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Steepest Cuts Will Kick In Over the Next Two Years

Plan Would Restore About $66 Million In Inpatient and Teaching Hospital Payments to Western NY Hospitals

In the wake of the harsh blow dealt to New York hospitals by the 1997 Balanced Budget Act (BBA), US Senator Charles E. Schumer today unveiled a plan that seeks to remedy the financial challenges that hospitals in Western New York are facing.

"Our hospitals have been on life support for the last three years. This bill will take them out of intensive care and allow them to begin to recover," Schumer said.

Although the BBA made important changes to Medicare payment policy and helped create today's federal budget surpluses, some of the policies enacted in the landmark law cut payments to health providers more than expected. The BBA contained spending cuts of nearly $216 billion dollars over 5 years to hospitals nationwide, $104 billion more than the Congressional Budget office had originally estimated.   As a result, hospitals throughout the country face serious budget shortfalls and in some cases may be forced to close.

In Western New York, the Healthcare Association of New York (HANYS) estimates that area hospitals will lose about $266.5 million by 2002. Kaleida Health is expected to lose $121.2 million; Catholic Health Systems is expected to lose $58 million; Erie County Medical Center is expected to lose $29.2 million; Lockport Memorial Hospital is expected to lose $5.9 million; Inter Community Memorial Hospital is expected to lose $2.3 million; Mount St. Mary's Hospital is expected to lose $5.2 million; Niagara Falls Memorial Medical Center is expected to lose $5.4 million; Sheehan Memorial Hospital is expected to lose $3.8 million; United Memorial Medical Center is expected to lose $7.4 million; and Brooks Memorial Hospital is expected to lose $1 million.

In each case, the cuts were about twice the level estimated when the 1997 budget law passed. The most severe cuts felt by these hospitals were in their teaching programs and inpatient payments.
"Somewhere along the road, these cuts went seriously awry. They were intended to help balance the budget but went far beyond what anyone could have ever imagined," Schumer said. "They were never meant to shut down area hospitals."

Schumer said that he and other Senators, under the leadership of Senator Daniel Patrick Moynihan, have crafted a proposal that will help area hospitals recoup some of the losses incurred by the BBA's spending cuts. This proposal is estimated to cost about $80 billion over 10 years and will be introduced in September when the Senate reconvenes.  According to Schumer, the plan will help Western New York hospitals by adjusting inpatient payments, like Medicare reimbursement for surgery, to help them keep up with increases in costs. In addition, he said that the plan will prevent further reductions in payment rates for vital teaching hospitals like Buffalo General and Erie County Medical Center which are on the cutting edge of medical  

"The BBA's harshest cuts are going to kick in over the next two years. If hospitals are struggling today, they could falter tomorrow," Schumer said. "If action is not taken to restore these cuts this year, hospitals in Western New York and all over New York State are going to have to sacrifice quality. No one wants that not here, not in New York, not throughout the nation."

Schumer estimates that Western New York Hospitals will receive about $66 million under the plan to blunt the losses in teaching and inpatient payments areas of major concern to these hospitals.  
The plan also targets additional relief to rural hospitals to make it easier for them to qualify for disproportionate share hospital payments under Medicare and provides support for rural hospitals with a disproportionate share of indigent patients.

"This plan will make hospitals whole again by rectifying the unintended consequences of a budget bill that was meant to balance the federal budget, not shut down hospitals," Schumer said.

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