Hospitals face millions in funding cuts after fiscal cliff

January 15, 2013 Updated Jan 15, 2013 at 7:10 AM EDT

By WKBW News
By Tracey Drury, Buffalo Business First Reporter

January 15, 2013 Updated Jan 15, 2013 at 7:10 AM EDT

Hospitals in the Western New York region could see as much as a $51 million loss over 10 years as a result of federal fiscal cliff legislation.

Statewide, the impact to New York's hospitals will total $1.28 billion over the 10-year period, according to an impact analysis by the Hospital Association of New York State.

The reductions would come primarily through Medicare reimbursements that were part of the American Taxpayer Relief Act of 2012, which pays for a one-year delay in the scheduled 27 percent reduction in Medicare physician payments.

In the local region, Erie County Medical Center stands to lose the most, with collective reductions of $12.7 million over the 10-year period, while Roswell Park Cancer Institute and Mercy Hospital of Buffalo will each see payment reductions of more than $4 million apiece.

The cuts come through several Medicare and Medicaid programs, with the analysis attributing the largest share of $800 million statewide coming through reductions to Medicare inpatient coding reductions from 2014 to 2017.

In Western New York, those reductions will total $36 million over the three-year period, with $4 million in reductions to ECMC - the largest single reduction. Kaleida Health will take the biggest hit as a system of $12.8 million; while Catholic Health hospitals could collectively lose more than $8 million in payments.

A second program expected to see payment reductions is the Medicare payment reductions for stereotactic radiosurgery outpatient services, which will have an impact primarily on specialty providers like Roswell Park Cancer Institute, which could see a payment reductions of $3.2 million, according to HANYS.

And another $13.8 million in cuts will come through an extension of the Affordable Care Act, which cut the Medicaid disproportionate share for hospitals. ECMC stands to lose $8.6 million through the extension, while Roswell Park will see $1.2 million in cuts.

Eva Benedict, CEO at Jones Memorial Hospital and chairman the WNY Healthcare Association (WNYHA), said the reimbursement reductions at other hospitals in the region has a detrimental impact on everyone because of how they all work together.

"As rural hospitals, we want our tertiary and urban centers to be very strong as well, because we rely on them to care for our patients," she said. "So all of us on this list are at risk for dollars."

James Kaskie, CEO at Kaleida Health and for Great Lakes Health, parent of Kaleida and ECMC, said in a recent interview those uncertainties remain the greatest challenge for the $1.3 billion system. Cuts in reductions ultimately result in changes to programs and services, while hospitals work to maintain a safe, quality experience for patients.

"It's the uncertainty of the financial environment and the economy, particularly when it relates to the policies coming from Washington and Albany," he said. "We agree that it needs to change, but it needs to change without creating hardships for our patients and those we serve."

The fiscal cliff legislation wasn't all bad, however. The HANYS analysis pointed to certain positive Medicare payment policies that were extended, including the Medicare dependent hospital program, which resulted in $6.9 million in additional funds statewide; and the Medicare low volume hospital payment adjustment, which will bring in $9.2 million across the state.

In Western New York, the low-volume Medicare program will bring in $2 million to three Western New York hospitals: $696,000 to Jones Memorial Hospital; $560,000 to Orleans Community Health; and $817,000 to Wyoming County Community Health System.

Benedict said the low-volume payment adjustment extension restores what was previously taken away, and what might be lost again after 2013 - but represents vital dollars to pay for fixed costs like equipment replacement and facilities maintenance.

"It's crucial we have the Jones Memorials and Orleans and Wyoming in these communities because of our geographic isolation," she said. "To maintain those emergency rooms and acute care services, we count on those funding sources."

"The problem is we're very lean - there is no fat on the bone so if we experience a lot of cuts, we really would have to look at services," she said.

Additionally, the legislation did not put into place cuts to graduate medical education and outpatient clinic services, which HANYS said would have disproportionately harmed hospitals and health systems in New York.

John Bartimole, executive director of WNYHA, said the biggest problem for hospital executives is not knowing how much worse the situation could get once federal legislators pick up the issue again in March after the law's two-month reprieve from sequestration ends. Bartimole echoed HANYS concerns that this second round of negotiations in Washington will put hospitals and health systems at additional risk as Medicare and Medicaid spending is eyed for reductions.

"We've survived one week off the fiscal cliff with as little damage as we could have hoped for, but there's another fiscal cliff in March," he said. "Healthcare has a target on it because Medicare is such a big part of the budget."

And for some hospitals, the reductions in payments could be the final push toward unsustainability, Bartimole said.

"It's safe to say that some of our hospitals are really on a precipice," he said. "If we continue to cut and to lose money, what is our longterm viability?"

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