McLean May Be Leased To For-Profit Company

The Harvard-affiliated McLean Hospital is considering leasing all or part of its operations to a private company, which would then receive access to the the psychiatric institution's facilities and programs, and any profits it might earn.

The negotiations between McLean and three corporations come in the wake of a failed attempt last fall to sell the Belmont-based psychiatric facility to the largest for-profit health care company in the world. Hospital Corporation of America (HCA).

The controversial move failed when hospital and staff, and doctors at the allied Harvard Medical School blocked the Board of Trustees' sale proposal.

The lease option has not been wholeheartedly endorsed by most doctors, who fear aligning academic hospitals with commercial concerns, but those involved in the negotiations are trying to form an agreement which will meet most of the objections.

Officials at the hospital said three points must be included in any proposal if it is to be acceptable, the hospital must remain nonprofit, it must still be owned by the McLean Hospital Corporation, and the hospital's governance must remain essentially unchanged.

Under the terms being discussed, the leasing company would initially own the building, depreciate it for tax purposes and then sell it to McLean for $1 after 20 years.

A source involved with the negotiations said McLean is talking with three companies HCA. American Medical International and National Medical Enterprises. The source added that most discussions had been with HCA and that the hospital was most likely to conclude a deal with the Nashville-based company.

George Putnam Jr. '49, president of McLean's trustees, said yesterday that the negotiations are still in the early stages, but estimated that any contract would be worth at least $2 million annually.

In such a deal all of the money would go to McLean. One of the major objections opponents of the sale last fall had was that because McLean was created jointly with the Massachusetts General Hospital, all the money from a sale--perhaps as much as $50 million would have gone to the larger hospital.

Administrators said they are interested in working out deal with a company like HCA because it will help them conduct the capital improvement they say the hospital badly needs and will protect the institution from rapidly rising health care costs and increasingly restrictive government regulations.

An HCA spokesman said the company is interested in a contract with McLean because it will give them a training facility for doctors from their other psychiatric hospitals and would be a good place to transfer difficult patients requiring long-term care.

In addition, McLean is hoping to get a private company to build one or more new buildings on the hospital's 150 acre grounds. This is attractive because profit-making companies have more borrowing power than non profit institutions and would take any liability off the hospital.

McLean has asked the state for permission to do $35 million worth of construction and renovation. The work is pending government approval and raising the money Putnam said he thought a private company might contribute up to $25 million.

Although McLean has run in the black in recent years, administrators fear that rising health-care costs, increasingly restrictive government regulations, and the need for long overdue capital improvements may cause a severe fiscal crunch within the next decade.

It is also well-known that HCA covets a Harvard affiliation for its prestige. Aligning with Harvard would make it easier for a company like HCA to affiliate with other teaching hospitals facing similar financial pressures. And, as one of the most respected psychiatric institutions in the country. McLean would be a flagship for the company's psychiatric line, which it is aggressively expanding.

Last fall doctors opposed the sale with a variety of philosophical objections based on their belief that teaching and research cannot be done properly in a for-profit hospital. They fear that financial considerations may limit their work. Doctors also complained that they were excluded from the decision making process and were-unsure that the trustees had the best interests of the hospital at heart.

The most immediate effect of the sale debate was that doctors were included on the committees considering the future of the hospital McLean General Director Dr. Francis de Marneffe said the discussions "increased the financial awareness of the staff of the problems a hospital faces in the years ahead."

"The process last year left something to be desired. This time the process has changed and we are much better off," de Marneffe adds.

Dr. Edward Shapiro, one of three staff members on the long range planning committee said yesterday. "People get worried when they don't know what is going on Having members of the staff on the committee has greatly increased communication."

Most doctors who opposed the sale continue to object to commercial medicine, but seen resigned to the prospect. They say that because the hospital faces serious financial questions which may have to be solved in unconventional ways, they must work with the administration to make sure their concerns are heard.

Dr. McDonnell, who was one of the leaders of the doctors opposing the sale said, "Some of us are still puzzled by the need for this." She and others are taking a position of "watchful waiting" to see what sort of proposal is worked out before taking a definite position. "[Last fall] we felt there were moral issues that were at stake and only financial issues were being addressed. We hope that it can be dealt with this time keeping the moral issues in mind," she said. She said most of the staff is still uncertain about the idea of a lease arrangement, but is willing to consider it. "Many of us are still feeling we don't have enough hard facts about what are the implications of these things." McDonnell said the staff is planning a meeting at the end of the month to discuss the proposal.

Administrators said it was unlikely that any formal proposal would be put forth before the fall, but Shapiro said doctors are tiring of the uncertainty about their hospital's future. "Everybody is very impatient to get on with it already," he said.

"The general sense is one of inevitability and the some financial daze in real," said Dr. Jonathan E. Kolb '65. But he added that while he thought was likely some sort of arrangement would go through at McLean, he still had reservation.

"I don't like the trend of medicine to be organized by the corporations," Kolb said. "[If McLean affiliates,] it's going to make it easier for all of medicine to be swallowed up by the corporations. It doesn't really affect me because I'm at McLean, but it is going to affect the guy in Pocattella, Ind. who doesn't have the clout to say, 'let's affiliate, not be bought out.'"

One of the most outspoken critics of teaching hospitals affiliating with for-profit companies is Dr. Arnold Relman, editor of the New England Journal of Medicine. He acknowledges that outright sales or lease arrangements like McLean is considering may help hospitals in the short run, but he fears the long term implications of people concerned with maximizing profits having a hand in administering teaching and research. He said that hospitals like McLean should avoid deals such as the one being discussed and that the government should take a more active role in supporting teaching and research.

"I would be frankly dismayed and disappointed it Harvard and the MGH trustees decided to lease McLean to HCA I don't think the community's needs would be served in the long run," said Relman