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Ellen Zane – Leading Change at Tufts/NEMC
Teaching Notes
Cynthia Ingols
Professor of Practice
School of Management
Simmons College
Case Synopsis
In the 1980s, the healthcare environment in Massachusetts and the nation changed dramatically.
In the early 1990s, in a bold move to contain rising hospital costs, a group of Boston leaders
merged the prestigious Harvard Medical School’s affiliated Massachusetts General Hospital
(MGH) and Brigham & Women’s Hospital (BWH) under the umbrella organization, Partners
Healthcare, Inc. (Partners). This decisive move in the Boston healthcare market and the eventual
affiliation of seven other area hospitals with Partners isolated hospitals such Tufts/New England
Medical Center (Tufts/NEMC), the primary teaching hospital of Tufts University Medical
School. In 1997, Tufts/NEMC merged with Lifespan, a Rhode Island hospital group. Five years
later and at a cost of $30 million to Tufts/NEMC, the merger was dissolved. Desperate to save
the hospital, Tufts University’s president recruited a highly successful hospital administrator,
Ellen Zane, to turn around Tufts/NEMC.
Zane became CEO of Tufts/NEMC in January 2004 and immediately encountered a myriad of
problems. The hospital was losing approximately $6 million per month. Because of the merger
and then divestiture, the hospital had lost many of its experienced administrative personnel.
Tufts/NEMC’s former allies had moved into partnerships with Partners’ hospitals. Problems
beset the hospital from every corner. The questions facing Zane were:
• How could she assess, quickly and accurately, the depth of the issues at Tufts/NEMC?
• Once she had diagnosed the problems, which ones should she attack first?
• How should she build her executive team?
• How should she reach out and communicate to the hospital’s 5,000 employees who
worked on all shifts around the clock?
• What should she say to physicians who often had attractive opportunities locally and
nationally?
• How could Zane keep these physicians at Tufts/NEMC and ask them to change how they
practiced medicine in order to reduce costs?
Zane routinely rose at 4:30 am to tackle the hospital’s numerous problems.
Intended Courses for the Case
The case was written for a MBA-level, macro organization behavior course, particularly one that
focuses on leading organizational change. The case would also be suited for courses in
healthcare management and leadership.
Learning Objectives
By the end of a classroom discussion of this case, students should be able to:
1. Identify the external environmental forces that pushed Tufts/NEMC into the failed
merger with Lifespan.
Theoretical Underpinnings of Case
There is an overabundance of books on organizational change. A search of Amazon.com by the
key words “leading organizational change” yields 546 titles, while “managing organizational
Table A Four Types of Change
Incremental
Discontinuous
Anticipatory
Tuning
Improving, enhancing,
first-order change
Reorientation
Frame bending of
identify/values
Reactive
Adaptation
Internally initiated
Re-creation
Fast change of all basic
elements, frame breaking,
second-order change
As Zane entered Tufts/NEMC, it was quite clear that she needed to “break frames.” The
organization was in desperate need on a number of dimensions: strong leaders who would make
knowledgeable, swift decisions; changes in its accounting and financial practices; and new ways
of thinking about and treating patients. In short, the hospital needed to be re-created. The purpose
of this transformational change is for organizations to survive in the “hypercompetitive business
environments” (p. 82) of today’s world.
Duck (2001) examines how leaders need to transform people and their organizational culture.
Since it is people, their routines, and their mental models that must change in any initiative,
Duck focuses on human responses to organizational change. She offers the Change Curve, “a
map of the territory of change” that includes predictable human emotional responses to the roller
coaster ride of moving a group of people from stagnation to productivity (pp. 17 – 19). Time is
the horizontal axis and morale and confidence are the vertical axis for this map of change.
Organizations, according to Duck, travel through five prescribed phases:
• Stagnation is characterized by outdated products or services, the exiting of
customers and organizational talent, and falling sales or share prices. Internally,
employees tend to be depressed or hyperactive.
