The state has long grappled with how to backfill the financial losses that hospitals incur when they care for a high percentage of Medicaid and uninsured patients, and Gov. Andrew Cuomo’s revised budget suggests one strategy is to cut off profitable hospitals.

As part of his 30-day amendments to the budget, the governor set a cap on how much charity-care funding profitable downstate hospitals can receive. Facilities in New York City, Long Island and Westchester that earn—or are part of a system that earns—at least $68 million in operating income or have an operating margin of at least 2.98% would be capped at $10,000 in indigent-care payments. The move would save $138 million in state funding, leaving $719 million, wrote Bill Hammond, director of health policy at the Empire Center, in an analysis of the health budget Friday.

Elisabeth Benjamin, vice president of health initiatives at Community Service Society, called the cap “a bold statement.”

“The administration is acknowledging that this money does not need to support extremely wealthy hospitals,” Benjamin said. “It’s inappropriate for the state to fund extremely wealthy hospitals that do little to no charity-care work in this manner.”

The move came after the state Department of Health last year convened a work group, co-chaired by Benjamin, to study the indigent care pool, a funding source run by the state for hospitals that treat large numbers of Medicaid and uninsured patients.

The 22-member group, made up of representatives from hospitals, unions, insurers and consumer advocacy organizations, met four times before submitting its findings in December. It considered different proposals, but “given the diverse viewpoints, the work group did not reach consensus on an exact distribution methodology,” according to the report, which was released earlier this month without a formal announcement.

New York currently receives $3.6 billion in Disproportionate Share Hospital funding, including the $795 million distributed through the indigent-care pool, according to the report. The other $2.8 billion is reserved for programs to support public hospitals.

New York’s distribution will come under greater scrutiny if Congress goes through with a scheduled $1.4 billion cut to New York’s DSH funding, set to take effect Oct. 1.

HANYS President Bea Grause, who co-chaired the work group, said her organization is working to preserve the charity-care support, not alter the indigent-care program’s methodology. “We’re focused right now on preventing cuts at the federal level and cuts at the state level,” she said, referring to Cuomo’s reversal of a planned $550 million boost to Medicaid.

A proposal from NYC Health + Hospitals’ sought more sweeping changes. It wanted a reduction in the funding pool with money redirected to reimburse public hospitals and safety-net hospitals that treat a certain threshold of Medicaid and uninsured patients.

The New York State Nurses Association backed that plan and proposed eliminating the transition collar that limited the amount some facilities could receive for providing charity care. That mechanism, which has been extended through March 2020, has slowed the pace at which funding is stripped from hospitals that treat a lower percentage of Medicaid and uninsured patients than their peers.

The proposal, which would have increased funding to Health + Hospitals, had majority, but not unanimous, support from the work group, Benjamin said. The governor or state Legislature has yet to embrace such a proposal.

© 2019 Crain’s New York Business

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