Harvard Hospital Posts First Profit in Years

The Beth Israel Deaconess Medical Center (BIDMC), a major teaching hospital for Harvard Medical School (HMS), reported a profit margin for the first time in years in a company-wide e-mail released last week to hospital staff.

Although the figures have not been officially audited, the hospital reported a $37.4 million increase in operating revenue, with a net profit of about $10 million, translating to an operating margin of one percent.

“Even this small margin is better than over half the hospitals in Massachusetts,” said Paul Levy, president and CEO of BIDMC.

In addition to the improved operating revenue, which BIDMC media relations director Jerry Berger said is typically the standard by which hospitals report their fiscal well-being, the hospital’s total revenues of $915 million showed a huge leap from $807.7 million in fiscal 2003, which had been down $14.6 million from 2002.

“This overall operating margin...puts us in the upper tier of all hospitals in Massachusetts,” Levy said.

This profit comes in the last year of a “three-year turnaround plan” Levy instituted. In seven years since Beth Israel and the New England Deaconess Medical Center merged, the joint venture has lost approximately $280 million dollars.

“The results of this year set us well on our path to meet our strategic objective of a two percent margin in 2005, three percent in 2006, and four percent in 2007,” Levy said.

He cited two factors as key in contributing to the increase in revenue: more patients and more surgeons.

“We treated almost 39,000 inpatients, a two percent increase over 2003, returning to the level of patients seen before the decline of the late 1990s and early 2000s,” Levy said. “Importantly, though, we had seven percent more surgical discharges than the previous year.”

Berger said that in the last three years the surgery department has hired an unprecedented 29 new surgeons.

Josef Fischer, head of the surgery department at BIDMC and Mallinckrodt Professor of Surgery at HMS, has led the effort to expand. Among other initiatives, Fischer recruited Daniel B. Jones from University of Texas Southwestern Medical School, who brought his Dallas-based team with him to Boston to develop a new minimally invasive surgery program.

Jones said that he “was not ignorant of the problems facing BIDMC” when he chose to come here.

In his time here, Jones has built a skills lab and simulation lab for students to practice minimally invasive surgery—something not available at any other HMS teaching hospital.

“Now the Brigham and Women’s Hospital and Mass General Hospital students have to come here to train,” said Jones. “We are the premier education center for this type of technology.”

It is this type of new direction within the hospital which enabled it to receive “spectacular” ratings from the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), according to Levy.

In addition to seeing more patients and expanding its surgery program, the hospital also restructured its administration, laying off more than 300 employees, Berger said. The hospital now has a full time staff of 5,677.

But he said $27 million of this year’s increase in operating revenue is due to one-time gains.

“We got some settlements from Medicare and Medicaid and private insurers,” Berger said. “We don’t think that this will be a problem for next fiscal year, as we know what is sustainable and what is not sustainable.”

—Staff Writer Risheng Xu can be reached at xu4@fas.harvard.edu.