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When a one-time public, charity hospital faces budget deficits and a municipality unwilling to bail it out, it must find a new role for itself in the contemporary U.S. health care system. Cambridge Hospital, long- known as Cambridge City Hospital, must decide whether it should remain public, what sort of role to play if it does remain publicly-owned and operated, and what sort of relationship to forge with the Boston-area''s large private hospitals. The case describes what appears to be, at least in the short term, the hospital''s successful strategic approach but, at the same time, raises a series of questions: Is there a continuing role for public institutions in the health care delivery system? Should they receive special consideration from state and federal funding programs? In addition to strategic management and public vs. private issues, the case provides a primer on the recent evolution of the U.S. health care system and the structure of its public funding programs. Partial support provided by the Robert Wood Johnson Foundation.