of pediatric patients. The hospital did not have an
obstetrics program. Because of its affiliation with Harvard Medical School, its advanced
technological capabilities, and its location among Longwood-area hospitals, Children's served as
a regional, national, and international referral center for pediatric care. More than 60% of
admissions were from outside the Greater Boston area.
The hospital provided more than 100 outpatient services for developmental disorders,
growth deficiency, orthopedics, childhood diseases, plastic surgery, and sleep disorders. In
addition to its on-site outpatient services and emergency room, it provided local outpatient care
for children at a community health center in a residential section of Boston. In 1989, Children's
opened an outpatient care center in Lexington, Massachusetts; patient volume at the center was
building slowly in 1992.
Children's had a Referring Physician Coordinator (RPC) to encourage primary and

community hospital physicians to refer patients to it. The PRC served as liaison to the referring
physicians, reporting on patients' progress and other relevant information after a patient had been
referred. Children's also had formal transfer agreements with several local hospitals for pediatric
referrals. A large number of graduates of the hospital's residency program went into private
practice, providing another referral channel.
More than 500 Children's Hospital scientists and physicians were engaged in research in
1989, making it the largest facility in the world dedicated to pediatric research. Research was
funded primarily by the NIH as well as by various private research foundations. Funding from
private companies accounted for about 10% of the research budget. Children's actively pursued
the licensing of technology and procedures by private industry and, during the late 1980s, worked
with Monsanto, DuPont, Becton-Dickinson, and other chemical and pharmaceutical companies
on technology transfer.
University Hospital University Hospital was the principal teaching affiliate in specialized care
for Boston University School of Medicine, providing care in all specialties except obstetrics and
15
to Apr 2024.
pediatrics. Many of its inpatient services were involved in integrated, multispecialty programs,
including cardiovascular disease treatment, neurosciences for the brain and spinal cord, and
treatments specially designed for the elderly. The hospital shared several services with Boston City
Hospital, another Boston University affiliate, located next door.
An affiliated physician group located at the hospital provided primary care to local
residents. The hospital itself provided various general and specialty outpatient services as well as
emergency services at two on-premise locations, one of which was a building shared with
physicians in private practice.
Most of University Hospital's research was directed toward the diagnosis and treatment
of medical problems covered by multidisciplinary teams. The hospital also researched the health
care delivery process, including attempts to control use of ancillary services, measurement of the
demands placed on a nursing staff, organization of managed care for the elderly, and coordination
of cancer treatment and cancer data management systems.
In 1988, the hospital initiated an expansion of affiliations with Boston-area HMOs and
PPOs, and hired a director of managed care systems to increase use by managed care systems.
In 1991, it had contracts with 11 managed care providers, seven of which were full-service
contracts. The remaining four were specialty service agreements in cardiac surgery or spinal cord
injury/rehabilitation. One of the full-service contracts called for University Hospital to be the
exclusive, tertiary care facility for Massachusetts-based subscribers of U.S. Healthcare, a national
HMO.
New England Deaconess Hospital (The Deaconess) The Deaconess operated clinical
departments in medicine, surgery, pathology, radiology, radiation therapy, and anesthesia, all of
which supported specializations in the treatment of diabetes, heart disease, cancer, AIDS and
other infectious diseases, nutrition, and behavioral medicine. It maintained 431 inpatient beds and
had a modest ambulatory practice. Deaconess had closed its emergency room in 1985 and had
no obstetrics or pediatrics departments. Like Boston's other major teaching hospitals, many of
the Deaconess's resources were concentrated in areas of medicine such as heart disease, cancer,
and organ transplantation, which required substantial research capabilities.
The Deaconess's primary specialty was the treatment of diabetes and related complications,
and it handled the hospital needs of diabetic patients from the Joslin Diabetes Center. During
the 1980s, the Deaconess developed a reputation for unusually good and compassionate care for
AIDS patients because of the work of Dr. Jerome Groopman, a leading specialist in hematology
and oncology. The hospital had also developed a substantial program relating to disease
prevention. It started the Institute for the Prevention of Cardiovascular Disease, the Mind/Body
Medical Institute, which integrated traditional medicine with mental techniques, including
relaxation response, to relieve pain for chronically ill patients, and a Center for the Study of
Nutrition and Medicine, used by patients with obesity-related illnesses.
In 1992, the Deaconess was renovating facilities for a new radiology suite, two new
medicine/surgery units, and a new operating room. It had added about 30 beds, including eight
intensive care unit beds.
Dana-Farber Cancer Institute (Dana-Farber) Dana-Farber Cancer Institute, one of 25

