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New York to Lead States in Extra Medicare Payments

May 30, 2010

WASHINGTON — Members of Congress from Iowa, Minnesota, Washington and Wisconsin secured extra money in the new health care law to reward low-cost hospitals in their states, which they said had long been underpaid by Medicare.

But it now turns out that New York will get more of the money than any other state, and some of the chief proponents of the bonus payments will not receive any.

The Obama administration recently disclosed how it planned to distribute the money, $400 million over the next two years, and the result was not exactly what Congress or hospital lobbyists had expected.

“I’m sure it’s a surprise to many of my colleagues in the Midwest,” said Daniel Sisto, president of the Healthcare Association of New York State.

An analysis of the data by The New York Times shows that New York hospitals are in line to receive nearly 12 percent of the money ($46.3 million), which is more than hospitals in any other state.

Virginia is expected to receive nearly 10 percent of the money, while Iowa and Wisconsin are each expected to get about 8 percent. Oregon will get 6 percent, and Missouri 5 percent.

Geographic disparities in Medicare spending emerged as an explosive issue in the Congressional debate on health care. More than 30 lawmakers, mostly from the Midwest and the Northwest, complained that their doctors and hospitals had been shortchanged by Medicare.

Representatives Bruce Braley of Iowa, Jay Inslee of Washington and Betty McCollum of Minnesota, all Democrats, were among the most vocal in demanding extra money to address what they described as severe inequities in Medicare’s payment formula.

But a preliminary analysis of the new formula suggests that hospitals in their districts will receive little if any of the $400 million being given out by the Obama administration.

The money is going to 415 hospitals in 273 counties around the country. The counties were selected because their average Medicare spending per beneficiary — adjusted for the age, sex and race of patients — was low. Indeed, by this measure, they rank among the lowest 25 percent of all counties in the country.

In New York, 50 upstate hospitals are scheduled to receive extra payments. The hospitals are in rural areas, small towns and medium-size cities that run west from Schenectady to Utica and Syracuse, south to Binghamton and Elmira and north to Lake Placid and the Adirondacks.

“New York is supposed to be a very high-cost state, but it has low-cost areas,” said Dr. Paul J. Kronenberg, president of Crouse Hospital in Syracuse, which is scheduled to receive $3 million. “Health care providers and hospitals here have made a concerted effort to improve the efficiency of our operations, prevent complications, reduce the length of hospital stays and lower readmission rates.”

Among the states not receiving any money, according to federal data, are Connecticut, Florida, Louisiana, New Jersey and Tennessee.

The federal government typically pays a flat amount for each Medicare patient admitted to a hospital, depending on the diagnosis. Payments are adjusted to reflect local wage levels. Extra payments go to hospitals that train doctors or treat large numbers of low-income patients.

David G. Kruczlnicki, the president of Glens Falls Hospital in New York, said he was surprised to learn that his hospital was to receive nearly $2 million in extra Medicare money.

But, he said, this sum is dwarfed by likely cuts in Medicare payments caused by other provisions of the new law.

“Over the first 10 years of health care reform,” Mr. Kruczlnicki said, “our hospital will see a reduction of $56 million in Medicare payments. There’s an assumption that we will receive additional payments on behalf of those who have been uninsured and unable to pay us at all.”

Robert Kellar, a spokesman for Mr. Inslee, said no hospitals in his Puget Sound district would receive money under the federal plan. But he added, “Jay went into this effort knowing that Washington State as a whole had suffered because of these historical formulas.”

Thirteen hospitals in other parts of Washington State are to receive a total of $15.2 million.

Kathleen Sebelius, the secretary of health and human services, said, “The current geographic variation in Medicare reimbursement rates is inequitable.” To reduce such inequities, she said, she intends to order changes in payments to doctors and hospitals after the National Academy of Sciences studies the issue and makes recommendations.