Cambridge Health Alliance Chief Executive Patrick Wardell. (Photo: Cornell)

Cambridge Health Alliance expects to come close to breaking even on its health care operations for two years in a row – unusual and welcome news for the system, which serves the second-largest number of uninsured and Medicaid patients in Massachusetts. And the system is expanding.

A budget adopted by Alliance trustees Tuesday predicts that the operating loss for the next fiscal year ending June 30 will be $4.5 million, less than 1 percent of expected operating revenues for the year. The system also expects an operating loss of just under 1 percent of revenues – $5.4 million – for the 2017 fiscal year, according to a report presented to trustees. That is much better than the $12.7 million loss on operations that had been expected.

The trustees also approved giving Chief Executive Patrick Wardell a bonus of 10 percent of his $609,000 salary this year. Board chairwoman Carol VanDeusen Lukas said a committee of the board had determined that Wardell had met performance goals fully for the year in the areas of finance, quality improvement, qualifying for special state and federal aid, and meeting strategic goals. A new contract set bonuses for meeting short-term goals in those areas, Lukas said.

Wardell came to the system in 2012 from the Hurley Medical Center in Flint, Mich., where he was president and chief executive. He has shepherded the Alliance through significant changes, including signing a medical affiliation with Beth Israel Deaconess Medical Center and expanding services in Malden, Everett, Winthrop, Chelsea and Revere.

“A real milestone”

Financial performance in health care operations is important because it measures the system’s strength in its core business: caring for patients. The Alliance has struggled to get to a break-even place for operations since it was forced to sell its highly profitable Medicaid health maintenance organization, Network Health, in 2011 because of financial requirements governing insurance companies. Network Health was sold to Tufts Health Plan.

“This is a real milestone,” system trustee Joshua Posner said at the meeting Tuesday, recalling that “some budgets in the past were only in the black because of Network Health.”

“This is the first where revenues cover the cost of running the hospitals and clinics,” Posner said.

In contrast, overall profit and loss includes other factors such as interest and, especially in the case of CHA, an annual payment from the city. That payment rose to $8.1 million this year from $7 million last year, and is expected to increase to $8.8 million next year, budget figures show. Ostensibly the payment goes to cover the cost of the system operating the Cambridge Public Health Department; it is not clear what the actual cost is.

From loss to gain

The system expects to report an overall gain of $7 million for this fiscal year and $4.3 million in 2018. It had forecast an overall loss of $4.8 million this year.

The Alliance includes Cambridge and Somerville Hospitals and the newly named CHA Everett Hospital, formerly Whidden Memorial Hospital in Everett. The system operates 15 primary care offices in Cambridge, Somerville, Malden, Everett and Revere.

The rosy predictions in next year’s budget depend partly on increasing the number of times patients visit clinics and doctors’ offices by 6 percent. The Alliance fell short of its forecast for outpatient visits in the fiscal year that just ended; next year’s budget predicts that it will benefit from “new program startup” as well as increased visits.

Hiring difficult

Because of the growth and other changes, the Alliance expects to hire the equivalent of 170 new full-time employees: 28 doctors and 142 support workers. A large chunk of the new workers – 79 doctors and support staff – will work in expanding areas including psychiatry, primary care, ophthalmology, obstetrics/gynecology, orthopedics/rehabilitation, specialized radiology and the Elder Service Plan, which serves frail seniors living at home.

This year, the system couldn’t fill all its budgeted doctor positions; the equivalent of 362 full-time physicians were employed, while the 2017 budget called for 378.

Trustees also approved spending $54.3 million on physical upgrades and other capital improvements over the next three years, more than double the amount of $24.8 million approved last year. Included in the 2018 total was $29.1 million in projects that had been approved in previous years but not fully implemented.

Details hidden

There were few details in the 2018 budget. Alliance spokesman David Cecere said the specifics had been discussed in private under an exemption to the state public meetings law for “strategic planning matters.”

Cecere provided some details in an emailed message. “We intend to make strategic investments in our core services, including primary care, (information technology and electronic medical records) and our various initiatives to integrate care across our system, as well as ongoing maintenance and improvements at our sites,” he said.

He also credited “investments we have already made” for the prediction of growth in the number of patient visits in the coming year. Those investments include a new ophthalmology and orthopedics service in Malden, a program to improve access to psychiatric care and “ongoing ramp-up” of primary care offices in Cambridge and offices serving an area the Alliance abbreviates as MCREW: Malden, Chelsea, Revere, Everett and Winthrop, Cecere said.

Capital budget

Until now, trustees had been reluctant to approve projects because of worry about the bottom line. “We are taking some big steps,” said Cambridge City Manager Louis A. DePasquale, who heads the CHA trustees finance committee, referring to the capital budget. “I have been one who has not wanted to spend. The time has come when we have to make an investment.”

The system depends on state and federal support in addition to revenue from patients. Next year government support is pegged at $159.5 million out of total operating revenues of $671.3 million. The Alliance also expects to qualify for a total of $44.5 million in payments based on achieving goals set by the state and federal government.

Despite its reliance on state and federal support, the Alliance did not budget for the possibility of the “repeal and replacement” of Obamacare, Cecere said last month – and that decision has been validated, at least for now. The budget also doesn’t include any contingencies for changes in state support. The possible impact on the system of Gov. Charlie Baker’s effort to control MassHealth costs, including a call to switch some MassHealth patients to private insurance plans, isn’t known.