When everything else is sorted out and set aside, the big remaining question in the proposal to reinvent the emergency department at Erie County Medical Center is who should benefit from the expected cost savings: the hospital or Erie County government and, through it – possibly – county taxpayers?
The question ought to be an easy one – the responsibility of hospital leaders must be to the hospital – yet those officials seem content to divert million of dollars in potential savings to Erie County government, where politics will decide how that money is spent. It may not be the worst thing, depending on how County Executive Mark C. Poloncarz and the Legislature decide how to use it, but it makes more sense for the hospital to use the money – up to $25 million – to defray its own costs.
Start from the beginning: Leaders at ECMC want to upgrade the hospital’s emergency department, which is both old and crowded. They make a compelling case for the investment, including the need for more space, to be modern and to serve a continually increasing number of patients.
The emergency room project is expected to cost $45 million, but improvements to boilers and generators, renovations to the nursing unit and other expenses push the total cost to $120 million. With $20 million available from a capital campaign, the hospital would need to borrow $100 million.
The question, then, becomes how to get that money. Either the county or its control board could borrow at lower cost than the hospital. Poloncarz offered to do the borrowing, with the stipulation that the savings produced by the county’s higher credit rating be used against the county’s growing costs of subsidizing indigent care at the hospital.
The bid failed with the Legislature, where four lawmakers blocked the supermajority needed to authorize borrowing. The objection was the belief that Poloncarz planned to use the savings from the 30-year loan up front, covering unexpected county costs and leaving future budgets – and executives – in a financial bind.
Having failed with the county, the strategy now is to ask the control board, which has an even better credit rating, to borrow the money on behalf of the hospital. It would be a shorter-term loan, since the board is scheduled to sunset in 22 years, raising the monthly costs of the loan but saving a bundle over its term. The control board seems willing to entertain that possibility, leaving the question of how to use the savings to be settled by the hospital and the county.
As far as it goes, it’s a good deal. It would be foolish for ECMC to spend more money than necessary in modernizing the hospital, which is a public benefit corporation. That’s both an obligation of its management and simple common sense.
But that same common sense should also apply to how to direct interest savings that could reach $25 million. That’s not chump change and, while it’s apparently legal – and considerate – of hospital leaders to want to donate that money to the county, it’s an odd way to run a business. What executive would voluntarily give up $25 million, especially in an industry whose margins are as tight as those in health care?
There is no good reason for the hospital to put the county’s financial demands foursquare in front of its own. Each has its own legitimate needs, but ECMC’s concern has to be the health care of its patients for years to come. That’s what needs to drive this decision.