Medical Center Head Resigns

A month and a half after Harvard’s second largest teaching hospital forced out its chief executive, and a week after the hospital’s bonds were reduced to junk status, the second in command at Beth Israel Deaconess Medical Center (BIDMC) has announced his resignation.

Michael Rosenblatt, who had been president of BIDMC since 1999, announced last Wednesday that he would be stepping down to return to teaching and research.

In an e-mail to hospital employees, Rosenblatt said that he had never even applied for the job of president—he said he accepted the position out of loyalty to the hospital. “Now, changes in management make this a natural time for me to move on with my career,” Rosenblatt said.

James Reinertsen resigned as CEO of both BIDMC and CareGroup, the umbrella organization of which BIDMC is the largest member, in late July. His resignation came as financial losses at both BIDMC and CareGroup continued to mount. Reinertsen had slowed but not stopped the hospital group’s losses—in the third quarter CareGroup lost $38.9 million.

CareGroup’s financial difficulties were further confirmed when Standard & Poor’s, the bond rating firm, designated CareGroup’s issues as “below investment grade.” In a press statement at the end of August, interim CEO Robert Melzer said that the rating won’t have a large impact on the immediate future of the group and that the downgrade was not unexpected. Melzer said that there were no plans to borrow more money, and that the bonds were insured so that there is little risk to current bond holders.

Melzer said that the expected downgrade was a factor in the decision to ask Reinertsen to resign.

The fiscal viability of BIDMC and CareGroup are of prime importance to Harvard Medical School (HMS), which trains 20 percent of its students at the flagship hospitals.

Unlike many universities, Harvard does not own its teaching hospitals, and as a result exerts only indirect control over their activities. HMS administrators said that the relationship hinges on the hospitals’ and the schools’ mutual benefit—HMS needs the hospitals to train its students, the hospitals need the school for the academic credentials it provides and the doctors it can help attract.

Recent events in the medical economy are putting stress on the educational mission of the schools, and officials at HMS said that the medical school needs to make sure that cost cutting measures don’t effect the quality of the teaching programs that goes on.

“The medical school is confident that the Beth Israel Deaconess can find a way to continue the educational mission at the hospital,” HMS spokesperson Don Gibbons said.

HMS is closely involved in the efforts to right the ship at BIDMC. HMS Dean Joseph B. Martin is chairing the search committee for a new CEO and Martin has in the past sat on search committees at HMS’ other affiliates.

There are also HMS representatives on the BIDMC’s recently formed Steering Committee which has met weekly since Reinertsen’s resignation to consider the hospital’s options. Paul Levy, HMS executive dean for administration, is one of the school’s prime liaisons with the hospital, and sits on the committee.

Steering committee meetings are private, and a spokesperson wouldn’t discuss what proposals were on the table, but Levy said that Harvard has suggested a real estate deal that would help BIDMC with its cash flow problems.

Under the plan, HMS would buy a Harvard Institute of Medicine building on the Longwood campus, and then lease it back to the hospital. Levy said the plan would provide relief to the cash-strapped hospital, without incurring cost to the school, since the hospital will repay HMS in rent money.

Levy said that HMS had proposed a similar deal two or three years ago, but that BIDMC was now seriously considering the plan.

Other options for the hospital may include strategic partnerships with pharmaceutical companies intended to bring research money to BIDMC.

But the search for a new CEO at BIDMC is a top priority, Levy said. There is no search ongoing for a new CEO of CareGroup, and it will be up to the new head of BIDMC whether to appoint a president as deputy.

—Staff writer David H. Gellis can be reached at gellis@fas.harvard.edu.