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State spending cuts crippling hospitals

01:00 AM EDT on Friday, April 10, 2009

By Cynthia Needham

Journal State House Bureau

PROVIDENCE — Reeling from a $31-million aid cut in the supplemental budget that the General Assembly passed early this month, the CEOs of Rhode Island’s community hospitals say they will struggle to survive the next year.

The money, which helped reimburse hospitals for giving free care to the uninsured, was part of a sweeping mid-year budget rewrite meant to close the state’s $357-million deficit.

“The latest round has had a significant deleterious effect on us. This year, through the first five months, through February, we’ve lost $1.8 million. Last year at this time we had lost $800,000,” said Charles Kinney, president of Westerly Hospital. “It’s not volume. Our inpatient volume is up. But we’ve seen a huge increase in bad debt and decreases in some of the ancillaries that are totally elective.”

Kinney, along with the heads of Woonsocket’s Landmark Medical Center and St. Joseph’s Health Services, told the House Finance Committee Thursday that if lawmakers do not reinstate the higher reimbursement levels in the coming year’s budget, the hospitals will face major financial instability.

If payment limits remain where they are now, Kinney said his hospital will be left owing the state $582,000 after it factors in licensing fees and Medicaid-related cash flow.

“We don’t know where we can turn at this stage in the game and we’re just asking you for your help,” Kinney said.

After an initial plan to cut the level at which hospitals are reimbursed, the governor reversed course and recommended restoring the money in his final budget rewrite. But the legislature, contending it had few choices, went ahead with the cuts.

Carcieri’s budget request for the fiscal year that begins July 1 does not propose restoring those funds.

John M. Fogarty, CEO of St. Joseph’s Health Services, which runs Our Lady of Fatima Hospital in North Providence and South Providence’s St. Joseph Hospital for Specialty Care, said those institutions are doing all they can to trim costs while protecting services to the local communities. But they are under enormous pressure.

“We’re not a hospital with an endless endowment and, like others, we are not a hospital that can weather endless losses,” Fogarty said.

Lawmakers who took testimony from the hospital chiefs Thursday made few comments, despite having shown sympathy toward their struggles in a hearing early this year. The current reluctance may be because the particulars of the next year’s tax-and-spend plan are expected to fluctuate until the state’s official revenue estimates are updated in May.

The medical centers aren’t waiting to see what happens. Hospital officials have already met with House Speaker William J. Murphy to work out what’s been described as a compromise plan that would help funnel more money back to their coffers. No updated proposal has yet been rolled out from any camp.

Licensing regulations require that hospitals provide free care to uninsured people whose incomes are below 200 percent of the federal poverty level (or about $35,000 for a family of three) and discounted care on a sliding scale to uninsured people with incomes between 200 and 300 percent of the poverty level.

Edward J. Quinlan, president of the Hospital Association of Rhode Island, said it is critical that lawmakers not overlook the “ultimate human service” that hospitals provide to Rhode Island in the form of patient care, but also as economic drivers.

“This industry, health care and hospitals, [is] the only private-sector economy to show job growth in the last decade,” Quinlan said. “We need to be very, very conscious of the economic stability of our hospitals, the role they play in their communities, the knowledge that seven of the largest 20 employers in Rhode Island are hospitals.”

cneedham@projo.com

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