L.I. hospitals to face big cuts

By Alex Costello

Faced with the unenviable task of closing the largest deficit in New York state history – $13.7 billion for 2009-10 – Gov. David Paterson has created a budget that makes cuts in nearly every category, while increasing some taxes.

One of the many items facing dramatic reductions is the state’s Medicaid program, and cuts along the lines that Paterson is proposing -$3.5 billion statewide – could mean massive losses for Long Island hospitals. “[Medicaid] is a federal/state shared program,” said Janine Logan, director of communications for the Nassau/Suffolk Hospital Council, which represents all 24 of Long Island’s not-for-profit hospitals, including Mercy Medical Center, which referred questions about the budget cuts to the council. “So for every dollar cut on the state level, there’s that much less coming from matching federal funds. It’s like we’re losing double.”

“We were able to do a statistical analysis of [Paterson’s] cuts and how they would affect the region totally – all 24 Long Island hospitals – and it’s going to be in excess of $64 million in Medicaid cuts,” Logan later added. And because the federal government matches every dollar the state contributes to Medicaid, federal funding will drop by $64 million as well – an actual loss to Long Island hospitals of around $128 million.

“The cuts are, to say the least, draconian,” said Joe Quagliata, president and CEO of South Nassau Communities Hospital in Oceanside. “I’m not sure that [Paterson] has spread the hurt across all of the sectors in a fair and equitable way. And the question that I think needs to be addressed is, is it possible for this industry to continue to provide the level of services that we are currently providing given the magnitude of damage these cuts will do to hospitals?”

The North-Shore LIJ health system would lose $51 million under the governor’s proposal, according to its spokesman, Terry Lynam. “We recognize the severity of the state’s fiscal situation,” Lynam said. However, “this goes beyond sacrifice. It goes beyond what we would consider to be reasonable and fair.”

North Valley Stream’s Franklin Hospital would lose about $1 million in funding, according to Lynam. He said that while it is too early to determine precisely where cuts will be made, new programs and construction projects are likely possibilities, as are free community programs and uncompensated health care. “What’s often overlooked is the free health care that New York hospitals provide to those who are either uninsured or just can’t afford it,” he said.

“[The cuts] are unprecedented,” said Douglas Melzer, CEO of Long Beach Medical Center, who is worried the cuts could cause a reduction in programs like the maternity and pediatrics clinics. “We do this principally as a service to the community,” Melzer said. “We would have to look at potentially closing those clinics.”

Arthur Gianelli, president and CEO of the Nassau Health Care Corporation, which operates the Nassau University Medical Center in East Meadow, had a similar assessment. “Cuts of this magnitude would be impossible to sustain, and would require major service reductions and the laying off of personnel,” Gianelli said.

According to Gianelli, NHCC would lose an estimated $22 million based on the governor’s proposal.

Budget cuts from Albany aren’t the only financial problems hospitals are facing in the new year. The investment portfolios of many hospitals are shrinking because of the failing economy. Money that was used to pay for malpractice insurance and pensions is suddenly not there. That means hospitals must fill gaps with funds from their working budgets.

“So, forgetting cuts, between the pension, the malpractice, and the reduction in investment income that will be earned on a much smaller portfolio,” said Quagliata, “we’re talking about $5 million in hits that are already built in to the 2009 budget without even considering cuts..”

And a worsening economy has a dual impact on hospitals. As people lose their jobs or go from full to part-time work, they lose health benefits. “There’s a great reliance on the emergency room by residents that are either uninsured or under insured,” Melzer said. “We’ve seen a growth in that.”

Hospitals are required to treat everyone, if someone comes into the emergency room who is uninsured or underinsured, the hospitals absorbs the expenses.

“If you have a family who has a child that’s ill – maybe they have a strep throat or an earache or whatever – and they have nowhere else to go, they’re going to go to the emergency room,” said Logan. “Well, the cost to deliver that kind of routine care is maybe four times what it is to deliver it in a physician’s office.”

“We’ve projected, for 2008, $24.2 million of uncompensated care,” said Quagliata. “That’s 7.5 percent of our gross revenue. We’re projecting that given the current run rate, it’s going to exceed $26.5 million [in 2009].”

Lynam said that in the past, governors’ budget proposals have usually included reductions in Medicaid that were later restored by the Legislature. But these are different times, he said, with a change in the Senate majority and a larger state deficit. “We have to wait to see what the legislature does,” he said, adding that hospital administrators will be making contingency plans if the governor’s cuts do become a reality. “When you get hit with reductions like this, something’s got to give. Fifty-one million – it’s going to take quite a lot to close that gap.”

“I think, obviously, the governor has a massive deficit he needs to deal with,” Quagliata said. “But at the same time, hospitals are suffering from the same financial meltdown that all industries are suffering from.

“Hospitals are in dire financial straits absent these cuts,” he added. “And when you add insult to injury, what results is a very dire dilemma that we’re facing.”

Andrew Hackmack and Mike Caputo contributed to this story. Comments about it? ACostello@liherald.com or (516) 569-4000
ext. 207.

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