Erie County Executive Mark C. Poloncarz has struck a tentative deal with Erie County Medical Center that would spread higher-than-expected payments that the county must make on behalf of the hospital and its nursing home into the future.
The deal is expected to address a financial concern that Poloncarz had warned in July was one of the chief threats to the county budget.
Poloncarz cautioned then that the county could owe “tens of millions of dollars of unbudgeted health care payments” this year and in future years, for its share of the cost of caring for uninsured and underinsured patients at the hospital and its nursing home.
So far this year, that prediction has not come true, in part, because $15.3 million of those payments required by the state and federal governments have been deferred until January. Instead, the county so far has paid about $1.1 million more than what it budgeted for the ECMC payments. .
But the potential for the payments to remain well above the $16.2 million that the county budgets each year remains a significant concern during the next few years, and hospital and county officials believe the latest agreement would help the county manage those costs.
County officials describe the agreement as a way to stabilize the impact on the county budget of those federally required hospital payments during the next three years, as they await more changes in federal health care.
“When the Affordable Care Act takes effect, the payments should go down significantly, if not even potentially be eliminated outright,” said Timothy Callan, the county’s deputy budget director.
The county payments for the hospital are calculated by the state and federal governments to help pay for the “disproportionate share” of low-income patients the hospital serves and for care at its nursing home. They are debited directly from the county’s bank accounts with a few weeks notice when they come due, making it difficult for the county to budget for them if they increase dramatically.
The proposed agreement would set up a credit system that would allow the county to seek up to $28 million in reimbursements from ECMC for annual hospital payments it makes above $16.2 million. The county then would pay back that money to ECMC in annual installments of $2 million starting in 2015.
The new deal, if approved by the County Legislature and a State Supreme Court justice, would amend a 2009 agreement struck by then-County Executive Chris Collins that sought to define the county’s obligations to the hospital, which spun off from the county as a public benefit corporation in 2004.
At the time, the two entities sought to resolve a number of outstanding issues, including a lawsuit over how much the county should subsidize the hospital. Among other items, the 2009 agreement eliminated a requirement that the county pay for all operating losses at the hospital and paved the way for construction of a new nursing home on the ECMC campus that will replace the Erie County Home in Alden.
The proposed amendment to the 2009 agreement also would address two other outstanding issues between the hospital and the county over the amounts paid since 2004 for workers’ compensation costs and retiree health care expenses. The agreement acknowledges that ECMC has paid $34.7 million for retiree health care for workers who were county employees before 2004 and that the county has paid $29.7 million for workers’ compensation for people employed by the hospital before 2004.
Those two figures were used to draw up the $28 million credit that will be available to the county starting this year.
“What we tried to do is compromise in a fair manner for everyone,” said ECMC attorney Anthony J. Colucci III.
The proposed agreement is expected to ease the impact of the hospital payments on the county’s budget during the next three years, but other factors also have lessened the impact on the 2012 budget.
Marci Natale, a spokeswoman for the state Department of Health, said a $15.3 million payment has been deferred until January.
In addition, the county has not yet had to pay back $5.3 million in federal funds that county officials earlier this year had been told the county would have to return.
At the time of the county’s midyear budget hearings, the county expected those payments to come due in 2012.
“This could have been a horrible, horrible year,” said County Budget Director Robert Keating.
Higher-than-budgeted payments for the county hospital had the potential to eat into the county’s fund balance this year.
“We had nothing indicating that we’d have any relief from those,” Keating said. “Now we have some relief.”