Hospitals lose big via fed equation BY LYNN WOODS

Hospitals lose big via fed equation
BY LYNN WOODS

Northern Dutchess Hospital, located in Rhinebeck, is less than five miles away from Benedictine and Kingston hospitals. But it receives approximately 25 percent more in federal reimbursements for Medicare.

According to Thomas Dee, CEO at Benedictine Hospital, the Kingston hospitals are experiencing a collective loss of $8 million due to the lower reimbursement rates, compared with the Rhinebeck hospital, and both facilities are losing workers because of the funding disadvantage.

“Our competitors have increased their salaries,” said Dee. “A nurse can go to Northern Dutchess and get a 25 percent increase in salary. There are many examples of staff who have left for hospitals in Dutchess, Orange and Westchester counties” all of which receive higher Medicare reimbursements than the Ulster County facilities.

The reason: Hospitals in Dutchess County are classified in a federal Metropolitan Statistical Area, or MSA, with a rating of 1.31, compared with 1.07 for the Ulster County facilities, according to Dee.

The MSA classification system, which is applied to cities and the surrounding metropolitan areas, pegs federal funding be it a Medicaid reimbursement or a housing grant to differing wage levels and other cost-of-living factors. The national wage index is set at 1. A hospital located within the New York City MSA, which is rated 1.4, would thus receive 40 percent more funding than the national average.

St. Luke’s Cornwall Hospital, which has locations in Newburgh and Cornwall, suffers from a similar disadvantage as the Ulster County facilities. While all other Orange County hospitals qualify for the New York City MSA rates, St. Luke’s has been rated in the Nassau-Suffolk MSA and as a result, receives $800,000 less in federal funding that its competitors.

To level the playing field, U.S. Reps. Maurice Hinchey (D-Hurley) and John Hall (D-Hopewell Junction) are crafting legislation that would create one regional MSA for Ulster, Dutchess and Orange counties. In addition, “We are writing a new provision, which would be included in any new Medicare bill, that all hospitals located within these counties should be attached to the New York City MSA,” said Wendy Darwell, Hinchey’s chief of staff.

Due to the Hudson Valley’s proximity to New York City, there has always been a scramble by politicians to have their district’s hospitals qualify for the higher MSA index of the city. The difference could be millions in dollars of funding. Neil Abitabilo, president of the Northern Metropolitan Hospital Association, based in Newburgh, noted that because the pool of money doled out by the Centers for Medicare & Medicaid Services (CMS) is limited, “if someone’s rate is going up, someone else’s rate is going down. What it does politically is create a no-win situation at the national level. Everybody who falls against an already-high wage area runs against a cliff.”

Under the law, hospitals can apply for a different MSA if they meet certain benchmarks: Their average wages must be at least 80 percent of the rate paid in the higher MSA and 106 percent of the average in their own MSA; and statistics must be available on the number of people commuting to the higher MSA area, according to Darwell.

Although hospitals in Orange County didn’t meet those benchmarks, in the mid-1990s, a series of temporary legislative provisions were initiated by U.S. Rep. Benjamin Gilman that qualified many of them for the New York City MSA. Additional provisions to get the city’s MSA area extended to Dutchess County were made after passage of the 2003 Medicare Modernization Act, as part of the horse trading that went on to gain Republican support for the bill. (In total, 45 hospitals around the country ended up in higher MSA classifications after passage of the bill, said Darwell.)

In 2004, the CMS wrote a special regulation that would qualify Orange County for the New York City MCA. Because St. Luke’s Cornwall is located only 14 miles from the Putnam County border, which was already part of the city’s MCA, the CMS reasoned the facility would be able to qualify for the higher rate through the standard regulatory process on its own.

St. Luke’s Cornwall has been trying to qualify for the higher MSA, but without success. “We’ve been working toward that end, and we’re still at a disadvantage,” said hospital spokesperson Judi Stokes.

The CMS provision expires at the end of September. A couple of Orange County hospitals have successfully qualified for the city’s MSA reclassification through the standard regulatory process. For the rest, “we are working on an extension of the provision,” which would include the Dutchess County hospitals and St. Luke’s Cornwall, Darwell said.

Abitabilo said it’s a tough process. “The moment a regional proposal gets put forward, someone has an objection.” Even high-wage area New York City got hurt when three northern New Jersey counties were added to the city’s MSA a few years ago, he said. The city hospitals lost $65 million of Medicaid money because of the reapportionment, Abitabilo said.

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