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Balanced Budget Act will cost UMC $27 million

UMC will lose about $27 million through 2002 because of the Balanced Budget Act of 1997, but hospital officials said they are managing the situation.

John Duval, University Medical Center's chief operating officer, said UMC will lose millions of dollars because the Balanced Budget Act causes hospitals not to be reimbursed for services provided to patients with Medicare and Medicaid.

UMC is expected to lose about $27 million through the course of the legislation until the year 2002, Duval said.

"The consequences of BBA are serious," Duval said.

But patients should not be concerned with the level of care they will receive at UMC, Duval added.

"We are managing this, and we are managing this aggressively," he said.

Duval said UMC is trying to control expenses, remove unnecessary costs and limit the amount of paid staff.

"We've been able to manage the situation to date," he said.

He added the problem is "the building of pressure over time" and that he is concerned with the long-term effects of the law.

He said UMC is "breaking even" right now and is not in debt - even though the hospital lost $4 million last year, partly because of the Balanced Budget Act.

UMC was forced to close three of its Tucson physician offices last year and also laid off some of its employees, but Duval would not specify how many.

UMC is not the only hospital being affected by the Balanced Budget Act. Six Arizona hospitals have been forced to close in the last six months because of the Balanced Budget Act, said Brady Chatfield, communications director for the Arizona Hospital and Healthcare Association.

Most of the closed hospitals were located in the Phoenix area and one was in Florence.

"Basically, they're not being paid for the services they provide," he said.

Chatfield said that figure is more than the number of Arizona hospitals that have closed in the past six years.

"I think we will probably see a couple more closures," he added.

Arizona hospitals will lose about $1.5 billion through 2002, Chatfield said. The national figure is about $300 billion, he added.

Chatfield said Arizona hospitals are probably affected more than hospitals located in other states because many of Arizona's patients are senior citizens who may use Medicare.

"We're actively working with the congressional representatives from Arizona," Chatfield said. "Of course, we want our hospital CEOs to participate in that. They're better at telling the story."

Chatfield said his organization - which represents the interests of about 90 hospitals statewide - met with all of the Arizona congressmen in January.

"All of them (congressmen) were pretty responsive," he added.

Chatfield said many Arizona hospitals participated in an e-mail campaign last week to notify Congress of the effects of the Balanced Budget Act, although the final number of participating hospitals would not be available until this week.

Duval said he would support legislation that would provide relief from the Balanced Budget Act.

"We, in general, support the various legislation efforts being made," he said.

Rep. Jim Kolbe, R-Ariz., is co-sponsoring a bill - HR 3576 - called the American Hospital Preservation Act of 2000, that would provide hospitals with the full inflation adjustment for Medicare payments.

The Balanced Budget Act of 1997 mandated subtracting 1.1 percent from the total to determine the reimbursement figure.

"This bill would eliminate the reduction in the Medicare inflation adjustment for inpatient hospital services and restore some of the funding cut by the Balanced Budget Act of 1997 (BBA)," Kolbe said in a prepared statement.

The bill was referred to the House Ways and Means Committee.