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ECMC, Kaleida fighting forced merger Advertising war between health care providers just got uglier

An advertising war between Kaleida Health and Erie County Medical Center just got uglier.

In the latest salvos, "citizens" groups accused ECMC of using tax dollars to compete with private facilities and Kaleida, a not-for-profit hospital, and of caring more about executive salaries than the health of the community.

The state has ordered the two organizations to consolidate to improve health care in Buffalo, although huge challenges remain in the way.

The aggressive campaigns underscore the deep differences in this arranged marriage, as well as the hospitals' strategy to continue competing for patients in a time of uncertainty.

Lost amid the hundreds of thousands of advertising dollars spent in the past year is an irony: while the hospitals fight for patients, they also agree dramatic change is needed to reverse a potentially disastrous situation.

In Buffalo, there are too many unused hospital beds, dated facilities and duplicative programs competing for fewer patients. Yet hospitals here still engage in a medical arms race that keeps open obsolete and financially weak buildings, siphons money that could go to recruit needed specialists, dilutes the ability of any hospital to achieve excellence in a range of programs, and slowly erodes the overall quality of care.

That's why the state's Commission for Health Care Facilities in the 21st Century, also known as the Berger Commission, said it made a Kaleida-ECMC consolidation a priority and offered to help pay for it.

"Rather than rallying around specific hospitals, I wish people would step back to see the bigger picture," said Dr. David Dunn, University at Buffalo vice president for health sciences and head of a regional group that advised the commission.

It's difficult to calculate spending over the past year on a barrage of billboards, radio, television, mail and newspaper ads. The hospitals declined to provide figures, and their unions have spent money, too.

Public relations experts offered estimates: TV spots cost $10,000 to $30,000 based on frequency and time; billboards can cost $2,500 a month and up, depending on location; radio ads on one station cost $1,000 to $2,000 a week; and The News charges $15,000 to $20,000, depending on frequency, for a full-page in the front section.

The hospitals also hired political lobbyists in connection with the commission.

ECMC paid $32,000 to L&J Rad LLC of Albany in March and April, and Kaleida paid Government Action Professionals of Buffalo $40,000 from January through April, according to documents filed with the Temporary State Commission on Lobbying.

In addition, ECMC contracted with a private public relations firm, Eric Mower & Associates.

The efforts have stirred controversy. Kaleida, for instance, complained to the Federal Trade Commission about claims made in ECMC ads for kidney transplant and cardiac programs, and the FTC negotiated changes. The most recent ads from "citizens" groups introduced a tone of animosity that surprised people.

"I'm appalled at both sides. It's time for them to put their guns and knives down," said Erie County Executive Joel A. Giambra.

Negotiations between ECMC and Kaleida have been deadlocked for months.

They can't agree on where key programs should go and how to divvy up seats on a new board of directors that will include UB.

Kaleida is much larger and wants more seats, as is typical in business mergers. ECMC officials fear a minor role that will lead to changes they oppose and contend are not worth the expense, such as moving the trauma center to Buffalo General Hospital on High Street.

The commission never spelled out what to do, deciding instead to leave the details of a consolidation up to local officials.

"We didn't want ECMC to see the recommendation as a takeover. But we didn't see this as a consolidation of equals either, otherwise we would have said so," said Buford Sears, a senior vice president at M&T Trust who sat on the commission.

Hospital consolidations are complicated in the best of circumstances. Other issues make this one a pressure cooker:

*The commission gave the state authority to close ECMC or Kaleida's Buffalo General unless a consolidation agreement is reached by year's end.

*The commission also called for closing Kaleida's Millard Fillmore Hospital, converting DeGraff Memorial Hospital into a long-term care facility, and building a new center for heart and vascular procedures for the combined organization. However, closing these facilities and Buffalo General would effectively destroy Kaleida, one of the largest employers in the region.

*Failure to accomplish a deal could jeopardize hundreds of millions of dollars in government funds the state says is available for closing hospitals, building the heart center and consolidating programs into centers of excellence. Finally, a ruling this month by the Appellate Division of State Supreme Court upheld an earlier decision that requires Erie County to subsidize ECMC in an amount equal to the difference between revenues and expenses, even though ECMC was spun off to a new public benefit corporation in 2004 to make it more self-supportive.

The court decision has no immediate effect because the county and ECMC reached an agreement that set annual subsidies through 2009.

The agreement gave ECMC $49.35 million for capital projects from 2006 through 2009, as well as operating subsidies of $20 million in 2006 (although the hospital returned $3 million), $14 million in 2007 and enough to cover hospital debt payments in 2008 and 2009.

The court decision gives ECMC a blank check to spend as much money as it wants on advertising, salaries and services, Kaleida contends.

"I've never seen a situation where a public enterprise has unbridled spending with taxpayer dollars to compete against the private sector," said James Kaskie, president and chief executive officer of Kaleida.

ECMC officials take offense at suggestions that they would manage recklessly, saying their goal is to operate in the future with only annual debt-service payments from the county.

"We feel we have a good story to tell, considering where we were in the past," said spokesman Tom Quatroche, who cited the hospital's improved finances.

Losses declined from $28.4 million in 2004 to $18.1 million 2005, and ECMC reported a surplus of $7.5 million in 2006.

Nevertheless, critics give reasons to worry.

ECMC has projected a $14 million loss for 2007.


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