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Hospital officials Wednesday welcomed a state budget that phases out a tax on their revenues and drops nearly all of the proposed cuts in Medicaid funding that they had lobbied against.

"We're tremendously relieved," said Daniel Sisto, president of the Healthcare Association of New York State, a trade group of non-profit hospitals, nursing homes and home-care agencies.

But the status of a handful of local issues tied to the budget remained uncertain Wednesday.

In particular, negotiations are continuing about funding for Roswell Park Cancer Institute, as well as about changes to a plan that would make the cancer center more independent from state authority.

The budget phases out over five years a tax on hospital and nursing home gross revenues, an assessment the industry has vigorously fought since its inception in 1990. In addition, the spending plan originally included a proposal to cut Medicaid payments statewide by $913 million, but the reductions in the end amounted to a more acceptable $128 million.

Those budget measures should help hospitals with large numbers of patients on Medicaid.

Representatives of Erie County Medical Center who had feared large cuts in Medicaid could not be reached to comment. But others expressed optimism that the medical center would not be hit anywhere as hard as initial proposals suggested.

"They can't be as bad off as they could have been. The tax is being phased out, and Medicaid is being cut far less," said William Pike, president of the Healthcare Association of Western New York.

Children's Hospital, which also cares for a large number of poor residents in the Buffalo area, will benefit from the same measures.

It also will receive additional funding from its designation as a "safety net" hospital and will lose less money than it expected from cuts to a program that helps those hospitals with disproportionate numbers of poor patients.

"I feel relieved," said Joseph A. Ruffolo, the hospital's president and chief executive officer.

In June, Gov. Pataki announced an agreement to set up Roswell Park as a public-benefit corporation, a change aimed at giving the hospital greater hiring flexibility and allowing it to enter into business arrangements with other health-care providers.

The deal hit a few snags since then, but Sen. Dale M. Volker, R-Depew, said he anticipated that a compromise would be reached between legislators and the governor by this weekend.

The talks center mainly on four issues: additional funding for the cancer center; how much control the governor will have in appointing Roswell Park board members; the power of the state comptroller to monitor finances; and what courts would have jurisdiction over medical-malpractice claims filed against Roswell Park.

"We're very close to an agreement," Volker said. "But we've had to reassess the numbers in the last few weeks based on more current data. We want to make sure they've got enough to operate the place."

The budget also increases rates that managed-care organizations, including health maintenance organizations, will receive for enrolling Medicaid recipients.

New York wants to cut Medicaid costs by moving poor people into HMOs, but HMOs had complained that the rates they now receive are not high enough.

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