Teaching Hospital Sells Land for Funds

McLean Hospital—one of two psychiatric teaching hospitals for Harvard Medical School—announced last week that it has completed the first phase of a land sale planned to keep the hospital financially solvent.

Twenty-six acres of property in the northern area has been sold to Northland Residential Corporation for the development of residential expansions in the town of Belmont, according to Michele L. Gougeon, CEO and executive vice-president of McLean.

The land sale is a part of a larger deal between McLean and Belmont, which calls for the sale of more than one fifth of McLean’s total property—some of which will be dedicated to building a new retirement community and the construction of a research facility.

Gougeon said that the proximity of the retirement community would allow convenient treatment of geriatric patients, and although she did not yet know who would be purchasing the research facility, she said it was possible that researchers at McLean will collaborate with its members.

“That’s the opportunity side of it,” she said.

This land sale was first proposed in 1996, Gougeon said, when the hospital was experiencing financial troubles.

“There was some great concern over the economic future of the hospital,” she said. “Part of this was to then say: If we’re looking at all of our resource base, how do we stabilize the resources of the hospital?”

In addition to land reallocation, Gougeon said that at the time the board of trustees also decided to create new services, downsize staff, and move some services off-site.

McLean’s financial problems stemmed in part from the fact that insurance companies were not sufficiently reimbursing the hospital for its costs, according to Gougeon.

Cynthia L. Lepore, director of public affairs at McLean, said that the hospital posted gains last year for the first time since 1991. But Gougeon said that McLean is still very concerned about its financial state.

Sam Muszynski, director of the Office of Healthcare Systems and Financing at the American Psychiatric Association, said that psychiatric hospitals in particular face multiple problems in trying to maintain fiscal stability.

“Psychiatric hospitals were having trouble because they weren’t being paid from Medicare or any other major payer—the trend in reimbursement has been flat to down,” he said.

Muszynski also said that in the 1990s, there was an overabundance of psychiatric hospitals. And he said that psychiatric hospitals are handling a much smaller pool of patients compared to general hospitals.

“The fact that you are still a one-product entity precludes diversification of lost revenue,” he said.

Financial solvency is even more of an uphill battle for McLean, said Muszynski, since it is also a teaching institution.

“Not all teaching costs and resident times are compensated for, but you have to teach and do the right thing whether you get paid or not,” he said.

Gougeon echoed this point.

“We want to be to be stable enough to support not only research but also clinical care, and to train people to do it,” said Gougeon.

“There’s some uncertainty for funding in teaching and research as that goes through state and federal budgets,” she said.

These factors combined are pushing psychiatric health care into a crisis, Muszynski said.

“We get reports where kids or people sit in rooms for days to get a psych bed—some wait 60 days,” he said. “We are on the brink of a major problem.”

Under these conditions, McLean hospital signed a contract with Belmont to sell 51 of its 238 acres in 1999.

Gougeon said that once the hospital decided that it was going to sell land, McLean began negotiating with Belmont “to come up with something good for us and good for them.”

The residential houses on the sold property will not be family units, she said, but rather will consist of town-house homes which will optimize space.

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