Ellen Zane – Leading Change at Tufts/NEMC
In the 1970s and 80s, the healthcare environment in Massachusetts changed dramatically. While there were national problems, such as the under-funding by the federal government and the rising enrollment of Medicare and Medicaid, there were also challenges peculiar to the state and Boston. The city was home to three medical schools: Harvard Medical School (HMS); Boston University Medical School; and Tufts University School of Medicine. Each school affiliated with the city’s hospitals for training and research. HMS, for example, trained its doctors at the equally prestigious Massachusetts General Hospital (MGH) and Brigham and Women’s Hospital (BWH). Tufts Medical School trained its physicians at New England Medical Center (NEMC), one of the oldest hospitals in the USA.
In the early 1990s in a bold move to contain rising hospital costs, a group of Boston leaders merged MGH and BWH under the umbrella organization, Partners Healthcare Inc. This decisive move and the eventual affiliation of seven other area hospitals left hospitals such NEMC isolated. In 1997, NEMC affiliated with a Rhode Island hospital group. Five years later and at a cost of $30 million to NEMC, the merger was dissolved. Desperate to save the hospital, Tufts University’s president recruited a highly successful hospital administrator, Ellen Zane, to turn around NEMC.
As she assumed the CEO position in January, 2004, Zane encountered a myriad of problems. Which ones should she attack first? How could she learn quickly and accurately the depth of the problems? Once she had diagnosed the issues, how should she build her executive team? How should she reach out and communicate to the hospital’s 5000 employees who worked 24/7? What should she say to physicians who often had attractive alternatives locally and nationally and who needed to change how they practiced medicine? Zane routinely rose at 4:30 am to tackle the hospital’s numerous problems.
Based on the case synopsis above and the textbook reading, please address the following in your Case Study:
- Articulate the steps and their importance that Zane took in the first six months to begin the turnaround of Tufts-NEMC. (5 marks)
Zane had to do certain actions to keep the financial stability of Tufts-NEMC by building a new surviving strategy. In Massachusetts, conversions and mergers were common.
The first step Zane took was a rapid diagnosis. This was very necessary in order to understand the breadth and depth of the problem. This was also necessary so that she could find out if it was possible to salvage the situation. The diagnosis also gave her an opportunity to identify the possible solutions for the problems. Some of the main findings were attributed to the size of the Tufts/NEMC and weakness in indicators of operational efficiency. The second step was to review the Tufts/NEMC managed care contracts. This was necessary in order for her to know whether the hospital was paid fairly. Her finding suggest the hospital was underpaid.
Ellen Zane then conducted staff changes. This was necessary because there was a need to recruit and retail talent. It was necessary to bring on board adequate, highly motivated, and talented staff who would propel the organization to another level. Ellen Zane also needed people who would support her to advance positive changes in the organization in her drive for change. Some of the staff changes she brought was to replace employees who did not share her long-term vision for the organization’s development. For example, she replaced 50% of the senior management team comprising seven members including the vice president. The fourth step was to improve employee motivation and satisfaction. After years of financial crisis, this was necessary because employees had been demoralized and this had affected organizational performance. Employee motivation and satisfaction were also necessary to attract and retain talented workforce. Zane then went ahead to launch an aggressive communication and outreach program where a series of meetings were scheduled during the day and night and where she ensured everyone to attend. The meetings served to help her to know employees and disseminate information to everyone including where the organization was heading. The meetings also helped to unite the team. Building a united team is a good step towards organizational performance. Zane also introduced cost setting measures. This was necessary to reduce wastage and save money. This was necessary to enable the organization improve its cash flow and generate more profits. Zane also introduced measures which improved organizational efficiency. This was not only good for increasing customer satisfaction but also for minimizing wastes. Zane established contract negotiations with insurers to improve the cash flow and avoid further losses because they were paid low. This was necessary to bring the hospital to financial stability. Ellen Zane invested a lot in network building. This was necessary because Tufts-NEMC had lost affiliations and networks in the past. Tufts further established closer collaboration with Tufts University. The university plays a key role in research and source of talent. Tufts University also had a strong reputation which Tufts-NEMC could leverage on.
- Describe Zane’s style? Specifically, how does her senior management team describe her? (2 marks)
A study on Zane’s past suggest she is a transformational leader. She has managed to transform the organizations she had worked for in the past. Senior management team, such as the president, describe her as a leader with the right mix of skills and a person with a passionate commitment to preserve physician-patient and hospital-community relationships. Another senior manager, VP for Finance, pointed out that Zane not only brought visibility but also a recognizable name in the market. Accountability is a leadership trait which was associated with Zane. The VP for finance was professional to an extend of employing consultants to find the root causes of the problems and prioritize them. In addition, Zane also brought unity to the physicians. Senior VP and CFO, Burke, described Zane as someone who had a good awareness of what was happening in the market and had a good network of personal relationships who could offer her support. He further described Zane as an action-oriented leader who seek 80-90% of the information she requires and act on it. Another senior manager, Schottland, describe Zane as a supportive leader who allow others to own their jobs. Taft, an employee, described Zane as a CEO who was humble and feel at ease to everyone. She blended well with employees and employees feel she was part of them.
- Based on our learning’s, what type of change has this been? (3 marks)
The story of Ellen Zane and her joining Tufts-NEMC demonstrate a truly transformational organizational change. The hospital emerge from loss making to profitability in a short while. Staff who were demoralized changed to employees who are highly motivated and committed to stay. The hospital also changed from inefficiency to high levels of efficiency which improved customer satisfaction. Before, the hospital has lost its relationship with the community and other organization but with the entry of Zane, the organizations established closer relationships with the hospital. There was positive transformation in every sector in the hospital and the changes uplifted the status of the hospital in terms of financial performance and reputation.
- What was happening within Tufts/NMEC in the 1990s? (7 marks)
In 1997, the merged hospitals was in search for a partner which could help them improve its fiscal instability. Tufts/NEMC was to later merge with Lifespan Corporation. However, the complexity of the merger was underestimated with its consequences. The merger was eventually to fail due to lack of effective coordination with the merger costing Tufts/NEMCV $30 million.
In the 1990s, the health sector in the state of Massachusetts was deregulated and this brought drastic changes in the health sector. The deregulation affected the financial viability of the hospitals and also pushed them to more cost effective and efficient management systems. During the period leaders at Tufts/NEMC struggled to find a strategy to survive in the new environment. This included conversions, mergers, and closures. Tufts merged with NEMC.
In 1992, the hospital added maternity service and became the first private hospital offering full service. The hospital also introduced a unique home offering bed and breakfast for cancer patients and their families. Tufts/NEMC was posting gains in 1990s but it was mainly through write-down in assets but not from either enhanced revenue cycle or improved efficiency. In 1996, the hospital had accumulated $240 million in depth up from $130 million in 1990. In the process, the hospital lost market share, acquisitions, and physicians to Partners and CareGroup.