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Kaleida Health, citing high costs, increased competition and a shortage of organs, will close the region's heart-transplant program at the end of the year.

The decision follows unsuccessful attempts by Kaleida Health to work out an arrangement with other transplant centers in the state and public health officials that would allow more donated hearts to stay in the Buffalo area for transplantation.

It also comes at a time when the hospital network, faced with a decline in revenue, is laying off staff and making other cost-cutting moves.

"This was a difficult decision given the prestige of such programs and the hopes we had when it started in 1987," John Friedlander, president and chief executive officer of Kaleida Health, said Monday. "But we can't afford to stick it out considering our responsibilities throughout our system and the resources we have."

He stressed that Kaleida Health still planned to invest heavily in its other heart-related medical programs, including heart surgery, at Buffalo General, Children's, Millard Fillmore Gates Circle, Millard Fillmore Suburban and DeGraff Memorial hospitals.

"We're trying to develop cardiac care as the major service line of Ka-leida," he said.

Kaleida Health -- and Buffalo General, before the merger that created the hospital network -- has been able to perform heart transplants with good results but never was able to do enough of them to make the program a success.

Medicare, the government health program for the elderly and disabled, will not pay for heart transplants at centers unless they do at least 12 a year for three years and maintain a high survival rate.

In addition, officials said, one major local health insurance company referred its members who needed heart transplants to the Cleveland Clinic and not Kaleida Health.

Kaleida Health performed only five transplants this year and barely more than a dozen in the past three years.

Ironically, area residents are among the leaders nationally in organ donation.

In March, the New York State Transplant Council recommended that Buffalo's adult and pediatric programs be decertified because they had not performed enough surgeries to maintain high standards.

The advisory group to the state Health Department also suggested that Albany Medical and the University of Rochester Medical Center's Strong Memorial Hospital be allowed to open new heart-transplant centers.

Those cities received approval this year, as did a program for Westchester Medical Center. They will join two other existing programs in Manhattan -- Mount Sinai Medical Center and Columbia-Presbyterian Hospital. Montefiore Hospital in New York City also plans to perform heart transplants.

Those six centers will compete for the approximately 110 hearts that are donated each year in the state, a number that has held steady annually since the early 1990s.

Nationwide, despite continuing advances in medicine, the demand for all organs far outstrips the number of organ donors, and thousands of people die waiting.

"There seems to be a disconnect in the state between the availability of organs and the number of programs," Friedlander said.

In New York State, hearts are distributed based on medical urgency regardless of where they are donated. This means that most organs end up in New York City, where there is the largest concentration of transplant candidates.

Kaleida Health wanted a waiver from state rules that would allow it to use hearts obtained locally for several years or until a minimum number of cases were performed. But officials said they could not obtain the necessary unanimous agreement of the other transplant centers.

The shutdown of the program coincides with efforts in Congress to approve new regulations that, as in New York State, would provide transplant organs to the nation's sickest patients.

There are 272 U.S. transplant centers and 62 organ-procurement organizations, each allocating its organs to populations of varying sizes. Critics of the regulations say smaller programs might close if they lose organs to centers in larger cities.

Friedlander said it would have cost more than $2 million a year over the next few years for the personnel and equipment needed to reach the threshold for obtaining Medicare coverage.

It was not a price the hospital network could afford to pay, he said, considering Kaleida Health's financial condition and other projects under discussion, such as an investment in pediatrics.

He pointed to the Balanced Budget Act of 1997, legislation that Congress passed to hold down Medicare costs over five years, as a prime reason for the decline in revenues. Kaleida Health officials have said that Medicare cuts alone will reduce revenues by $14 million in 1999 and $20 million in 2000.

Kaleida Health has worked out an arrangement in which potential heart transplant patients can receive their initial and post-operative care in Buffalo, but receive the transplant in the Cleveland Clinic. Only a fraction of heart-failure patients make good transplant candidates.

"Heart-failure patients have been referred to us because of the transplant program. We still want to keep those patients for their medical care," said Dr. Susan Graham, medical director of the transplant program.

Kaleida Health officials said the move away from cardiac transplantation will allow it to invest in other services and equipment.

Dr. Mark Shields, executive vice president for medical affairs, cited as examples expansion of minimally invasive heart surgery, robotic assistance in heart surgery and a program to ensure rapid evaluation of potential heart-attack victims.

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