Medicaid special reimbursement payments to Erie County Medical Center are being slashed by two-thirds for this fiscal year after Congress failed to reinstate a key portion of the federal program for hospitals by Oct. 1.
State officials notified the hospital that the institution's payments would be reduced by $29 million.
ECMC will receive $15 million in Medicaid "disproportionate share hospital" instead of the $44 million that the hospital requested, State Medicaid Director Jason A. Helgerson said in a letter to Thomas J. Quatroche, Jr., CEO of the hospital.
That includes $11 million to cover expenses incurred in prior years and $4 million in additional "scheduled" payments.
It was not clear what impact the cuts would have on the hospital's budget and operations.
The Medicaid cut is expected to have "a significantly negative impact on our ability to provide quality healthcare to the patients we serve," said Peter Peter Cutler, spokesman for ECMC.
"This comes at a time when ECMC is executing a strategic vision, which will improve patient care, enhance our facilities and provide a broader array of services to the ever-changing needs of the population we serve," he said.
The Medicaid cut will "place all of this in jeopardy and will have a detrimental impact on implementing the efficiencies and new services that will make healthcare more effective and affordable," Cutler added.
ECMC received $59.2 million in similar payments in 2015, accounting for just over 10 percent of its $553 million in total revenues.
The Medicaid payments soared 21 percent in 2016 to $71.5 million, or 12 percent of its $616.5 million in total revenues. But it reported only $10.16 million in operating income and just under $2 million in net income, so a $29 million cut in DSH funding would cause a significant annual loss of as much as $27 million.
The new fiscal year began this month.
The payments do not directly affect or benefit patients but are designed to offset the costs that hospitals incur from providing medical care and treatment to the uninsured and indigent, especially for those institutions that treat a larger share of them. Under the program, hospitals submit their prior years' expenses for reimbursement, on a rolling basis, and can also seek funding as an advance against future expectations.
They are also not the only funds that hospitals receive from the state under Medicaid, but many hospitals are nevertheless heavily dependent on them.
Significant cuts had been anticipated when Congress allowed the federal payments program to lapse two weeks ago, reducing the money available to public hospitals. In fact, Gov. Cuomo and other state officials lobbied to prod Congress to act, uniting in a coalition and warning of the repercussions.
"For months, Governor Cuomo has repeatedly and publicly warned of the devastating impact these federal cuts will have on New York’s hospitals," Helgerson said. "These cuts directly impact your institutions – the public and safety-net hospitals that provide critical care to millions of our most vulnerable citizens."
Helgerson said the state does not believe there is any "imminent threat of insolvency" for any hospital, based on an "initial review" of each institution's finances. But he wrote that officials are still conducting independent evaluations of every one and created a reserve fund "in the event a hospital is on the brink of insolvency."
In the meantime, Helgerson said the state "continues to call on the federal government to restore this critical funding," and noted that "some in Congress hope to restore the program." But he said the state still had to "operate on the current law," so all payments to all public hospitals were paused "to reconcile their accounts" before any more money was disbursed.
According to Helgerson's letter, the state Division of the Budget and the state Department of Health worked with consultants on a preliminary analysis of the Medicaid program, with the final review to be completed by year end. The review sought to "justify each hospital's fair allocation," regardless of when each had previously submitted invoices for prior expenses, and identify an appropriate annual payment.
"Our priorities are fair allocations to all hospitals involved in the program, stability of the workforce and preservation of the highest levels of patient care," Helgerson wrote.
If hospitals asked for payments based on future estimates of Medicaid money, additional money could be allocated "once we are informed of any Congressional action to restore DSH funding," he added.
Four other letters were sent to executives around the state, affecting hospitals in New York City, Westchester County, and Nassau County, as well as two under the State University of New York.