Op-Ed: How Hospitals Fared in State Budget

Just about one month past the April 1st deadline, the state legislature and governor’s office agreed upon a budget for the 2023 – 2024 state fiscal year. The $229 billion spending plan offers mixed results for the hospital industry. Most importantly, we secured a Medicaid rate increase, although it is less than what we asked for and need for suburban hospitals to remain financially sound in the coming years. We have more work to do.

As I wrote in my last blog post, Medicaid reimbursement has historically underpaid hospitals for the cost of the care provided; today, it’s about 60 cents on the dollar. Except for a one-time one percent rate increase last year, Medicaid reimbursement rates have remained flat for some dozen years or so. The news that the final budget includes a 7.5 percent rate increase for inpatient care and 6.5 percent for outpatient care is great news at first blush, until we factor in a statewide loss of about $525 million in this fiscal year for hospitals participating in the 340B drug program, thanks to a state policy change in the Medicaid pharmacy benefit on April 1. Regardless, these rate increases only begin to close the underpayment gap.

More about 340B

The federal 340B drug program allows hospitals to purchase certain drugs at deeply discounted rates. The resulting savings help hospitals reinvest in community benefit programs, such as nutritional food assistance, transportation services, and even supportive housing for the most vulnerable.  A provision in the 2021 state budget shifted the Medicaid pharmacy benefit out of Medicaid managed care plans and into NYRx, the state’s Medicaid pharmacy program.  The consequence of this shift is that savings on 340B drugs purchased for Medicaid beneficiaries now accrue to the state, not providers.  This hampers hospitals’ ability to invest in needed community programs.

Missing from the Budget

Left out of the budget were sorely needed provisions to assist hospitals with the severe workforce shortage that has strained their finances and challenged staffing needs. An important managed care proposal, known as “pay and review,” was also absent from this budget. These are two priorities we are pressing for now with legislators during the remaining days of this legislative session, which is scheduled to end June 8.

What is “Pay and Review?”

“Pay and review” is a proposal forwarded by the hospital industry and supported by the governor in her proposed budget to address the practice of insurers delaying or even denying payment for medically necessary in-network emergency care until a claims review is conducted. This common sense proposal would require payment upfront to hospitals for services rendered, while health plans conduct medically-necessary reviews post-payment.

Workforce Shortage Needs Fixing

We were greatly disappointed that workforce flexibilities put in place by executive orders during the pandemic to ease the workforce shortage were not included in this budget and made permanent. The governor has indicated her intent to let the workforce executive order expire later this month, adding new urgency to the need to codify these provisions in statute.  Our region’s hospitals continue to rely heavily on these flexibilities to meet staffing needs and so need a seamless transition to address this daily dilemma. Proposals such as continuing to allow expanded scope of practice for nurses, pharmacists, physician assistants, and others and allowing New York State to join the Interstate Medical Licensure and Nurse Licensure Compacts would go a long way toward addressing workforce shortage needs. However, a provision to establish oversight of temporary staffing agencies is in the budget, though no cap on agency fees was included, as the Assembly had proposed.

The workforce shortage has many causes – delays in approving out-of-state clinicians’ licensure in New York, worker burnout, competition from other sectors of healthcare and the economy, a shortage of faculty that limits capacity to train new workers, and the cost and duration of education programs, to name a few.  The crisis isn’t limited to nurses or nurse’s aides, either; positions such as respiratory therapists, lab techs, surgical techs and all behavioral health positions are in short supply.  One hopeful sign is legislation introduced by Assemblywoman Pat Fahy, the chair of the Assembly Higher Education Committee, which would offer some relief. It would allow for a 180-day temporary permitting process for RNs, LPNs and physicians who are licensed in good standing in another state, while a licensure application is pending with the State Education Department.

More about state and federal fixes for workforce needs will be explored in an upcoming blog post.

Other Relevant Items

The budget continues supportive funding for financially distressed hospitals and provides investment in healthcare facility modernization. That is good news. But this is overshadowed by an $85 million dollar cut to the state’s Indigent Care Pool (ICP). Twenty-four out of the 51 hospitals affected by this cut statewide are located in our suburban regions. The ICP partially reimburses hospitals for caring for the poor and uninsured. A $150 million ICP cut to the same group of hospitals was implemented in 2020. These cuts will remain in place through 2025.

Looking Ahead

The state legislative session is scheduled to end on June 8. The Suburban Hospital Alliance will continue to press for workforce shortage relief, sensible managed care reforms, and fight any harmful medical malpractice legislation, among other priorities. The next Darwell Dose will comment on the outcome of this state legislative session.


About the Suburban Hospital Alliance of New York State

The Suburban Hospital Alliance of New York State advocates on behalf of hospitals in the Hudson Valley and Long Island regions. It engages key lawmakers and regulatory decision-makers in Albany and Washington to ensure reasonable and rational health care policy prevails.

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