Friday, April 19, 2024

071714i CHA lossesCambridge Health Alliance leaders warned of extraordinarily difficult times ahead as trustees on Tuesday adopted a $602.9 million budget for the coming year that leaves the struggling health care system $19.8 million in the red even after promised increases in productivity and volume.

“It is an incredible challenge,” said Louis Depasquale, head of the trustees’ finance committee and Cambridge assistant city manager for finance, referring to assumptions in the budget that there will be 8 percent more visits to doctors this year.

“This is not to be negative, but to make everyone aware of what’s involved,” Depasquale said. “We’re in very difficult waters and we are a long way from where we need to be.”

Another trustee, affordable housing developer Joshua Posner, said that after the Alliance sold Network Health, the Medicaid HMO whose profits offset Alliance operational losses for years, “we do not have the capacity to lose $20 million a year. We need to move forward to a balanced budget.”

Last year trustees approved a budget that relied on $17 million in unspecified efficiency savings to be recommended by a consultant, and still projected losing $19.1 million. Much of the savings did not materialize, and patient volume fell far below expectations; officials now expect to lose $28.1 million for the year that ended June 30.

The new budget assumes that volume will increase while staff rises less than 1 percent, through new productivity goals for doctors, better handling of appointments and other changes, such as steering mental health patients to groups rather than individual therapy. The Alliance is also opening clinics and programs in Malden, Everett and Revere.

At the meeting Tuesday, officials told trustees that the changes were already beginning to work. Chief Executive Patrick Wardell said managers had worried that the new requirements “would overtax” employees. “Fears that significant numbers of people would leave did not materialize,” Wardell said. “This makes us feel more comfortable” in expecting improvements.

“The staff is behind this,” he said at another point in the meeting.

Chief Financial Officer Jill Batty said doctors who have been working for the Alliance for a while have already begun seeing more patients, although newly hired physicians haven’t achieved the same productivity gains. In part, the budget “will succeed or not on our ability to achieve the right amount of cooperation,” she said.

One trustee asked whether the Alliance, which has clinics in Malden and Revere and a hospital and clinic in nearby Everett, would be hurt by a plan by Partners Healthcare, the largest hospital system in the state, to acquire Hallmark Health System and its hospitals in Medford and Melrose.

“We certainly are concerned about it,” Batty said. Wardell said the Alliance has “a couple of years lead” over Partners in the area. And Lawrence Memorial Hospital of Medford, which would become a facility for outpatients and hospital patients expected to stay three days or less under Partners, “won’t be going after the same patient mix we attract,” Wardell said.

But Dr. Laura Sullivan, medical director of Malden Family Medicine, said Partners can hurt in another way. “One big challenge of Partners is the amount of money they have,” Sullivan said. “I just lost a [primary care physician]; they are paying him $45,000 more for a minor administrative position.”

The Alliance’s patient mix is mostly people on Medicaid, Medicare and the uninsured; the system is the second-largest “safety net” hospital in the state because of the large number of poor and uninsured patients it serves. Officials have said inadequate Medicaid reimbursement levels, shrinking state aid for the uninsured and low payments from private insurers make it difficult for the Alliance to balance its budget, let alone earn a profit.

“This isn’t just because we can’t figure this out,” said trustee Carol VanDeusen Lukas, a researcher at the Veterans Administration, referring to the continued losses. “We’re being battered.”

Depasquale countered: “Even with this and with that [reason], we’re still 19 million in the hole.”

State figures support complaints about poor reimbursement levels; in 2012, 83 percent of the state’s hospitals got higher reimbursements for patient care from private insurers. At the same time, the Alliance stood out for high costs. Its average cost per hospital patient was 27 percent higher than the average for teaching hospitals after adjusting for the severity of illness, the state agency that studies health care finance reported.

The “teaching hospitals” are nine institutions with some doctor trainees in residency programs, such as Mount Auburn Hospital, Baystate Medical Center in Springfield and Lahey Clinic. They are not high-powered and expensive academic medical centers such as Partners, Brigham and Women’s Hospital, Beth Israel Deaconess Medical Center and Tufts Medical Center.

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