• What were the problems that led to BIDMC getting in trouble? What could be a way out

There were both external and internal factors that led BIDMC to the position it found itself in. The external factors included the fact that the landscape within which hospitals were operating changed due to mergers within the industry which was thought to give the merged firms greater advantage in terms of bargaining power etc. Due to these industry mergers, BI felt that they should also merge and the fact that they did so quickly with a hospital with a widely varying culture played a significant part in the issues at hand. It was not only the fact that these hospitals merged that caused a problem but the fact that they tried to achieve clinical integration between the different cultures which had a negative impact on the performance of the business. The second contributing external factor is the change from a cost plus to a more competitive managed care financial system, which was further compounded by the fact that each hospital before the merger was having its own financial issues. The third external factor was the changing national health care system which meant that hospital reimbursements were no longer as generous and the main player in the space – Medicare- started to face restrictions. These reductions in Medicare payments also coincided with cost pressures from other insurers, which led to Management signing under-cost contracts with local insurance companies.

Internal factors that led to these problems included the fact that there were many resignations from the Deaconess hospital due to the fact that after the merger many key positions were held by BI staff. There were also animosity issues between the profitable hospitals in the group and the non-profitable ones due to the joint obligation concept of debt servicing. Another key factor contributing to the