Wednesday, July 24, 2024

Cambridge Health Alliance expects income exceeding $1 billion in the next fiscal year. (Photo: Marc Levy)

The Cambridge Health Alliance expects its revenue to grow in the next 12 months because of increased business. But the Alliance will lose money anyway – because higher expenses will outstrip the improvements.

“CHA is growing, we expect to grow in fiscal year 2025,” chief financial officer Jill Batty told trustees at a meeting June 12. “Likewise we expect our expenses to grow.”

The proposed budget for the next fiscal year, which starts July 1, forecasts an overall loss of $6.4 million, compared with break-even performance this fiscal year: a $300,000 gain. Total income exceeds $1 billion. This year the Alliance benefited from a one-time state “hardship payment” of $9.2 million as well as Covid relief income; there will be no hardship payment in fiscal year 2025.

The Alliance’s finance committee approved the budget on June 12, voting to send it to the full board of trustees.“We will be working very hard to stay within it,” chief executive Assaad Sayah said. The work, he said, “is based on growing, not shrinking.”

The Alliance, which includes two hospitals in Cambridge and Everett and 16 clinics in Cambridge, Somerville and nearby communities, is a safety net health care system, meaning most of its patients are poor or uninsured. It’s a major provider of mental health services, operating two community behavioral health centers in Cambridge and Malden and new expanded inpatient units in Somerville for teens and children. It has struggled to keep finances in the black for years and last year it laid off or reduced hours for 84 workers and cut 254 positions to avoid a huge deficit that threatened its existence, officials said.

CHA has deep connections to the city of Cambridge; it grew from the former Cambridge City Hospital, operates the city’s public health department and is considered a public health care system. The city’s financial contribution to the Alliance has often meant the difference between an overall loss or gain; the proposed budget for the 2025 fiscal year doesn’t break out that figure. The city will pay almost $8.7 million, according to the latest agreement between Cambridge and the Alliance, obtained under the state public records law. The money is supposed to reimburse the Alliance for operating the Cambridge Public Health Department. Its officials have said the Alliance spends more than the city allocation.

Working with a consultant

Batty said CHA had made improvements this fiscal year that increased revenue. For example, she said, a centralized scheduling system made it easier to find appointments for patients. And changing the process at Everett Hospital’s emergency room to create a “separate track” for patients who aren’t acutely ill reduced the number of people who leave the emergency room without being seen, she said. These changes will continue, Batty said.

CHA has been working with a private consulting company, Huron Consulting Group of Chicago, to improve its financial situation, according to a written summary of the budget. The Alliance will “move forward” to “implement the various improvements identified in [the consultant’s] strategic assessment on an accelerated basis throughout FY25. We will be focused on building systems and processes to achieve growth while also managing expenses, in order to result in an improvement to CHA’s net income. We will build on the cultural improvements associated with our high reliability initiative to achieve a broad array of improvements in quality, safety, and financial performance,” the budget summary said.

Details of the consultant’s evaluation and recommendations weren’t included. The budget narrative did say CHA has made changes in billing such as getting reimbursed for services from nonclinicians, improving the description of the “level of care” provided, reducing denials from insurers and modifying charges “where necessary to capture revenue up to the amounts allowable under payer fee schedules.”

CHA spokesperson David Cecere said the consultant was hired this year “to assist us in assessing what our opportunities might be to improve access and other strategic metrics, including financial sustainability.” Cecere didn’t answer the question of how much Huron is being paid. He said the consultant’s evaluation “affirmed much of the work already underway and also identified opportunities to further accelerate or enhance outcomes.”

Save on outside staff, spend on Rx

The Alliance expects robust increases in the number of visits to doctors, or outpatient volume, in the next fiscal year, according to the budget. Inpatient volume, measured by the number of patients discharged from a hospital bed, will remain essentially flat in total, though it will decrease for medical/surgical patients and increase for psychiatric patients, mainly because of the expansion of inpatient services for teens and children. CHA expects to reopen beds in a specialized unit for adolescents with neurodevelopmental conditions such as autism July 9. Half of the 24 beds were temporarily closed last year because most of them were empty.  It turns out that CHA has permanently switched 12 of the 24 beds to serve adolescents with non-specialized mental illness, Cecere disclosed Monday. That means the neurodevelopmental unit will have 12 beds for teens when it reopens. Cecere said the unit will have an “average census of six patients.”

The budget also forecasts a substantial increase in the number of days that psychiatric patients stay in the hospital; the length of stay for medical/surgical patients will drop and time in the hospital for obstetrical/gynecological patients will remain generally flat compared with this year, the budget says.

CHA will reduce expenses in part by hiring fewer staff from outside agencies, such as travel nurses. Agency workers generally cost more than in-house employees.

That’s not the only reason for higher staff expenses. At a finance committee meeting in April, Batty said costs for CHA’s own staff were higher than expected in this fiscal year partly because the Alliance is spending more on employee health benefits. And one reason for that is prescriptions for expensive new weight loss and diabetes drugs, she said.

Surge in clinicians

The budget for next year includes an increase of 62.4 “full-time-equivalent” positions, or a modest 6 percent. But one area will see a decrease of 12.7 full-time-equivalents. That’s only slightly less than 2 percent, but it represents an important group of employees, as the area is for “Chapo,” which stands for Cambridge Health Alliance Physicians Organization, the Alliance’s doctors and other medical professionals..

Cecere said the decrease in physician and advanced clinical staff FTEs is more a matter of timing than loss of positions. It’s “based on differences between when positions become vacant and when new recruits are available to fill them,” he said.

“Although we expect to experience normal turnover in these roles over the coming year, we will see increased capacity for new patients and better access to appointments for current patients as a result of a number of factors: Many of our newer providers will have completed their ‘ramp up’ period, we have more centralized scheduling systems which result in better use of the available appointments slots and we continuously work to improve the people and technology supporting our providers in their practice,” Cecere said.

The budget calls for an increase in nonphysician clinicians: the equivalent of 187.3 full-time staff, or an 8 percent rise.