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ECMC deal could mean Legislature showdown Special session needed to avoid court ruling

In the next week, between the holidays, the future of Erie County Medical Center may be decided.

County Executive Joel A. Giambra and the medical center Thursday released details of a proposed settlement of a lawsuit over the hospital's taxpayer subsidy, setting up a potential showdown with the County Legislature.

The two sides say the Legislature must meet in special session before the end of the year to approve the proposed deal in order to avoid a court ruling in the case Dec. 30, a deadline set by State Supreme Court Justice Joseph G. Makowski.

An unfavorable decision could financially cripple the medical center or place a tremendous economic burden on the county, officials said.

However, so far, the chance of a special session appears slim.

"The timing on this is bad. People feel rushed. But that doesn't mean it's a bad deal," said Michael A. Young, ECMC's chief executive officer. "It's a win for the county and the taxpayers. It's good for us, and it's good for our employees."

The county in 2004 transformed the hospital into a separate entity in hopes of making it more self-supporting, while agreeing to work out annual subsidies and some funding for equipment and renovations.

But financial problems led the county to cut the 2005 subsidy from $29 million to $19 million and to reduce the proposed 2006 subsidy by $13.5 million. The county also delayed paying capital improvement funds.

ECMC challenged the actions, filing a lawsuit earlier this year.

In September, Makowski said Erie County is obligated to provide a total of $18.4 million to ECMC for equipment and renovations in 2004 and 2005.

Left unresolved was whether the county is required to provide an annual operating subsidy and how it should be determined. This month, the judge de
layed making a summary judgment in favor of one party or the other, or starting a trial, while officials tried to reach a settlement.

Both sides prefer a deal that would gradually eliminate the subsidy.

County officials fear a court decision that could saddle the county with an unlimited obligation to cover large hospital losses every year, whereas hospital officials fear a ruling that could leave them without any subsidies.

"There is extreme risk for both parties," Giambra said.

Under the proposed settlement, ECMC would receive:

Subsidies of $19 million in 2005, $20 million in 2006, $14 million in 2007, $6 million in 2008 and $8 million in 2009.

$15 million in 2007 for employee incentives to accept changes in work rules.

New capital improvement funds of $3.5 million in 2006, $15 million in 2007, $15 million in 2008 and $8 million in 2009.

The county would likely borrow for the capital improvements, officials said.

Money for the 2005 subsidy has already been given to the medical center, while the plan is to use tobacco settlement funds for the 2006 subsidy. In 2008 and 2009, the subsidy covers nothing but debt payments on bonds the county sold in the deal that created the new hospital entity.

The tricky year is 2007, for which the Legislature would likely have to raise taxes to cover the cost of the incentives and the subsidy, officials said.

"The deal provides clarity. The county knows what it will pay each year, and we know what we will receive," Young said.

With the Dec. 30 court deadline, he and Giambra see an urgency for the current Legislature, which adjourned Dec. 16, to take up the issue instead of the next Legislature, which will have nine newly elected members.

Young said the hospital would be out of business in 2006 without a subsidy, especially with a $13.5 million pension payment to make by Jan. 30.

Erie County Attorney Laurence K. Rubin briefed legislators about the proposal Dec. 15-16, but legislators complained that they were given nothing in writing.

"When you're looking at these issues, it just can't happen this quickly. Any time they are trying to run something down your throat this way, it could be problematic down the road," said departing Legislature Chairman George A. Holt Jr., D-Buffalo.

Giambra countered that his administration had the foresight to put the matter on the Legislature agenda as progress was made, though it was listed as "2005 budget-related litigation" without a reference to ECMC.

"We had to see first if there was a willingness to take this on," he said. "There wasn't, so we didn't share the details."

e-mail: hdavis@buffnews.com and mspina@buffnews.com

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