CAMBRIDGE — The new chief executive of Cambridge Health Alliance says he wants to improve the way medical care is delivered and paid for at the system’s three so-called safety net hospitals, but is also open to forging partnerships that may fall short of outright mergers.
Patrick R. Wardell, 59, who arrived here in mid-March from Michigan State University’s Hurley Medical Center in Flint, Mich., said he plans to spend the first six months working with his board on a plan to strengthen the finances of Cambridge Health Alliance, which serves a large population of low-income and immigrant patients. After that, he may seek affiliations with larger and richer institutions that can invest in the hospital group.
The alliance includes 155-bed Cambridge Hospital — the state’s only remaining publicly owned acute care hospital — as well as Somerville Hospital and Whidden Memorial Hospital in Everett. About 70 percent of their patients are insured by government payers such as Medicaid, which covers low-income residents, and Medicare, which provides coverage for older patients. But those reimbursements often don’t meet the hospitals’ expenses.
“We receive 60 cents on the dollar in terms of what the cost of care is and what we get reimbursed for,” Wardell said. “We do a very fine job of primary care and outpatient care. But primary care for Medicaid patients doesn’t pay that well. The methodology for payments are just inadequate for these organizations to be self-sustaining.”
Cambridge Health Alliance registered about $40 million in losses at its physicians organization and providers network in the 2011 fiscal year. But the losses were more than offset by about $90 million in profits from its Medicaid managed-care insurance unit, Network Health, enabling the hospital system to report more than $50 million in net income.
Network Health was sold to Watertown-based Tufts Health Plan at the end of last year largely because changing financial reserve requirements made it impossible for Cambridge Health Alliance to continue owning it, Wardell said. The state Medicaid program, MassHealth, recently approved expansion of Network Health coverage into Western Massachusetts under Tufts.
Without the insurance subsidiary, Cambridge Health Alliance will be more dependent on its hospitals and doctors in coming years, just as government aid to safety net hospitals is expected to decline, said Wardell, who draws his paycheck from the city of Cambridge and doubles as its health commissioner. Thus, affiliating with outside parties has become important. But because the alliance is a public institution, a full-scale merger is less feasible, he said.
Wardell’s predecessor, Dennis Keefe, reached a similar conclusion in 2010 when he approached prospective partners, an effort that didn’t produce results. Cambridge Health Alliance has long referred patients to nearby hospitals, such as Mount Auburn in Cambridge and Massachusetts General in Boston, but those clinical relationships are limited.
Because of system’s public status and the large number of low-income patients it treats, Cambridge Health Alliance does continue to benefit from two pools of federal money. It will get about $22.4 million this year under a three-year “transformation initiative” for hospitals with a disproportionate share of low-income patients, and $152 million this year under a special three-year Medicaid waiver program.
With more than 100 primary care doctors serving about 100,000 patients annually, Wardell believes Cambridge Health Alliance would make an attractive partner, funneling referrals to specialists at other institutions that provide more complex care. But first, he said, the system must make its own operations more efficient. Toward that end, the alliance is increasing its share of risk-based insurance contracts, which give providers incentives to lower costs and improve quality.
It is also seeking to improve services to immigrants in the Cambridge and Somerville area, such as preventive health programs to better manage diseases like diabetes, and a large network of translators in languages ranging from Portuguese to Haitian to Nepalese.
“I’m confident we can get there,” Wardell said. “But it’s going to be a difficult journey.”
Wardell, who grew up in New York’s Bronx borough, has worked at hospitals in New York, New Jersey, and Michigan. He was attracted to the top job at Cambridge Health Alliance partly because he considers Massachusetts a laboratory for health care innovation, he said.
“The state is ahead of the rest of the country in thinking about, and dealing with, health care reform,” Wardell said. “I felt I’d be parachuting into the hotbed of health care reform.”