Lots of things to iron out.  Here is latest fallout from greater
Boston area:

Health provider predicts big loss
Hospital alliance cites impact of reform law; Could cut 300 jobs,
suffer $25m shortfall
Email|Print|Single Page| Text size - + By Jeffrey Krasner
Globe Staff / March 17, 2008

Cambridge Health Alliance, a key part of the Boston area's healthcare
network, is facing a potentially "catastrophic" loss this year and is
looking to eliminate up to 300 jobs, or about 9 percent of its
workforce, in an effort to stabilize finances.
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The alliance, which includes Cambridge Hospital, Somerville Hospital,
and Whidden Hospital in Everett, says it is being hit hard by the
state's new healthcare reform law, which has left it responsible for
providing free care for those without insurance while reducing the
hospitals' compensation for such services.

"A significant downturn in our volume and the transition to the new
free care pool reimbursement system created a perfect storm for us,"
said Dennis D. Keefe, chief executive of the alliance.

Before healthcare reform took effect last year, Keefe said, Cambridge
Health Alliance was reimbursed by the state for the full cost of
providing services to the uninsured. Under the new system, "we only
get 60 to 70 percent," he said. The reduction is particularly
significant for the alliance because its hospitals serve a high
percentage of uninsured patients. Despite the state's efforts to
enroll all low-income residents in free or subsidized insurance
programs, many still do not have coverage.

Keefe said the hospital was especially bruised in its second fiscal
quarter, which ended Dec. 31, when the new payment system for
uninsured patients took effect. Government payments for free care to
the uninsured fell by nearly $14 million compared with the previous
quarter, he said.

At the same time, the number of patients admitted to the alliance's
hospitals dropped by about 3 percent, while patients kept overnight
for observation - a category for which insurance companies do not pay
as well - grew by 48 percent. Additionally, the number of walk-in
patients, which do not generate as much revenue as inpatients, also
grew substantially in the six months that ended Dec. 31, Keefe said.

During a department meeting last month, the chief administrative
officer of the health system's physicians' group predicted a potential
loss of $25 million to $35 million for the year.

"This would be catastrophic," Dave Porell told members of the
Department of Psychiatry, according to the approved minutes of the
meeting, which were obtained by the Globe.

On Friday, Gordon H. Boudrow Jr., chief financial officer of the
system, met with bargaining representatives for nurses at Cambridge
Hospital, who have worked without a contract since last summer. He
said the system lost $13.2 million in the first six months of the
fiscal year, and is on track to lose about $26 million for the year.

Cambridge Health Alliance is the last publicly funded healthcare
system in the state. In addition to the three hospitals, the system
includes 20 community health centers. It is the largest provider of
mental health and addiction treatment services in the state. Of 348
beds in use, 45 percent are devoted to mental health and addiction
treatment, an unusually high proportion.

Keefe said he has met several times with Dr. JudyAnn Bigby, state
secretary of health and human services, to discuss the alliance's
finances. Bigby, in an interview, said Cambridge Health Alliance
posted a surplus of $1.6 million in fiscal 2007 and is receiving
"substantially" more public funding this year than last year.

She acknowledged that the healthcare system is burdened because mental
health services don't pay as well as complex medical procedures like
heart surgery and cancer treatment. But she also said the state had
compensated the alliance for payments that were delayed by the federal
government.

"The Commonwealth will continue to support Cambridge Health Alliance
with public funding as much as we can," Bigby said.

Keefe said the alliance is indeed receiving more money from the
government this year, but that it is because of increased
reimbursement for treating low-income patients, not additional funds
to help the system stay afloat.

"It's accurate for her to say that payments have gone up, but you have
to deduct the expenses for providing medical services," he said.

To stem losses, the health system has put in place a hiring freeze and
eliminated discretionary spending, such as for travel and conferences.
It is seeking to eliminate the use of contract nurses and other
outside care providers, which cost more than using staff.

The system is also trying to keep more patients under its care for
longer periods. It wants doctors to limit referrals to specialists or
other physicians outside the alliance - something hospitals refers to
as "leakage."

"All staff needs to continue to focus on keeping patients within our
system, as appropriate, and to continue to focus on improving our
inpatient volume in particular by increasing admissions on each campus
each day," Keefe wrote in a Jan. 16 memo to staff. "We must also refer
our patients for necessary services within our ambulatory care system
whenever possible."

Keefe said the hospital is also exploring ways to combine services
among its three hospitals to minimize duplication. Cambridge Hospital
and Somerville Hospital are ripe for consolidation of specific
services, he said, because they are close to each other.

The Massachusetts Nurses Association, in an update to its 400 members
at Cambridge Hospital, said the alliance's financial problems are the
result of poor management.

"The introduction of the new health reform law was years in coming,
and the changes in reimbursement rates and other factors have been
well known and should have been anticipated," the union said in a
newsletter. "Our management built a budget that anticipated
unachievable growth and set up this hospital for the failed situation
it now faces."

Jeffrey Krasner can be reached at krasner@globe.com.