In what hospital officials billed as a remarkable comeback story. The Cambridge Hospital yesterday announced it is the winner of a prestigious national award for excellence in Community Service.

The $75,000 Foster G. McGaw prize, awarded by the Illinois-based philanthropic organization Baxter Foundation and the American Hospital Association, cited the hospital's "visionary" outreach programs such as health care for the homeless, house calls for the homebound elderly, and a school-based teen health center.

John G. O'Brien '72, administrator of the hospital, wearing a butterfly pin on his lapel for a press conference yesterday afternoon, said the institution had undergone a caterpillar-like metamorphosis since it lost $10 million in 1987. At the time, O'Brien said, there was much concern and uncertainly over the future of the hospital and some doubt over whether it would survive.

Since then, O'Brien said, the Harvard Medical School-affiliated hospital has developed a host of new programs that are more responsive to the community's needs. "We really increased our primary care outreach to the community." O'Brien said in an interview yesterday morning.

The result is an award-winning hospital that has broken even for the past two years and will make a small surplus in the 1993 fiscal year, which is about to conclude. Ambulatory care visits are up, as are hospital admissions. The City Council recently approved plans for an ambitious $-40 million building project on the hospital's Cambridge Street campus.

In addition, the hospital has become an important caregiver and training center for Harvard students. The University Health Services frequently has its doctors operate there when students need emergency surgery, and Harvard Medical School uses the hospital as a training site in primary care and pediatrics for its students.

All this happened while hospitals, and city hospitals, around the country were floundering.

Across the Charles River, Boston City Hospital is facing serious troubles. The difference, O'Brien said, is, "Cambridge Hospital, unlike Boston City [Hospital] is not a political football."

Avoiding the controversial political entanglements of its Boston neighbor may have been a key factor in The Cambridge Hospital's successful turnaround.

But you sure wouldn't know it from yesterday's press conference, where city politicians were out in force.

City Councillors Francis H. Duehay '55, Alice K. Wolf, Sheila T. Russell, and Walter J. Sullivan were in attendance, as was Mayor Kenneth E. Reeves '72, And one of the biggest rounds of applause at the event went not to O'Brien or a hospital doctor, but to Charles Flaherty (D-Cambridge), speaker of the Massachusetts House of Representatives.

Flaherty, who is on the hot seat after a recent Boston Globe investigation focused in part on his close relations with lobbyists and a trip he took to a tropical resort, praised the hospital and its staff for its "commitment...compassion...dedication."

The cheers for Flaherty were more than just sympathy. The state representative was instrumental in engineering changes in the state Medicare and Medicaid reimbursement structures, bringing the hospital more rewards for caring for the urban poor.

"Charlie Flaherty has been phenomenal behind the scenes," O'Brien said.

"He is the person who has made this day possible," said Richard deFilippi, chair of the hospital's governing board.

Since 1987, Cambridge Hospital's "free care" has ballooned from $3.5 million to $25 million. Flaherty has seen to it that the state helped the hospital handle those costs, hospital officials said.

Beyond all the talk of politics and costs, though, many hospital employees have used the past few days simply to savor the thrill of national recognition.

"This prize obviously represents just a tremendous honor to us," said Dr. Katherine S. Kosinski, chief of pathology at the hospital and an instructor in pathology at Harvard Medical School.

Dr. David H. Bor, acting chief of medicine at the hospital and an assistant professor at Harvard Medical School, said the award recognized the hospital's "zest for public service."

That sentiment was echoed by Patricia Morgan, executive director of the Baxter Foundation, who praised the "innovative," "progressive," and "culturally diverse" staff of The Cambridge Hospital.

"They are succeeding by serving, and in the process they are providing ideas and inspiration for the nation's hospitals," Morgan said