Rush CEO Dr. Larry Goodman to retire

Rush University System for Health CEO Dr. Larry Goodman will retire this summer, the academic health system announced late Wednesday. 

Dr. Ranga Krishnan, current dean of Rush Medical College and senior vice president of Rush University Medical Center, and Dr. Omar Lateef, the chief medical officer for the system and medical center, and senior vice president of medical affairs for the medical center, will split Goodman’s role. Krishnan will become CEO of the Chicago-based system, a three-hospital network anchored by Rush University Medical Center, and Lateef will become CEO of the medical center. 

Goodman has been CEO of Rush University Medical Center since February 2002 and assumed the role of CEO when the system was formed in March 2017. He informed the board about his retirement plans more than a year ago to kick off succession planning, said Goodman, who will turn 69 soon.

“Things are going well at Rush, I am fortunately healthy, I enjoy what I do, and I believe these kinds of transitions take time so I wanted to be purposeful in our succession planning,” Goodman told Modern Healthcare. “Some CEOs can stay too long or get sick and then not perform as well. I have been here my entire career and I care deeply about Rush, so I wanted to make sure I did the correct thing.”

Comparing Rush to other institutions, it would be hard to find another university, flagship hospital and medical system led by a single leader, said Susan Crown, chairman of the system and medical center boards. 

“We have grown substantially in all three areas,” she said. “Given our aspirations, it is important for each entity to have strong leadership and focus.” 

Rush has pushed several initiatives during Goodman’s tenure, two of which include boosting community outreach and revamping CMS’ hospital star ratings program. 

Rush spearheaded the West Side United program, a coalition of health systems, public institutions, residents and community groups formed in 2017. The group aims to address some of the root causes that have led to a 16-year discrepancy in life expectancy for some West Side residents from those in Chicago’s Loop. 

The academic health system has led dozens of informal “listening sessions” throughout the West Side to hear what residents need and learn how to appropriately intervene. Rush and West Side United are trying to spark a recovery through job training, local hiring and purchasing, small business funding and housing development. In the West Side and beyond, Rush looks to expand mental health services—particularly for military veterans— reduce gun violence and increase access to healthy food, among other initiatives.

Rush’s quality experts have been vocal about their criticism of the CMS’ star ratings. The agency’s statistical model unevenly weighted the eight measures in the safety-of-care group, which has skewed star ratings since they were first released in 2016, Rush argues. Quality experts contend that the latent variable modeling used in the calculations isn’t appropriate for measuring clinical outcomes and they are working with the CMS to adjust the formula. 

An infrastructure is in place to continue these efforts after his retirement, Goodman said. 

“It goes all the way up to the board,” he said.

Modern Healthcare’s sister publication, Crain’s Chicago Business, recently reported that Rush is exploring a merger with Swedish Covenant Health, which operates a one-hospital community health network in Chicago that includes a 150-member physician group and a managed care organization.

Rush nixed a merger with Chicago-based Little Company of Mary Hospital & Health Care Centers last year but has steadily grown its ambulatory network. More outpatient expansion is planned, executives said.

“We want to figure out how to get closer to the home and how to get new services in place outside of the traditional avenues of more clinics and more surgery centers,” said Krishnan, adding that Rush will look to build its own facilities as well as partner with both typical and atypical healthcare companies.

The academic health system is repaying more than $21 million to the federal government for alleged overpayment for inpatient and outpatient rehabilitation claims. 

Rush reported $94 million in operating income on revenue of $2.43 billion in 2018, up from $69.5 million in operating income on revenue of $2.27 billion in 2017, according to Modern Healthcare’s financial database. It had a 3.9% operating margin in 2018, up from 3.1% the year prior. 

Through the first half of its fiscal 2019, which started July 1, the academic health system posted a 1.9% operating margin and an adjusted $1.5 million operating loss related to early retirement payouts for certain employees. That compared to $47.2 million of adjusted operating income through the first six months of fiscal 2018.

