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ALBANY IS TALKING seriously these days -- and it should -- about Medicaid reimbursement for hospitals. It used to be that the hospitals themselves determined what they charged patients for medical services, but no more. Today, Albany and Washington help determine what hospitals in the state may receive for the care of patients.

At immediate issue in Albany -- and currently the focal point of the intense negotiations among representatives of the hospitals, the Senate and Assembly and Gov. Cuomo's office -- is how to split up $13 million in extra state Medicaid payments already set aside for the first quarter of next year.

But that's only the tip of this fiscal iceberg. The plan could ultimately involve up to $500 million and set Medicaid reimbursement patterns for the next three years after current formulas end Dec. 31.

Medicaid, of course, is the federal-state program of health care for the indigent. Its costs are shared 50 percent by Washington, 25 percent by Albany and the remaining 25 percent by the state's counties.

At least four principles ought to guide the negotiations:

The base year for computations, now 1981, ought to be brought up to the latest year for which figures are available, 1989. Much has changed in health care since the early 1980s. Costs are higher now; AIDS and crack are putting pressure on the state's hospitals.

Albany's argument that to update the cost base could penalize the more efficient hospitals and reward the less efficient sounds unconvincing. On the contrary, not to calculate on contemporary conditions would seem to ignore reality.

Outpatient care should be encouraged. Hospitals want the extra $13 million split so that $11 million goes for inpatient care and only $2 million for outpatient care. That's the wrong balance. More money should go into outpatient care, which is more cost-efficient. It emphasizes preventive medicine (shots and clinic care) and cheaper ways of performing procedures. Some money ought to also go into widening access to preventive care for the two million New Yorkers with no form of health insurance coverage at all.

Inpatient dollars may trigger larger numbers of dollars from other sources, as the hospitals contend. But the reimbursement formulas ought to aim at getting more efficient services for the medical dollar, not simply more dollars.

The inpatient-outpatient split of the $13 million, which will set a pattern for much larger amounts, ought to be closer to the $7 million/$6 million reportedly sought by Gov. Cuomo.

Area hospitals are not doing badly. Western New York's hospitals, collectively, earned $9.9 million in profits last year, according to the State Department of Health. Some did better than others, but as a group they're not on the financial edge.

The hospitals say that they have benefited from Medicare payments generous enough to subsidize other losing care and that this subsidy has now ended. The precise impact of the changes, however, is not known now.

Anyway, why should state taxpayers be asked to compensate for reimbursement difficulties caused by a federal program? Let the hospitals complain to Washington about Medicare inequities.

Whatever the final reimbursement package, hospitals rightly ask that it cover the next three years and be settled soon. They are entitled to a smooth transition. They shouldn't suffer cash flow problems, and they should have the stability necessary for confident planning for the future.

Above all, Albany had better get busy. It needs to reach an agreement that is enacted into a three-year law now -- before the Legislature goes home this summer.

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