These should be boom times for New York’s hospitals, whose collective revenues have been surging by the billions for several years.
Yet almost of half of the state’s hospitals are operating in the red, and their leaders are howling in Albany about catastrophic consequences if Gov. Cuomo so much as slows the growth of Medicaid spending.
The explanation for these seemingly contradictory trends is that consolidation is splitting the hospital world into two camps: the haves and the have-nots.
This growing divide is documented in my new Empire Center report on hospital finances across the state. From 2012 to 2016, the combined income of New York’s hospitals increased by $14 billion, or 23%. That was almost twice as fast as the medical inflation rate and three points higher than the average for hospitals nationwide.
Meanwhile, the state’s hospital admissions declined by 6%, a welcome byproduct of changing medical practices. Patients who do check in are increasingly skipping the smaller, neighborhood providers in favor of major academic medical centers and other large, well-equipped regional facilities.
Hospitals gaining market share — about a quarter of the total, statewide — are generally doing well. The state’s largest, New York-Presbyterian in Manhattan, posted a whopping $496 million surplus for 2016.
Quite the opposite is true for hospitals in the shrinking majority, more than half of which reported deficits in 2016. The have-not group included all 11 facilities in New York City’s Health + Hospitals system, which treats a disproportionate share of the poor and uninsured. Their combined deficits of $646 million accounted for more than half of the losses statewide.
The realities of this dynamic seem to be lost on Albany.
Last month, facing an unanticipated dip in tax revenue, Cuomo called for trimming Medicaid spending to balance the state budget. He floated proposals that would save the state $550 million and reduce total Medicaid spending (including federal matching aid) by about $1.1 billion. That sounds like a lot, but it amounts to slowing the growth of the mammoth program from 4% to 2%.
One of the cuts would exclusively affect large hospitals with surpluses exceeding 2.98% — the very institutions that could best afford to take the hit.
Another “cut” involves rescinding an across-the-board Medicaid reimbursement increase for hospitals and nursing homes, which he unwisely initiated just a few months ago and which has not yet taken effect. The extra money would have flowed to financially strong institutions as well as the weak. Canceling the hike would not reduce what providers receive but continue paying them at current rates.
Hospital groups have responded with hyperbolic warnings about widespread layoffs and closures — as if New York’s Medicaid system has been starving the industry for money. In reality, the state’s already high level of Medicaid funding for hospitals surged by 27% from 2012 to 2016, nine points faster than the national average.
The primary reason so many hospitals are in trouble has little to do with Medicaid, and everything to do with the fact that their patients are going elsewhere.
Regardless, the industry’s misleading message worked: The Assembly and Senate flatly rejected Cuomo’s proposed cuts, and even the governor has backed away from his own plan.
The result of this political inertia is a Medicaid system that keeps blindly jacking up hospital reimbursements across the board — further boosting the bottom lines of the thriving few while postponing a necessary and inevitable downsizing of the overall system.
The haves will get more, and the have-nots will flounder.