Beth Israel Deaconess and Lahey Health complete merger

Beth Israel Deaconess Medical Center and Lahey Health officially combined to form Beth Israel Lahey Health, the second-largest health system in Massachusetts, the organizations announced Friday. 

In November, Massachusetts’ attorney general approved the deal with conditions including a seven-year price cap; participation in MassHealth, the state’s combined Medicaid and Children’s Health Insurance Program; and $71.6 million in investments supporting healthcare services for low-income and underserved communities in Massachusetts.

The price cap guarantees Beth Israel Lahey Health’s price increases will remain below the state’s annual healthcare cost growth benchmark of 3.1% for seven years. That will prevent more than $1 billion of the potential cost increases over a seven-year span projected by the Massachusetts Health Policy Commission, according to Attorney General Maura Healey.

Healey’s assurance of discontinuance does offer some flexibility amid “significant change in market conditions,” including significant swings in the consumer price index or new laws that significantly raise the cost of care. 

The Massachusetts Health Policy Commission, which has produced critical reports of the merger citing a potential to increase healthcare costs by up to $251 million per year, said it commends the conditions the attorney general placed on the deal that would help mitigate its concerns. They will have a real impact on access to treatment for mental health and substance-use disorders for patients across eastern Massachusetts, the commission said.

These types of regulations could become the new normal for hospital merger and pricing policy in the U.S., policy experts said. 

Between the Massachusetts Health Policy Commission and strong attorney general, Massachusetts has been fairly far out in front in terms of healthcare policy, said Zack Cooper, associate professor of health policy and economics at Yale University.

“What they are signaling with this settlement is that they will allow these sort of entities, conditional upon enforcing price regulation,” he said. “This is the de facto price and spending cap may become the norm in the next decade or so. Frankly, we face a choice of using a public option to put pressure on providers and insurers or simply regulate directly.” 

The industry is moving toward these types of monopolies that require price regulation, Cooper said. The challenge will be whether to regulate prices over the entire systems or only the overlapping sites. With the latter, the evidence shows that systems tend to shift the price increases to other sites in the system, he said.

“Capping prices for the entire system is a notable outcome of this ruling,” Cooper said. 

The merger includes Beth Israel in Boston and Lahey in Burlington, as well as Boston’s New England Baptist Hospital, Mount Auburn Hospital in Cambridge and Anna Jaques Hospital in Newburyport. 

Beth Israel Lahey Health operates a total of 10 hospitals as well as three affiliate hospitals in Cambridge Health Alliance, Lawrence General Hospital and Metrowest Medical Center. 

Its network includes four academic and teaching hospitals with affiliations with Harvard Medical School and Tufts University School of Medicine, eight community hospitals, specialty hospitals for orthopedics and behavioral health, and ambulatory and urgent care centers. It has a population health enterprise and a centralized network of administrative and operational services, executives said. 

“Through local and system partnerships, as well as the enthusiasm and talent of all our employees and providers, we will invest in and strengthen community-based care, informed by innovation and discovery,” Dr. Kevin Tabb, president and CEO of Beth Israel Lahey Health, said in prepared remarks.

The combined entity would have around $6 billion of revenue, more than 4,000 physicians and 35,000 employees.

Beth Israel and Lahey executives argued that their combination is necessary to heal a dysfunctional Massachusetts healthcare market that continues to overuse hospitals and academic medical centers. It’s the only way to check Partners, they said. Executives said they plan to expand the state’s now-limited behavioral health service network, helping divert patients from costly emergency departments. They pledged to use their combined purchasing power and expertise to lower costs, which they say will outpace any potential price increases.

Lahey Health narrowed its operating loss in 2018, but its expenses related to salaries and wages and supplies continued to rise. It reported a $29.6 million operating loss on revenue of $2.15 billion in 2018, compared to a $65.6 million operating loss on $2.03 billion in revenue in 2017.

CareGroup, which is the corporate parent of Beth Israel Deaconess, New England Baptist Hospital and Mount Auburn Hospital, reported $38.7 million of operating income on revenue of $3.53 billion in 2018, a significant increase from a $3.1 million operating loss on $3.33 billion of revenue in 2017.