Duck argues that change initiatives can fail at any point along the Change Curve. People in the
organization fail to understand the thinking and priorities of leaders during the Implementation
phase and become confused, overwhelmed, pessimistic, and ask if all the activity will make a
difference. Or, leaders take their eyes off the change initiative during the Determination phase,
and, in essence, abandon the change effort. The main point for Duck is that people and their
responses require careful attention and management and that this is a task for change leaders.
These different theories suggest different kinds of questions to ask during a discussion of the
case.
Research Methods
The authors conducted one-on-one interviews with Zane and seven other members of the senior
executive team. Each conversation was tape-recorded. In addition, Zane provided the authors
with newsletters and other internal organizational documents.
Assignment Questions
1. Describe the health care environment in Massachusetts in the 1990s. What were the
driving forces for change that were pushing the industry? What impact did these
forces have on New England Medical Center?
Suggested Teaching Plan
I. I. Describe the health care environment in Massachusetts
Major points to pull from students:
• 1991: deregulation of hospitals which had been regulated since 1981
• 1994 merger of Mass General Hospital & Brigham and Women’s Hospital
• Early 1990s, the federal government under-funded Medicare & Medicaid
• Insurers consolidated in the 1990s, leaving three: Blue Cross/Blue Shield,
II. What was happening within Tufts-NEMC in the 1990s?
They were slow to react to the changes in the environment. The case tells us that they were
accumulating debt, were inefficient in changing processes and managing cash flow, and were
losing physicians and market share. A long line of physician CEOs placed emphasis on care
rather than business efficiency. The case states that Zane was the first woman and first non-
III. By 2002 and 2003, what are the five or six dynamics within Tufts/NEMC that are
contributing to the hospital’s problems?
Divestiture by Lifespan left Tufts-NEMC devastated. By 2002, Tufts-NEMC was hemorrhaging
$3 to $6 million per month. This amounted to $18 million loss in 2002 and $38 million loss in
2003. The Massachusetts Attorney General’s office stepped in to protect collateral bonds.
Leaders of the hospital had to meet with the Attorney General staff once per month to assure
them that bond payments would be made. Physicians were leaving and the hospital was losing
market share.
IV. What did Zane do in her first six months?
In answer to this question, students usually point out the following actions:
1) She brought in consultants, the BDC Advisors, Inc. They conducted a “rapid diagnosis”
of the problems. BDC Advisors found that Tufts/NEMC was behind on a number of
industry indicators: accounts receivable; accounts payable; average length of stay;
operating margin; and days cash on hand (see Case Exhibit 11).
2) She rebuilt her senior management team. She fired seven of the senior management team
V. What has Zane accomplished by the middle of 2006?
Students at this point in the discussion usually point out the following:
Cost Savings and Efficiency Improvements: Under the leadership of people such as David
Fairchild, she empowered her staff to tackle several key problems. She began cost-saving
Better Coordination and Communication: She united the two physician groups at the hospital.
“They now speak with one voice.” (p. 10). She communicated with all of the hospital staff
through events such as the “town meetings.” These occurred at all hours of the day to reach
people on all shifts.
Networking and Alliances: She began to build different networks of physicians and other
alliances. She affiliated with Children’s Hospital to augment the services of Floating Hospital for
Children. She made agreements quickly, since Tufts-NEMC did not have the resources or the
Brand Recognition: Zane worked to re-build the Tufts name with the hospital. She wanted to
brand the hospital and the school as an expert center for advanced care, and build on the draw of
Tuft/NEMC’s urban, China Town location.
Improved Cash Flow: By selling a building to Tufts University for $28 million, and by
renegotiating the managed care contracts, Zane vastly improved the cash flow and was able to
improve days-cash-on-hand, an important benchmark in the industry.
VI. What is Zane’s style? Specifically, how does her senior management team describe
her?
Students typically have responses such as:
• She’s an excellent communicator. She is a straight talker. She delivers bad and good
news so that people can hear it (Joelson).
• She is visible and easily accessible. Dr. Salem talked about how they went to visit
patients and nursing staff on a regular basis. She held Town Meetings at every shift
VII. What would you do next if you were Zane?
Most class discussions include the following points:
• She must continue to build the hospital’s brand and presence in the Boston market.
References
