Cambridge Health Alliance May Consolidate Health Care Services

While the Harvard-affiliated Cambridge Health Alliance has been gripped by a financial crisis since instituting a hiring freeze in February, officials maintain that the quality of care at the hospital system will not be compromised—though services may be consolidated.

In the face of a mounting deficit, Health Alliance CEO Dennis D. Keefe launched a strategic planning process earlier this month to confront the problem of rising costs and simultaneously diminishing funds.

In a letter to the community, Keefe said that the Health Alliance will be teaming up with the firm Ernst & Young to evaluate the hospital system’s overall structure and present proposals by the end of December. Keefe said that the Health Alliance—which owns three hospitals and 21 clinics based in Cambridge, Somerville and Boston—will be holding a series of Town Hall-style meetings throughout the coming months to receive input from those with a stake in its future ranging from employees to community leaders.

The strategic planning comes at a time when the Health Alliance is facing financial woes stemming largely from the number of uninsured patients it has been treating in the months following the enactment of Massachusetts’ health care reform act last year. The hospital system has already cut back on discretionary spending, such as travel costs, and is halfway through laying off roughly 300 workers—nine percent of its staff, according to Health Alliance spokesperson Doug M. Bailey.

“I don’t like the word ‘cuts,’” Bailey said. “There has been no decision to cut or reduce services. Quite frankly, the bottom line is that we are getting paid less for the services we deliver.”

Prior to passage of the health care law in 2006, the Health Alliance was reimbursed by the state for the full cost of providing uncompensated services. But the hospital system is now only receiving 60 to 70 cents for each dollar of medical service provided, according to chief financial officer Gordon H. Boudrow, Jr.

Bailey said that the state underestimated the popularity of the program “by a huge amount,” and that Mass. Gov. Deval L. Patrick ’78 is trying to close the gap between how much hospitals spend and how much the state reimburses. As one of the 10 largest health systems in the state, the Health Alliance currently receives over 700,000 patient visits a year—and that number is expected to increase in coming years. Representatives at the state’s Executive Office of Health and Human Services were not available for comment.

Though the numbers for the fiscal year 2008 have not been finalized yet, Bailey said that the Health Alliance was hit especially hard this year with an annual $13 million in additional expenses to be tacked on under a new accounting rule, which requires public employers to record costs for post-retirement benefits. Bailey declined to release additional figures as an audit has yet to be completed, but stated that without the $13 million tag, the Health Alliance would have been on “very solid footing.”

The Health Alliance will continue to deliver the same services and the same quality care despite the tough financial situation, Bailey said. He added that access cannot be equated with quality and that an organization does not need to have many outlets to deliver high quality care.

“We believe it can be done,” Bailey said. “But we’re not there yet to tell you how.”

One arm of the Health Alliance’s operations that will not be touched is the Integrated Clerkship program, the hospital-training program launched in 2004 as part of the Harvard Medical School curriculum reform, according to Judith Klickstein, one of the organization’s senior vice presidents.

The alliance, which includes Cambridge Hospital and two others in the Boston area, will continue to provide on-site training for third-year Medical School students. The clerkship—which receives much of its financial support from the Medical School—is a redesign of the traditional medical curriculum with an emphasis on patient care.

Despite Bailey’s optimism, he acknowledged that the hospital system does need to become more financially self-sufficient.

“We’ve got to find ways to become more efficient at what we do to continue to fulfill our mission,” Bailey said.

—Staff writer June Q. Wu can be reached at junewu@fas.harvard.edu.