On February 10, 2003, GNYHA President Kenneth E. Raske delivered testimony to the New York State Senate Finance and Assembly Ways and Means Committees regarding the impact of the Executive Budget's proposed Medicaid cuts and new taxes on hospitals, and the "unsustainable damage" that those measures would cause to hospitals. "New York hospitals suffer from the poorest financial condition of any other states' hospitals, and there is no way they can bear these enormous Medicaid cuts," said Mr. Raske. "These cuts would mean fewer nurses and other key staff, longer waiting times, fewer services, and reduced quality for every patient in the hospital. And the timing of these proposed cuts could not be worse, since hospitals are also actively trying to bolster their disaster readiness capabilities."

Severe Fiscal Impact: GNYHA's fiscal impact analysis identified a number of damaging consequences that would result from the proposed budget.

• The Executive Budget estimates that the combination of the new Medicaid cuts and the new tax on hospitals would cause $596 million in NYS hospital losses in State fiscal year (SFY) 2003-04, which begins April 1, and $682 million in losses in SFY 2004-05.
• The average loss caused by the Medicaid inpatient cuts is 9% of Medicaid inpatient revenue statewide. However, the impact on individual hospitals varies greatly; their losses would range from 2% to 48% of Medicaid revenue.
• When these losses are added to current hospital operating losses of $337 million in 2001, they would cause losses around the State to increase to $1 billion. In NYC, the Budget would result in operating losses of almost $700 million.
• The Budget proposes a change to the Medicaid program that would trigger a punishing ripple effect on hospitals. In order to save $53 million, the State must cut hospital rates by more than $400 million, because the Budget proposes to change the State's contribution to various aspects of the Medicaid program. In New York today, the State contributes 25% of every Medicaid dollar spent on hospitals. The new budget's proposed reallocation of funding responsibilities between the State and localities would reduce the State's contribution to spending on hospital care from 25% to 13%. Therefore, for every $1 the State cuts from its Medicaid budget, hospitals would lose $7.70 in Medicaid reimbursements.

Hospital Disaster Readiness: Since 9/11, 2001, hospitals throughout NYS have had a new level of responsibility to be part of the first line of defense against possible nuclear, biological, and chemical attacks. Virtually no funding has been received—or is slated to be received—to help hospitals meet these new responsibilities, and the proposed State health care cuts could disrupt many of the current efforts to ensure public security. In his testimony, Mr. Raske cited the results of a recent GNYHA survey on hospitals' emergency preparedness expenditures (see story on page 1), which showed that New York downstate hospitals spent $90.2 million on disaster readiness in 2002 alone, but only $5.9 million was available from outside sources—meaning that these hospitals had to rely on their own, already overburdened operating budgets to fund critical emergency preparedness projects.

Condition of New York's Hospitals: GNYHA's testimony also provided national data that demonstrated NYS hospitals' poor financial condition relative to other states' hospitals and New York hospitals' relatively high efficiency indicators. According to the Almanac of Hospital Operating and Financial Indicators published by Ingenix/Center for Healthcare Industry Performance Studies, the median total margin of New York hospitals in 2001 was 0.6%, compared with 3.3% for hospitals nationwide. Moreover, New York hospitals rank last in the country on overall financial health on measures of profitability, liquidity, and capital infrastructure—the result of insufficient revenue—but they score very well on national efficiency indicators like cost and price per discharge adjusted for patient severity of illness and cost of living. New York hospitals' adjusted cost and price per discharge are among the lowest of any states' hospitals.

GNYHA Advocacy Agenda: GNYHA strongly opposes the Medicaid cuts and new hospital taxes specified in NYS's proposed Executive Budget, and is launching a multifaceted campaign to protect its members from these damaging provisions.