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Worcester, Massachusetts, Healthcare Market Overview: March 2000

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Management Summary During the past two years, the two hospital-based integrated delivery systems (IDSs) in Worcester have made significant investments in building and restructuring their health services capacities. The future health of these IDSs depends on whether they can recoup their investments in an environment of shrinking Medicare revenues and increasing cost pressures from managed care organizations (MCOs). According to the Massachusetts Hospital Association, the average Massachusetts hospital posted a 3 percent operating loss in 1998, and the losses will increase as further Medicare cuts come into effect. Meanwhile, Fallon Community Health Plan (FCHP), the largest HMO in Worcester County, seems to be on the road to financial recovery after losing money in 1998 and 1999. UMass Memorial Health Care System has rapidly grown through acquisition to become the leading healthcare provider in Worcester County and the immediate vicinity. The IDS now employs 10,000 people, including 800 physicians, compared with 7,500 employees at the end of 1998. Annual revenues are $1.1 billion, up from $700 million at the end of 1998. UMass Memorial owns five hospitals with a total of 1,145 beds and is affiliated with nine additional hospitals. In 1998, it purchased HealthAlliance, a regional health system in northern Worcester County. More recently, the IDS added the 42-bed Wing Memorial Hospital and Medical Center in Palmer, located west of Worcester. During 1999, the IDS completed the consolidation of its physician groups into one entity: UMass Memorial Medical Group. St. Vincent Hospital, owned by the national for-profit hospital company Tenet Healthcare, will move to the Worcester Medical Center complex in downtown Worcester as of 1 April 2000. St. Vincent will retain its name and corporate structure, as will the physician groups within the St. Vincent Healthcare System IDS. The hospital is exploring the best way to convert its former building to other uses. It...


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