CT Children's Shmerling willing to take risks

HBJ PHOTO | Matt Pilon CT Children's CEO James Shmerling said he must tackle both immediate fiscal challenges and insurance-contract design.

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By Matt Pilon

Connecticut Children's Medical Center is the state's largest pediatric hospital outside of Yale, but its new CEO James Shmerling knows that won't be enough to ensure financial viability.

Hired in November after a nearly nine-year stint at Children's Hospital Colorado, Shmerling is arriving at a relatively young institution that has grown its footprint in recent years and won accolades for several of its specialties, but also run into financial challenges.

“It's had some ups and downs financially, it's had some difficulties, but it's a strong hospital providing terrific care,” Shmerling, 61, said in a December interview. “What I see here is tremendous potential to be a highly ranked national children's hospital.”

He acknowledges many structural and competitive hurdles stand in the way of long-term success.

But the Nashville native, who has a wife, four children and five grandchildren, says he's up to the task. Shmerling previously worked in leadership roles at no less than five pediatric hospitals around the country in his 36-year career. He's been in healthcare markets with steep for-profit competition, like what he faced as CEO of Children's Hospital Colorado between 2007 and last summer. He's worked at a university-owned health system (Vanderbilt) and a Methodist system in Tennessee — his home state.

He's also an immediate past chairman of the Children's Hospital Association, which has members nationwide. He even helped Irish health officials site a new national children's hospital in Dublin several years ago.

It's those credentials that led CT Children's to hire Shmerling, according to Chip Gengras, chairman of the hospital's board of directors and president of Gengras Motor Cars.

“Jim has been in organizations that have been in similar places to where we are right now,” Gengras said. “He has a passion and experience that came through very clearly.”

One of the hospital's biggest challenges is that more than half of its patients are on Medicaid, which doesn't fully cover actual costs. That helped drive budget deficits at CT Children's totaling $35 million in fiscal years 2013 and 2014, and prompted the hospital to ask, and receive, a $10 million state grant last year to shore up its finances.

Shmerling insists the hospital can remain independent, but he won't rule out asking the state for another grant this year. The hospital is going through a strategic planning process to create operational efficiencies.

Shmerling said he is also going to expect more from the CT Children's foundation, with a goal of approximately doubling annual fundraising to $25 million within three years. To lead that charge, CT Children's last month appointed David Kinahan, previously vice president of development at Tulane University School of Medicine, as foundation president.

Shmerling also hopes to grow CT Children's patient base through pediatric partnerships with other hospitals, work already started under his predecessor, Martin Gavin.

CT Children's has care agreements with Hartford Healthcare, Yale, and Baystate and Shriners hospitals in Springfield, Mass. It also has research partnerships with UConn Health and Jackson Laboratory.

“We have those collaborative models,” Shmerling said. “One of the things the board asked me is 'how do we expand that?' ”

In addition, consolidation is a difficult proposition for a children's hospital, which would have to compete with other, more profitable services as part of a larger hospital system.

“Pediatrics doesn't make a lot of money,” he said. “No big adult system wants to take that all on.”

Besides expanding its patient numbers, the Massachusetts partnerships are also aimed at another threat — competition.

Shmerling is casting a wary gaze as far away as Boston, where he senses a coming Connecticut encroachment by the much larger Boston Children's Hospital, which last year acquired a sizeable pediatric practice in eastern New York that has several offices in Fairfield County.

“Nothing's going to stop them,” Shmerling said. “We've got to be more competitive and say 'here's the demarcation line and we're going to compete like crazy if you try to cross it.' “

Shmerling also wants to move CT Children's away from fee-for-service insurance contracts towards risk-based contracts that reward the hospital for good health outcomes of a patient population, but penalizes it if it doesn't perform up to snuff.

He is hopeful about a piece of federal legislation that would offer a new payment model for pediatricians and primary care doctors who care for chronic and expensive Medicaid patients.

Shmerling said he also plans to engage directly with insurers and Medicaid officials to see if they would be willing to design risk-based contracts.

“Children are such a small part of the overall spend that I think we can convince them to experiment with us … and demonstrate whether it can work,” he said. “This is an insurance town.”

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