Copyright 1999 The New York Times Company
The New
York Times
November 27, 1999, Saturday, Late Edition -
Final
SECTION: Section B; Page 1; Column
1; Metropolitan Desk
LENGTH: 1912 words
HEADLINE: State Subsidies to Hospitals Face Renewal
Deadline, Spurring Policy Debate
BYLINE: By
JENNIFER STEINHAUER
BODY:
New York hospitals
are being suffocated, according to one viewpoint, by the government and by
insurance companies that place profits perilously above patients' needs. Or,
from another vantage point, the hospitals are hopelessly inefficient
spendthrifts whose practices have not kept pace with cost-cutting trends in
health care.
Administrators running the hospitals say they are
Dickensian institutions, reeling from federal and state budgets cuts, barely
able to eke out a profit. They are places where nurses frantically toil to take
care of wards crowded with patients, and where doctors waste precious time
fighting with managed-care companies. To make matters worse, administrators
argue, state business leaders want to abandon their critical role of paying high
medical-insurance premiums to help these hospitals absorb the costs of caring
for the poorest and sickest, and Congress is taking away precious teaching
dollars. Health insurance companies and business groups counter that health care
costs in New York State are nearly 20 percent higher than in the rest of the
country, fueled in large part by hospitals in the city that they see as temples
of medical arrogance and fiscal insouciance. Too many specialists, eager to try
out their latest costly toys, hospitalize people for problems that could be
solved in a doctor's office, and labor leaders, loath to lose a single job,
resist the closing of the most under-used hospitals, the business argument goes.
The two sides have been at the heart of protracted debates over how to
fix New York hospitals' ailing financial picture. And their characterizations of
the health care system and its troubles and expenses, however contradictory they
seem, are both accurate. New York hospitals ended 1998 with operating losses of
$115 million, according to figures released this week. Yet their traditions are
deeply embedded, so much so that long-term solutions to stem those losses have
eluded experts for years.
This year, the people who provide health care
and those who pay for it are finding themselves at a crucial juncture as they
prepare to do battle with the State Legislature over the future of state health
care financing, because the state's Health Care Reform Act expires at the end of
next month. Further, teaching hospitals stand to lose tens of millions of
dollars in Medicare money under a new Congressional budget bill.
If the
Health Care Reform Act is not renewed, hospitals will lose a large portion of
their state funds. So parties on all sides are scrambling to devise ways to deal
legislatively with two significant and incendiary portions of the law: paying to
educate medical students, which in New York is a huge and prestigious business,
and covering the hospital bills of the state's poor uninsured patients, which is
a huge burden.
Hospital and labor organizations have spent hundreds of
thousands of dollars on an advertising campaign expressing outrage at plans to
cut the amount of money devoted to health care. And business leaders have raced
around the state in recent months trying to convince anyone who will listen that
it is time for someone else -- they have not specified whom -- to start footing
the bills.
Both sides hope to influence any plan that Gov. George E.
Pataki may have.
The reasons why the city's hospitals and the health
care industry arrived at this point are many and varied, and to a great extent,
are rooted in some obvious economic realities. Almost everything in New York,
from electricity to labor to peanut butter, costs more than it does in the rest
of the country. Thousands of people in the state are uninsured, and the health
care system in New York City reinforces the outmoded practice of placing
teaching hospitals front and center for even the most basic care.
At the
same time, the Medicare and charity pools that historically combined to allow
the state to build top-notch medical centers while also serving its poorest
residents have either dried up or been threatened, while managed care companies
have tightened the reimbursement screws.
"The hospitals' story about
being broke is fundamentally accurate," said James R. Tallon, the president of
the United Hospital Fund, a health care research and philanthropic organization.
Insurers' arguments that hospitals could be more efficient are "also
legitimate," he added.
"There is room for more efficient use of
resources across the board," Mr. Tallon said. "But the question is, are you
going to achieve that in a fair fashion?"
For decades, hospitals in New
York, like those in many other areas of the country, enjoyed prosperity. Through
a combination of the federal Medicare program and a state plan that paid for
educating doctors, hospitals could afford to eat the costs of the uninsured
while building many highly esteemed medical centers and training thousands of
residents, many in highly specialized areas that attracted people from around
the country to New York hospitals.
But in the last several years, a
confluence of events reined in the flow of cash. Governor Pataki made major cuts
in the state's Medicaid program, which pays for care for the poor, while
Congress pulled back on Medicare, which primarily pays for care for retirees and
disabled people.
At the same time, a state system that set the rates
that insurers paid hospitals ended at Mr. Pataki's behest, forcing hospitals to
start negotiating $16 billion a year in charges with the insurers. This freed
health maintenance organizations to vastly decrease their reimbursement rates to
the hospitals.
All the while, the ranks of the uninsured swelled.
Suddenly, hospitals found themselves competing for patients and making budget
cuts, anathema just a decade ago. Add on the high cost of labor -- which health
care financing experts says is 70 percent of health care costs -- and the system
has become more expensive while less profitable.
The state's method of
paying hospitals for care they give essentially free is also unorthodox, coming
in the form of an 8 percent surcharge on every hospital and laboratory bill.
Businesses find this practice unfair because they feel it is ultimately passed
to them in insurance rate increases. But that pool of money helps to cover the
state's three million uninsured, who tend to seek almost all their care in
hospitals, and many medical centers, especially the New York City public
hospital system, say that they could not survive without this subsidized public
service.