comprehensive cancer centers in the United States, was founded to provide to care, teaching, and
research related to the identification and treatment of cancer in children and adults. Originally
16
to Apr 2024.
a research center dedicated to the development of techniques for fighting childhood cancer with
chemotherapy, it expanded in 1969 to provide adult and pediatric patient care for all types of
cancer, as well as research in clinical studies and biomedical science. Observers noted that as a
true specialty center, Dana Farber was insulated from some of the pressure by payers to expand
the role of primary care doctors.
Patients were usually referred by physicians at community hospitals if Dana-Farber offered

a promising treatment for them. Patients came predominantly from New England because the
designation as a comprehensive cancer center required that patients from New England be the
focus. Patients from outside the region were often referred because Dana-Farber was one of only
a handful of facilities that offered certain advanced procedures.
A large percentage of treatment at Dana-Farber was done on an outpatient basis.

Outpatient services were conducted by two general oncology units, adult and pediatric, and six
specialty units: breast evaluation, dermatology, head and neck, lungs, sarcoma, and gynecology.
Dana-Farber was licensed by the Commonwealth of Massachusetts to maintain 57 inpatient beds;
thirteen of the beds were for bone marrow transplantation. No surgery was performed at Dana-
Farber. Adult patients needing surgery were generally transferred to nearby oncology units at
Brigham and Women's, Beth Israel, or New England Deaconess Hospitals. Pediatric patients were
admitted to the oncology unit at Children's Hospital, which was directed by Dana-Farber
physicians.
Dana-Farber provided training programs for research and clinical fellows at neighboring
hospitals. Residents from Beth Israel and Brigham and Women's Hospitals rotated through its
adult oncology unit, and residents from Children's Hospital rotated through its pediatric oncology
unit.
An estimated 60% of capital and human resources were dedicated to research. The
National Cancer Institute (NCI), an arm of the National Institutes for Health, in 1990 rated Dana-
Farber "one of the premier cancer centers in the world" for its research and clinical achievements.
More than 75% of Dana-Farber's research funding was derived from government sources, mostly
from the NCI. Sources of the remaining 25% were foundations, corporations, and private donors.
17
to Apr 2024.
792-095 -18-
Exhibit 1 Brigham and Women's Financial Statements, 1984-1991 (in thousands)
1991 1990 1989 1988 1987 1986 1985 1984
Operating Revenues
Total patient revenues a a $423,987 $375,592 $308,265 $284,467 $253,258 $234,535
Less: Contractual adjustment a a (86,858) (73,862) (48,965) (43,290) (37,552) (38,799)
Less: Uncompensated care a a (33,839) (26,577) (22,572) (22,480) (17,840) (17,898)
Net patient revenues 417,424 367,711 303,290 275,153 236,728 218,697 197,866 177,838
Other operating revenues 110,020 105,174 93,031 82,236 67,002 60,065 46,640 39,556
Total Operating Revenues $527,444 $472,885 $396,321 $357,389 $303,730 $278,762 $244,506 $217,394
Salaries, benefits and supplies 444,909 401,807 361,333 325,556 276,920 249,543 221,433 196,989
Depreciation 30,583 26,330 23,234 18,564 14,655 11,781 10,760 8,406
Uncompensated carea 38,485 31,931
Interest 8,627 8,499 8,742 8,429 7,680 8,952 8,892 9,176
Operating Gain $ 4,840 $ 4,318 $ 3,012 $ 4,840 $ 4,475 $ 8,486 $ 3,475 $ 2,823
Assets
Cash and investments $ 65,266 $ 17,905 $ 11,713 $ 9,193 $ 17,732 $ 15,577 $ 8,811 $ 3,460
Current board-designated assetsb 104,606 97,600 86,855 81,009 NA NA NA NA
Accounts receivable (net) 50,715 54,171 60,142 52,665 45,208 49,542 48,064 47,526
Other current assets 19,058 16,144 9,903 11,014 7,462 5,208 4,986 9,094
Total Current Assets $239,645 $185,820 $168,613 $153,881 $ 70,402 $ 70,327 $ 61,861 $ 60,080
to Apr 2024.
Board-designated assetsb 163,951 73,508 84,008 45,676 101,337 92,703 48,987 42,593
Fixed assets (net) 280,577 240,599 216,853 199,970 189,044 162,201 147,985 140,579
Total Unrestricted Assets 684,172 499,927 469,474 399,527 360,783 325,231 258,833 243,252
Donor-restricted assets 69,073 56,248 54,905 47,270 45,677 39,655 37,844 30,181
Total Assets $753,246 $566,175 $524,379 $446,797 $406,460 $364,886 $296,677 $273,433
Liabilities & Fund Balances

