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Patients could face service cuts at upstate NY hospitals as costs skyrocket

David Robinson, USA TODAY Network New York State Team
Posted 9/30/22

Medical deserts could soon expand in upstate New York as dozens of hospitals face budget deficits linked to declining patient revenues and skyrocketing labor costs, a new survey found.

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Patients could face service cuts at upstate NY hospitals as costs skyrocket

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Medical deserts could soon expand in upstate New York as dozens of hospitals face budget deficits linked to declining patient revenues and skyrocketing labor costs, a new survey found.

About 50 hospitals warned that health care service cuts will unfold in the coming year − unless their finances improve or government relief is provided, according to the Iroquois Healthcare Association survey.

Among the findings:

  • Nearly 90% of the hospitals reported negative or razor-thin operating margins, leaving them on track to end 2022 with millions of dollars in operating losses;
  • Of those hospitals, about 30 sites faced potential losses of at least 2%;
  • Potential losses exceeded 10% for about 10 hospitals, as staffing shortages in part fueled operating struggles and budget deficits;
  • The hospitals’ spending on contingent staffing, such as travel nurses, has spiked about 50% from last year;
  • By the end of 2022, the group’s 52 overall hospitals are projected to spend more than $1.2 billion on contingent staffing.

“In my 30 years doing this, I’ve never seen the financial condition of our hospital members worse than it has been for the last six months,” said Gary Fitzgerald, president and CEO of the trade group representing hospitals serving 32 counties spanning much of upstate.

“If nothing happens, at this point next year we will see some service reductions,” he added, “and some hospitals have already reduced services.”

The mix of staffing shortages and budget deficits, Fitzgerald noted, have forced some upstate hospitals to cut back on everything from outpatient surgeries to maternity wards this year. And the pressure to reduce services − particularly in rural communities − has only grown more severe amid supply chain issues and historic inflation. The fiscal crisis threatening upstate hospitals is unfolding despite billions of dollars in taxpayer-funded pandemic bailouts that flowed to hospitals in New York since 2020.

One reason is that federal rules funneled much of the $178 billion in pandemic aid nationally to large hospitals and health systems, which wield outsized political power through lobbying and general economic clout.

In other words, the federal government bailed out rich hospitals — many of which held large cash reserves and other investments — and provided less aid to smaller community and rural hospitals that needed the money.

Meanwhile, top executives at many of those large health systems in New York reaped the biggest shares of $73 million in bonuses paid out at hospitals in the state in 2020, the USA TODAY Network reported.

Addressing the inequality in hospital pandemic aid and bonuses, Fitzgerald said: “It’s a constant battle between large and small hospitals and rural and urban.”

With recession risks looming large over the next year, politically charged debates over providing further government aid or funding to hospitals could get complicated, despite the fact more than 1,400 communities are designated as medically underserved areas.

One way state lawmakers may attempt to provide relief is by increasing reimbursement rates for Medicaid, the jointly funded local, state, and federal health program for low-income and disabled people.

New York raised the Medicaid rate by 1% during the current state budget, but health care leaders asserted that fell short of covering the rising costs of care at hospitals and nursing homes.

Many upstate hospitals that serve aging populations also benefit from increased reimbursement rates for Medicare, the federal program for elderly and disabled Americans.

Lourdes Hospital in Binghamton is one of the regional hospitals testing and treating patients with COVID-19.

Fitzgerald suggested upstate hospitals are also considering asking lawmakers to raise taxes on marijuana, alcohol, or cigarettes to direct more money to hospitals providing care to those harmed by the products.

Tax raises would be a tough sell, however, due to the fact New York already has some of the highest so-called sin taxes in the nation.

Further, any push for another round of emergency federal bailouts for hospitals would face hurdles based on criticism of the inequity and bonuses linked to early pandemic aid. Advocates asserted any relief funding should include bans on executive bonuses, acquisitions, and other spending unrelated to patient care. Much of the debate will follow the election on Nov. 8, as health care leaders ramp up lobbying efforts in Albany and Washington, D.C. The next state budget process will begin in January, with a goal of finalizing it by April.

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