The dramatic reduction in federal Medicare reimbursement rates for several hospitals in Dutchess County and one in Orange County, caused by the expiration of funding legislation in October, will result in a shortfall of millions of dollars in 2008. U.S. Reps. Maurice Hinchey, John Hall and other representatives from the region are scrambling to put together legislation in an omnibus bill that would restore the cuts and even improve the reimbursement rates, which hospital executives fervently hope will be passed into law before the new year.
If not, the impact could be devastating, resulting in staff reductions and cutbacks in care. Neil Abitabilo, president of the Northern Metropolitan Hospital Association in Newburgh said, “We can”™t imagine (Congress) won”™t fix it, because it affects a whole lot of places around the county. We need to have the Republicans stamp their feet to get this legislation in.” If it doesn”™t pass ”“ and Abitabilo said the fact that “Congress can”™t get anything through” is certainly cause for anxiety ”“ “there will be massive effects on the hospitals. Orange County would lose $8 million or more and Dutchess probably the same.”
The reduction has to with a change in the federal government”™s classification of the hospitals”™ geographical designation, called a Metropolitan Statistical Area. MSAs allow for adjustments in the reimbursement rate due to the varying wage levels and cost of living indexes in regions near or in different urban areas. Northern Dutchess Hospital, Vassar Brothers Medical Center and Saint Francis Hospital, all located in Dutchess County, were rated in the New York City MSA for the past three years, but when the law placing them in that MSA expired on October 1, they were down-rated to the Bridgeport, Conn., MSA, which has lower reimbursement rates.
St. Luke”™s Cornwall Hospital, which had been rated in the Nassau-Suffolk MSA and was already at a disadvantage compared with other hospitals in Orange County, all of which are in the New York City MSA, is even worse off: It has been down-rated to the Poughkeepsie-Newburgh MSA, which has the lowest reimbursement rates in the valley.
Beth Duffy, CFO at St. Luke”™s Cornwall, said the change in designation will result in a shortfall of $3.5 million next year. “We”™re trying to get (Congress) to agree on legislation that can be passed by both houses. Otherwise I will have to reduce my staff, and it would be significant. When you look at hospitals in New York state, the margins are so low that $1 million is a lot of money.”
David Ping, vice president of strategic planning and business development at Health Quest, a network that includes Northern Dutchess Hospital and Vassar Brothers, said one challenge is the “real drain of our work force to Westchester and New York City.” Being in the New York City MSA enabled his facility to reduce its dependence on agency nurses, but now he”™s facing the prospect of relying on the agencies again to “fill the holes in our schedule. It becomes a real quality issue. I”™m hoping we can find efficiencies elsewhere.”
Will de la Pena, CFO at Saint Francis Hospital, said the downgrading was costing his facility $1.3 million. “We”™re currently paying salary rates similar to what a lot of New York City hospitals are paying. Since we”™re competing in the same marketplace for labor, we should be compensated in the same way.” While the MSAs were designed “to reflect the amount of actual costs and expenses associated with doing business in your area, there”™s no longer any rhyme or reason with that original premise,” he said.
***
(Next week, Lynn Woods will report on a pair of managed health care providers that offer financial bonuses for meeting performance standards.)
Â
Â