Notes and accounts payable $ 89,204 $ 66,439 $ 53,639 $ 46,025 $ 52,207 $ 45,164 $ 36,914 $ 24,012
Third-party accruals 41,726 40,073 64,499 56,166 39,663 27,797 34,031 25,679
Other current liabilities 5,020 4,536 4,370 4,720 3,632 11,342
Total Current Liabilities $130,930 $106,512 $123,158 $106,727 $ 96,240 $ 77,681 $ 74,577 $ 61,033
Long-term debt and other liabilities 347,091 205,057 180,370 141,770 126,365 129,341 98,123 100,352
Fund balances (restricted and unrestricted) 275,225 244,606 220,852 198,120 183,855 157,864 123,977 112,048
Total Liabilities and Fund Balances $753,246 $556,175 $524,380 $446,617 $406,460 $364,886 $296,677 $273,433
Source: Brigham and Women's Hospital audited financial statements.

a
Reporting changed in 1990 (in accordance with the new Hospital Audit Guide) to not reporting total revenues or contractual adjustments,
and reporting uncompensated care as an expense.
bBoard-designated assets: funds set aside by Board of Trustees for specific purposes. They are not considered restricted because, unlike restricted assets,
they can, if necessary, be released by board vote for general purposes.
792-095 -19-
Exhibit 2 Brigham and Women's Administrative Organizational Structure, 1991
+))))))))))))))))))))))))),
* Board of * +))))))))))))))))))))))))))))))))))))))))))))))))))))),
a
* Trustees * * Chief of Medicine Chief of Rheumatology/ *
a
* Chairman: John McArthur * * Chief of Surgerya Immunology *
.)))))))))))0)))))))))))))- * Chief of Orthopedics Chief of Radiology *
+))))))))2)))))))))), * Chief of Obstetricsa Chief of Pathology *
a
* President & CEO a/)))))))))))))))))))))))1 & Gynecology Chief of Anesthesia *
* H. Richard Nesson * * Chief of Neonatology Chief of Radiation Therapy *
.))))))))0))))))))))- .)))))))))))))))))))))))))))))))))))))))))))))))))))))-
*
+))))))))))))))))))0))))))))))))))0))))))))2))))))))0))))))))))))))))0))))))))))))))))))))),
* * * * * *
+)))))2))))))), +))))2))))), +))))2)))))), +))))))2))))), +))))))2))))))), +)))))))2))))))))))),
* Sr. VP * * Exec. VP * * Sr. VP * * VP * * VP * * Sr. VP *
* Development * * & COO * * & CFO * * Planning * *Info. Systems * *Research & Ventures*
* & Public * .))))0)))))- .)))))))))))- .))))))))))))- .))))))))))))))- .)))))))))))))))))))-
* Affairs * *
.)))))))))))))- *
*
*
*
*
*
*
*
*
to Apr 2024.
*
+))))))2))))))))))))0)))))))))))))))))))0)))))))))))))))))))0)))))))))))))))))))0)))))))))))))))))),
* * * * * *
+)))))2)))))), +))))))2)))))), +))))))2))))))), +)))))))2))))))))), +))))))2)))))), +)))))))2)))))))),
* VP * * VP * * VP * * VP * * VP * * VP *
* Nursing * * Ambulatory &* * Clinical * * Clinical * * Clinical * *Human Resources *
* Services * * Community * * Services * * Services * * Labs * .))))))))))))))))-
.))))))))))))- * Health * .))))))))))))))- .)))))))))))))))))- .)))))))))))))-
.)))))))))))))-
Also liaison to Also liaison to Also liaison to
departments of: departments of: departments of:
OB-GYN Medicine Anesthesia

