Another lawsuit is brewing between the county and Erie County Medical Center.
"We have been unable to secure an understanding with the hospital on how we are to recover our $8.8 million," County Budget Director James M. Hartman said Monday. "So as of this morning, we are going to proceed with legal action."
The county gives the hospital millions of dollars for its operations and long-term improvements. But this year, the county learned ECMC was to receive an additional $17.6 million under a federal program that covers public hospitals for losses serving the working poor who do not qualify for Medicaid, or those who might qualify but never applied.
The federal government pays half of the award, and, in New York State, the rest comes from the counties that sponsor a public hospital. So on behalf of the federal program, state officials in late March plucked $8.8 million from the county's bank account and gave it to ECMC.
Since then, the administration of County Executive Joel A. Giambra and the hospital have bargained over what to do. Under a court-approved consent decree, county government already was giving ECMC $8.4 million to supplement this year's operations.
After recording a $7.5 million profit last year, the hospital has lost its pauper status. Michael Young, its chief executive officer, received a $100,000 bonus last year, bringing his pay to more than $500,000.
The hospital, county officials reasoned, should find a way to return the $8.8 million to county government. Even if it did, they said, the hospital still would be in better financial shape than officials foresaw at the beginning of the year.
The two sides discussed a deal for ECMC to return most of the $8.8 million, while the county was expected to assume more of the hospital's costs for retiree health care. ECMC also would have the right to keep all future "intergovernmental transfers" -- payments under the federal program that covers the losses public hospitals incur for treating the poor.
Giambra refused to accept those long-term consequences to get back a little more than $8 million this year. Monday, Giambra's aides told county lawmakers during their midyear budget hearings that a legal battle is imminent.
A spokesman said the hospital is prepared to meet in court "to bring clarity to this situation."
"We had been in negotiations," said Thomas P. Quatroche, the hospital's spokesman and its senior vice president for marketing. "We understood the financial situation they were in. We were hoping to negotiate a win-win for both sides. We couldn't come to an agreement on that."
ECMC officials said county budget-makers should have known an intergovernmental transfer was likely this year. County officials also knew the federal government had closed the loophole that the state and counties with public hospitals had used to take back most of their transfer payments, justifying it by saying they had provided other support.
In September, a state Health Department official had warned that the federal government was watching the program and could begin audits in select counties. "However," his letter continued, "this requirement in no way prohibits a public provider from reimbursing their sponsoring local government for appropriate expenses."
In other words, public hospitals and their sponsors still could seek a middle ground, as ECMC and county officials have tried without success. Their negotiations have played out under the stress of ECMC's discussions with the Kaleida Health Network to merge with Kaleida's Buffalo General Hospital.
Those talks, triggered by the Berger Commission's report to streamline hospital care across the state, have devolved into an advertising war, with both ECMC and Kaleida trying to bring public opinion to its side.
To settle the county's dispute with ECMC, County Attorney Laurence K. Rubin said he might try to reopen the consent decree approved late in 2005 by State Supreme Court Justice Joseph G. Makowski. Makowski had ruled the county was obligated to ensure the hospital ends each year in the black, and the decree specified county aid to ECMC for the rest of this decade.
"We are putting together the legal team," Rubin said Monday, explaining he did not expect to hire an outside law firm. "We are going to do this in-house, and we should be ready to go to court within the next several weeks."