Teaching hospitals face woes in budget; Intensive medical care and specialized services undergoing scrutiny


ALBANY, N.Y. -- Born at 23 weeks, Baby K almost didn't make it and her twin sister died. Too young to breathe on their own, such preemies face an uphill struggle.

"This is right on the edge," said Dr. David Clark, the director of the Children's Hospital at Albany Medical Center, where Baby K has spent the past 10 weeks in a full-service neonatal intensive care unit, the only one of its kind in a 25-county region of northeastern New York.

These units, with access to sophisticated technology and experienced medical staff, have helped improve the odds for premature babies over the past decade. But such intensive medical care comes with a cost. Albany Medical Center, like other teaching hospitals, is struggling to pay for neonatal and other highly specialized services as it grapples with federal budget cuts.

Subsidies cut

In the past, Congress authorized higher Medicare payments for teaching hospitals because of the costs they incur in training graduate medical students, conducting research and operating state-of-the-art technology. The Balanced Budget Act of 1997 cuts those subsidies by between $2.9 billion and $7.1 billion for the five-year period from 1998 to 2002.

In the first two years of the act, Albany Medical Center lost about $11 million in Medicare reimbursements. That figure is expected to climb to $45 million by 2002.

Albany Medical Center, which employs 6,409 full- and part-time employees, has been able to operate in the black, despite the lost revenue. Over the past three years, it has sought to save money by leaving 165 positions unfilled, by implementing across-the-board budget cuts and by consolidating administrative offices.

The medical center, with its $445 million annual operating budget, also has been looking at new sources of revenue, including expanding its lucrative outpatient surgery department and by seeking more federal research grants.

Yet Albany Medical Center has seen its slim operating surplus get even smaller over the past five years. Administrators are increasingly nervous about how to save money without cutting into the programs that have helped define the center's mission as a place for research, quality medical education and advanced medical care.

'No vision at all'

"If these budget cuts from the BBA continue, I don't know where the money is going to come from," James J. Barba, president and board chairman of the Albany Medical Center, said of the Balanced Budget Act.

Although the medical center has no plans to eliminate programs, Barba has not ruled out that possibility.

The prospect of reduced services at teaching hospitals has prompted an outcry from some hospital and industry leaders.

"We have no vision at all as a nation where we're going as a health care system," said Daniel Sisto, president of the Healthcare Association of New York.

With studies showing that for every dollar spent on teaching hospitals, the state gets a $3 return in research money and economic development, Sisto believes the federal cuts are misguided.

Not only are government subsidies being trimmed but some private insurance companies have gone bankrupt, leaving hospitals to foot the bill for unpaid claims. Others are late making payments or frequently dispute bills, adding to the financial uncertainty.

"The particular vulnerability of teaching hospitals is that they have special missions that non- teaching hospitals don't have ... and for which the reimbursements that are now available are simply becoming inadequate," said Dr. Jordan J. Cohen, president of the Association of American Medical Colleges.

Adding to the stress at Albany Medical Center is the growing cost of caring for the uninsured.

Last year, the medical center provided about $18 million in free care, up from $15 million five years ago.

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