Rheumatology Radiology Orthopedics
Faculty Practices Medical Staff Pathology
Emergency Affairs Surgery
HCHP Ambulatory Joint Center for Hosp. Systems
Neonatology Rad. Therapy HCHP Inpatient
Source: Brigham and Women's Hospital documents.

a Expected to retire within the next three years, or under active search in 1992.
792-095 -20-
Exhibit 3 Comparative Statistics (in thousands) for Boston Teaching Hospitals, 1989
University Total Research Residents Total

Hospital Affiliation Revenues Revenues Admissions Beds and Fellows Employees
Massachusetts General Harvard 448.3 115.6 33.7 1,081 930 8,130

Brigham and Women's Harvard 424.0 90.0 35.0 720 920 7,048
N.E. Medical Center Tufts 262.8 34.2 16.8 452 272 2,930
Beth Israel Harvard 261.7 30.2 29.5 504 207 3,323
Children's Harvard 215.1 34.0 14.9 335 164 2,869
N.E. Deaconess Harvard 196.4 10.2 13.8 431 222 2,651
University Boston University 169.8 8.0 10.6 379 282 1,917
Dana-Farber Cancer Institute Harvard 51.6 40.0 NAa 57 9 631
Sources: Massachusetts Department of Public Health, Annual Hospital Statistical Reports; individual hospital annual reports and bond
prospectuses.
to Apr 2024.
Most patients at the Dana-Farber Cancer Institute are seen on an outpatient basis.
Exhibit 4 Selected Financial Statistics for Boston Teaching Hospitals, 1984-1989 ($ in

thousands)
1989 1988 1987 1986 1985 1984
Massachusetts General
Gross patient revenues $448,322 $409,164 $373,346 $368,425 $330,744 $299,967

Net patient revenues 340,245 327,432 331,819 299,531 270,644 257,537
Total operating revenues 389,575 389,575 435,541 398,239 363,342 350,988
Total expenses 405,337 374,212 434,573 395,191 360,954 349,097
Operating gain (loss) (15,672) (5,248) 968 3,048 2,388 1,891
Overall gain (loss) (2,772) (1,884) 3,084 3,708 3,344 2,817
Current assets $122,511 $101,349 $102,268 $107,570 $79,517 $77,307
Total assets 580,828 552,897 518,341 497,596 304,668 288,680
Current liabilities 84,441 66,709 84,648 92,138 55,985 56,763
Long-term liabilities 292,158 291,620 217,682 221,993 83,679 84,526
Fund balances 204,229 194,568 202,043 179,104 162,549 147,391
New England Medical Center

Total expenses 215,511 196,598 208,935 191,882 163,296 151,914
Operating gain (loss) 575 (2,343) 560 2,530 2,212 3,085
Overall gain (loss) 5,865 1,233 7,449 (4,217) 5,468 4,757
Current assets $50,290 $56,057 $57,951 $47,164 $42,087 $32,983
Total assets 300,189 271,455 301,343 286,192 223,436 196,006
Fund balances 85,969 80,093 78,941 71,480 69,645 64,455
Beth Israel
Gross patient revenues $261,744 $217,675 NA $171,884 $159,840 $154,560