In any other industry -- say, retail -- the competition that
results from tight times creates fallout. In New York City, Macy's and
Bloomingdale's have survived. Bonwit Teller and A.& S. have closed. But New
York has yet to close hospitals, and indeed many centers have expanded,
reasoning that they need to offer comprehensive cancer centers and top-notch
cardiac care to compete for patients.
"It is starting to look like the
collapse of the Soviet empire," said Megan McAndrew Cooper, the editor of the
Dartmouth Atlas, which tracks regional variations in health care. "Everyone in
New York had to have the best of everything. There was no cooperative planning
or constraint on resources, and now all of a sudden reimbursements get cut back
and they are left supporting incredible overhead with no income. Things are
getting very wobbly."
In fact, while New York has greatly reduced the
number of days people stay in the hospital (that figure is still higher than the
national average), the number of hospitals has not decreased. "If you have too
many hospital beds, getting someone out of one earlier just frees up the bed for
someone else," Ms. Cooper said. "What they should be doing is admitting fewer
patients."
Further, the trend in medicine in the 1990's has been to do
more procedures and treatments outside the hospital, in doctor's offices or even
in the home. But in New York City, 82 Medicare patients out of 1,000 are still
treated in the hospital for things that could be done in an ambulatory center;
in San Francisco, that number is 51.
Hospital administrators and doctors
contend that they have worked hard to move a huge system into the future, and
add that it is infuriating to hear arguments about how they should be treating
fewer patients when the number of uninsured patients in the state has risen at a
far faster rate than in the rest of the country, and managed care companies are
whittling down payments.
"We may not be 100 percent there," said Ruth
Levin, vice president in charge of managed care for Continuum Health Partners,
parent to Beth Israel and St. Luke's-Roosevelt Hospital Center.
But it
does not help hospitals' efficiency when insurance firms "call us every day to
remind us what the doctors should be doing," she said.
"Actually, it
costs us a lot of money," she said. "I have eight nurses who do nothing but
communicate with managed care companies."
This circles back to the
sticky issue of doctors. New York trains them by the thousands; the doctor to
population ratio in New York is about 50 percent higher than in the rest of the
country. And the state has far more specialists: 175 per 100,000 residents,
compared with a national average of 122 per 100,000.
While all states
receive some Medicare money to pay for educating doctors, each has its own
system of supplementing that pot. Many, including New York, use a portion of
Medicaid dollars. But New York has a unique system under which employers pay a
state tax based on the number of teaching hospitals in their region, a charge
reflected in higher medical insurance premiums.
"No one in the country
has a system of taxing businesses to train doctors," argues Elliott Shaw, the
director of government affairs for the New York Business Council, which would
like to see this portion of the Health Care Reform Act eliminated.
But
supporters of this system, unusual and costly as it is, argue that training
doctors has economic and social benefits for the state, because fine teaching
hospitals attract patients from around the world. "It is a cost well worth
paying," said State Assemblyman Richard N. Gottfried, chairman of the State
Assembly Committee. "The local economy benefits because one person's decision to
come to our hospital for a surgery is worth $100,000 to the local economy. And
graduate medical education is also a way we pay for a lot of
health care for the uninsured, because a lot of what residents do is provide
uncompensated care."
And so it may be that while New York's costs are
extremely high, the argument over whether to help keep hospitals afloat could
center on shifts in the mind-sets on both sides of the debate. Should people in
less-populated areas of Brooklyn be forced to travel an hour to a hospital
because their local center fell to insolvency, as people do, say, in remote
areas of North Dakota? Can young people in medical school adapt to the notion of
becoming family doctors instead of super sub-specialists, and how would that
affect the popularity of some of the more renowned hospitals? And where is the
policy proposal for the city's ranks of uninsured?
"You always have to
be careful about applying market forces in health care," Mr. Gottfried said,
"because the values of the marketplace say if something isn't a profit center we
cut it out. And in health care there are things we need that are not profitable.
People are trying to figure out how to change their internal culture here. It is
complicated."
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GRAPHIC:
Chart: "What Drives Up Hospital Costs"
Some of the reasons why New York City
hospitals have high expenses compared with those in other cities.
HOSPITAL EMPLOYEES
Acute-care employees per 100,000 residents
in 1996
Atlanta: 11.9
Chicago: 21.9
Miami: 12.1
Minneapolis:
11.4
San Francisco: 12.1
New York City: 20.8
United States: 13.2
Specialists per 100,000 residents in 1996
Atlanta: 115.5
Chicago: 140.2
Miami: 146.3
Minneapolis: 100.5
San Francisco:
180.0
New York City: 175.0
United States: 122.9
MEDICARE
PATIENTS
Percentage who visited 10 or more doctors in the last 6
months of life in 95-96
Atlanta: 14.7
Chicago: 20.5
Miami: 34.7
Minneapolis: 8.7
San Francisco: 10.9
New York City: 31.4
United
States: 16.1
Hospitalization for ambulatory-care per 1,000
enrollees in 1995-96
Atlanta: 77.5
Chicago: 91.9
Miami: 77.3
Minneapolis: 62.0
San Francisco: 51.4
New York City: 82.5
United
States: 73.7
(Source: Dartmouth Atlas of Health Care 1999)
LOAD-DATE: November 27, 1999 
