Bidmc Case Summary

1 - What were the problems that led to the BIDMC getting in trouble?

a) Lack of leadership:

BIDMC had 45 members on its board. It was probably more a country club with disengaged members than a place where management was reviewed and decisions were taken. It is a sign of very poor governance. The board remained passive when the financial positive was worsen quickly. The board did not held the management accountable while it should be its main role. The president of BID was unaware of decisions for a long time and seems not in charge. Many other dysfunctions show a clear lack of leadership and accountability among managers.

b) Merger for the wrong motivations and poorly executed:

The merger between Beth Israel and Deaconess, two hospitals with very different cultures, was decided with the wrong motivations (“bigger is better”, economies of scale, synergies, etc.) without quantifying them. We cannot find any signs of taking the right steps to reach those objectives

Instead BIDMC poorly negotiated those contracts, created improper incentives, and frustrated the personnel of the hospital.

c) New environment:

Hospital care is a very difficult business to monitor: a lot of costs are indirect and management rely heavily on the workers to disclose information. There is an asymmetry of information between the top managers and the employees. This result in a struggle similar to the one for monitoring a large and complex bank. Hospitals went from a cost-plus environment to a competitive environment just before the merger. This change created complexity and paralysed the hospital, at a time when being nimble would have been an advantage. The merger and the clinical integration contributed to make the situation chaotic.

d) Lower reimbursement:

Following a new political environment, hospitals reimbursements decreased in real and something in nominal