Total expenses 210,301 186,943 200,743 172,205 154,860 138,183
Operating gain (loss) 889 (1,841) (1,626) 659 1,263 4,113
Overall gain (loss) 2,365 2,312 5,500 8,458 7,120 8,593
Current assets $53,307 $38,638 $32,618 $30,570 $28,791 $29,755
Total assets 283,617 249,753 217,690 207,342 198,458 190,526
Fund balances 86,230 83,866 81,552 78,477 69,910 62,774
Children's

Total expenses 187,536 164,874 148,144 134,122 127,132 117,598
Operating gain (loss) (1,665) 421 (7,654) (2,235) 3,591 9,853
Overall gain (loss) 241 3,462 1,846 5,871 6,792 10,337
Current assets $71,200 $79,253 $97,286 $67,000 $60,009 $52,275
Total assets 233,401 177,952 341,064 300,688 215,204 208,372
Fund balances 106,808 97,376 102,446 96,689 88,694 86,539
21
to Apr 2024.
Exhibit 4 (continued)
1989 1988 1987 1986 1985 1984
New England Deaconess

Total expenses 147,551 134,192 137,764 128,997 120,131 110,736
Operating gain (loss) (540) (3,098) (28,639) 2,308 (1,814) 2,503
Overall gain (loss) 2,125 (1,159) (26,725) 3,562 (796) 3,482
Current assets $72,931 $63,182 $58,094 $36,304 $27,686 $24,644
Total assets 157,382 120,015 113,373 98,696 78,604 67,959
Fund balances 14,758 12,060 10,710 39,414 35,758 36,259
University

Total expenses 133,878 121,211 103,438 93,640 88,677 84,944
Operating gain (loss) (3,623) (7,479) (95) 2,889 1,683 2,187
Overall gain (loss) 3,059 (2,044) 7,272 10,449 6,966 6,952
Current assets $47,103 $33,509 $29,828 $29,940 $24,882 $17,388
Total assets 192,329 175,766 173,354 168,702 158,112 68,403
Fund balances 51,584 50,402 54,315 51,158 42,959 36,686
Dana-Farber Cancer Institute
Gross patient revenues 51,618 42,153 35,756 32,006 34,669 31,533

Total expenses 110,697 87,897 74,823 67,243 58,273 55,117
Operating gain (loss) (4,856) (3,686) (5,918) (4,493) (784) 729
Overall gain (loss) 7,055 3,772 4,115 3,048 4,041 4,043
Current assets 12,998 12,823 13,392 9,570 10,365 11,445
Total assets 133,337 124,378 121,029 108,975 64,367 56,240
Fund balances 69,737 59,692 54,080 50,503 47,221 43,226
Sources: Boston Teaching Hospital audited financials; and Nancy Kane, Harvard School of Public Health.
22
to Apr 2024.
Exhibit 5 The Brigham and Women's Hospital in 1992: Statistics
FY 91 FY 90
AVAILABLE BEDS 726 720
ADMISSIONS
Medical 10,547 9,471

Surgical 11,697 10,924
Gynecological 3,143 3,349
Obstetrical 10,789 11,687
Newborn Intensive Care 1,536 1,501
Total Admissions 37,712 36,932
AVERAGE LENGTH OF STATE (DAYS)
Medical 6.4 7.0

Surgical 7.4 7.7
Gynecological 4.0 4.1
Obstetrical 3.7 3.6
Newborn Intensive Care 10.0 10.1
All Services 5.9 6.1
AVERAGE OCCUPANCY RATE 84.2% 85.0%
DAYS OF INPATIENT CARE 221,238 223,466
SURGICAL PROCEDURES
Inpatient 14,619 13,839

Ambulatory 11,571 11,339
Total 26,190 25,178
BIRTHS 9,757 10,491
AMBULATORY VISITS
Clinic Visits (Hospital and Groups) 428,299 394,246

