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Medical center officials decry plan to slash subsidies

A plan to slash the county hospital's annual subsidy and force a merger with another hospital system doesn't make sense, Erie County Medical Center executives say.

If given a chance to wean itself gradually from its subsidy, the medical center can succeed, officials said, as called for last year when the county spun off the institution into a separate public corporation.

Hospital officials sought to make their case in anticipation of the expected release this week of the county's four-year fiscal recovery plan.

County Executive Joel A. Giambra said last week he will propose cutting $12 million the county provides for medical center operations, as well as all aid to the Erie County Home, while maintaining about $7 million for paying off debt. He wants to sell the county nursing home and merge the medical center with another hospital system.

Even if the county's chaotic economic problems force the medical center to seek a merger, medical center officials warned that Kaleida Health, the likeliest partner, is financially weak.

"Many people believe (the medical center) is the county's biggest problem. I would tell you that it should be the county's source of pride," said Michael Young, chief executive officer.

For this year, the medical center requested a total subsidy of $29 million for the hospital on Grider Street and nursing home in Alden. It was allocated $25 million, which was lowered to $19 million as the county encountered financial problems.

For next year, the medical center requested $23 million.

Hospital officials said Giambra's proposals to slash the subsidy by $12 million would cripple the institution.

"We can get to break even eventually, but not if we're cut off at the knees with cash flow," said Sue McCarthy, chief financial officer.

Young and his colleagues list a number of reasons to continue support for the medical center:

The county, led by Giambra, sold the medical center and nursing home to the public benefit corporation in a $105 million deal. But the county agreed to negotiate an annual subsidy and to provide $29 million for new equipment from 2003 through this year, which it has not done. Both matters are now the subject of a lawsuit.

Young said the money for equipment is essential to bringing in new services that can generate more revenue.

The hospital is busy, and the number of patients is rising. The facility also provides important services, such as a regional trauma center, that would be expensive to replicate elsewhere if a merger eliminated acute care at the Grider Street facility.

Although Kaleida Health has expressed interest in assuming medical center services, Young said that hospital system still faces financial problems such as a large amount of debt and losses at a majority of its hospitals.

"Both of our health systems have economic challenges. It would be like merging Ford and GM. You'd rather combine with Toyota," Young said.

The medical center inherited county labor agreements with work rules, fringe benefits and pension expenses that make labor costs significantly higher than at other hospitals. Officials say they hope the threat of a control board taking over county finances will persuade unions to agree to changes.

The money-losing Erie County Home could be sold, but with lower labor costs, keeping it might make sense. It provides patients for the hospital, and hospital patients no longer needing acute care can be transferred there.

Closing the medical center is impractical since that would require the county to come up with tens of millions of dollars to pay off the hospital's debts and contractual obligations to employees.

What's likely to happen?

Most legislators don't want the medical center to merge or close, said County Legislator Barry Weinstein, R-Amherst, a physician. But, he said, how they will handle the subsidy in the upcoming debate over expected increases in property and sales taxes remains unclear.

Hospital executives argue that the subsidy is relatively small -- less than 2 percent of total county government.

e-mail: hdavis@buffnews.com

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