Emergency Visits 46,285 45,886
Neighborhood Health Center Visits 67,697 64,845
Total 542,281 505,077
RADIOLOGIC PROCEDURES
X-Ray Examinations 188,943 178,808

CT/MRI Scans 23,277 17,767
Total 212,220 196,575
CARDIAC SURGERIES 1,363 1,297
CLINICAL LAB TESTS 2,965,944 2,758,888
STAFF
Staff Physiciansa 1,780 1,778

Residents 493 466
Fellows 565 547
Registered Nursesb 1,343 1,100
Other employeesb 3,223 3,338
Total 7,404 7,229
aThis number represents active, associate, consulting, courtesy, and research staff.
It does not include residents and fellows.
b
Numbers represent full-time equivalents.
23
to Apr 2024.

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Harvard Business School 9-792-095

Rev. March 30, 1993

The Brigham and Women's Hospital in 1992

Patients and Payers

Brigham and Women's revenues came from a wide range of payers:

Payer Percent of Revenue

Medicare 28% 28%

The uncertainty created by the new reimbursement regulation was accentuated by

Neonatology (newborn medicine) The Department of Neonatology was a joint practice of

Ambulatory (Outpatient) Care

Department Active Staff Pct. of Staff

Medicine 584 50.4%

Patient Care Support and Administrative Services

Major research areas at BWH included cardiology, cancer, epidemiology, pathophysiology

Ambulatory care facilities in the hospital included an emergency room, an outpatient

Children's had a Referring Physician Coordinator (RPC) to encourage primary and

Dana-Farber Cancer Institute (Dana-Farber) Dana-Farber Cancer Institute, one of 25

Patients were usually referred by physicians at community hospitals if Dana-Farber offered

A large percentage of treatment at Dana-Farber was done on an outpatient basis.

1991 1990 1989 1988 1987 1986 1985 1984

Liabilities & Fund Balances

Source: Brigham and Women's Hospital audited financial statements.

departments of: departments of: departments of:

OB-GYN Medicine Anesthesia

Source: Brigham and Women's Hospital documents.

University Total Research Residents Total

Massachusetts General Harvard 448.3 115.6 33.7 1,081 930 8,130

Exhibit 4 Selected Financial Statistics for Boston Teaching Hospitals, 1984-1989 ($ in

1989 1988 1987 1986 1985 1984

Gross patient revenues $448,322 $409,164 $373,346 $368,425 $330,744 $299,967

New England Medical Center

Gross patient revenues $262,770 $223,475 $203,148 $196,416 $181,521 $174,278

Gross patient revenues $261,744 $217,675 NA $171,884 $159,840 $154,560

Gross patient revenues $215,131 $186,029 $167,828 $142,939 $139,339 $135,925

1989 1988 1987 1986 1985 1984

New England Deaconess

Gross patient revenues $196,368 $172,526 $170,111 $161,094 $130,591 $123,640

Gross patient revenues $169,750 $143,866 $114,753 $108,348 $109,020 $97,237

Dana-Farber Cancer Institute

Gross patient revenues 51,618 42,153 35,756 32,006 34,669 31,533

Exhibit 5 The Brigham and Women's Hospital in 1992: Statistics

AVAILABLE BEDS 726 720

Medical 10,547 9,471

AVERAGE LENGTH OF STATE (DAYS)

Medical 6.4 7.0

AVERAGE OCCUPANCY RATE 84.2% 85.0%

DAYS OF INPATIENT CARE 221,238 223,466

Inpatient 14,619 13,839

BIRTHS 9,757 10,491

Clinic Visits (Hospital and Groups) 428,299 394,246

X-Ray Examinations 188,943 178,808

CARDIAC SURGERIES 1,363 1,297

CLINICAL LAB TESTS 2,965,944 2,758,888

Staff Physiciansa 1,780 1,778

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Brigham and Women's Hospital Final - Jan 2024

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