1. In Move to Cut Hospitals, U.S. Will Pay New York $1.5 Billion By RICHARD PÉREZ-PEÑA The New York Times October 3, 2006 http://www.nytimes.com/2006/10/03/nyregion/03hosp.html?ref=policy

2. Background Squeezed by health insurers, declining demand, decades of heavy borrowing and outright mismanagement in some cases, hospitals in New York have been in crisis for several years. About 20 have closed over the last five years, a few have filed for bankruptcy to reorganize their finances, and many others are in precarious condition. Squeezed by health insurers, declining demand, decades of heavy borrowing and outright mismanagement in some cases, hospitals in New York have been in crisis for several years. About 20 have closed over the last five years, a few have filed for bankruptcy to reorganize their finances, and many others are in precarious condition. On Oct 2, 2006 the Bush administration has agreed to pay New York $1.5 billion over five years to help stabilize the state’s financially troubled hospital industry. In return, the state will move forward with shrinking that industry, cutting Medicaid costs, and sharply increasing the sums it recovers from Medicaid fraud. On Oct 2, 2006 the Bush administration has agreed to pay New York $1.5 billion over five years to help stabilize the state’s financially troubled hospital industry. In return, the state will move forward with shrinking that industry, cutting Medicaid costs, and sharply increasing the sums it recovers from Medicaid fraud. The state intends to close under-used hospitals and improve the economic health of those that remain, and to steer people to cheaper health care alternatives than the ones they use now, like outpatient clinics rather than emergency rooms, and in-home care rather than nursing homes. The state intends to close under-used hospitals and improve the economic health of those that remain, and to steer people to cheaper health care alternatives than the ones they use now, like outpatient clinics rather than emergency rooms, and in-home care rather than nursing homes.

3. About the Agreement(1) Included in the program will be the expanded use of e- prescribing, increased use of electronic medical records and regional health information organizations and expansion of primary care services. In addition, the funding will further build upon phase one of HEAL NY, which helped advance information technology initiatives aimed at the restructuring of the health care delivery system. Included in the program will be the expanded use of e- prescribing, increased use of electronic medical records and regional health information organizations and expansion of primary care services. In addition, the funding will further build upon phase one of HEAL NY, which helped advance information technology initiatives aimed at the restructuring of the health care delivery system. To receive the money, the state must prove to Washington that it has actually cut costs, by meeting targets for reducing the use of hospitals and increasing the use of managed care plans within Medicaid. To receive the money, the state must prove to Washington that it has actually cut costs, by meeting targets for reducing the use of hospitals and increasing the use of managed care plans within Medicaid. The agreement between the state and the federal Department of Health and Human Services, which took 16 months to negotiate, contains a long list of specific conditions the state has to meet. Some are relatively simple — in fact, the state is already carrying out some measures, like limiting which prescription drugs Medicaid recipients can get. The agreement between the state and the federal Department of Health and Human Services, which took 16 months to negotiate, contains a long list of specific conditions the state has to meet. Some are relatively simple — in fact, the state is already carrying out some measures, like limiting which prescription drugs Medicaid recipients can get. But other requirements are much tougher, like a substantial increase in the amount of money the state must recover from Medicaid fraud prosecutions, a target much higher than the amount any state has recovered to date. State officials said the Medicaid fraud section involved especially tough negotiations. But other requirements are much tougher, like a substantial increase in the amount of money the state must recover from Medicaid fraud prosecutions, a target much higher than the amount any state has recovered to date. State officials said the Medicaid fraud section involved especially tough negotiations. http://www.nytimes.com/2005/07/18/nyregion/18medicaid.html?ex=1279 339200&en=b7bf75d8d29b6c0b&ei=5088&partner=rssnyt&emc=rss http://www.nytimes.com/2005/07/18/nyregion/18medicaid.html?ex=1279 339200&en=b7bf75d8d29b6c0b&ei=5088&partner=rssnyt&emc=rss http://www.nytimes.com/2005/07/18/nyregion/18medicaid.html?ex=1279 339200&en=b7bf75d8d29b6c0b&ei=5088&partner=rssnyt&emc=rss http://www.nytimes.com/2005/07/18/nyregion/18medicaid.html?ex=1279 339200&en=b7bf75d8d29b6c0b&ei=5088&partner=rssnyt&emc=rss

4. About the agreement(2) Another part of the deal is designed to address what state officials believe is the overuse of nursing homes, especially by people discharged from hospitals. In at least one region of the state, people who need long-term care would be referred to offices and Web sites that would explain options like “assisted living” centers or care in their own homes. The state would not require one choice over another. Another part of the deal is designed to address what state officials believe is the overuse of nursing homes, especially by people discharged from hospitals. In at least one region of the state, people who need long-term care would be referred to offices and Web sites that would explain options like “assisted living” centers or care in their own homes. The state would not require one choice over another. The agreement sets specific, year-by-year requirements for money collected from such cases, rising from more than $215 million in the second year to $644 million in the fifth and final year, state and federal officials said. Until last year, no state had collected more than $100 million in a year. The agreement sets specific, year-by-year requirements for money collected from such cases, rising from more than $215 million in the second year to $644 million in the fifth and final year, state and federal officials said. Until last year, no state had collected more than $100 million in a year. The agreement went into effect October 1. Failure to meet the fraud and abuse recovery targets will result in penalties for the State and failure to reach other milestones will result in termination of the waiver. The agreement went into effect October 1. Failure to meet the fraud and abuse recovery targets will result in penalties for the State and failure to reach other milestones will result in termination of the waiver.

5. Economics $ Q Q’ Quantity If there is waiver, then what happens? MC ATC Q Q’ Quantity If the number of hospitals declines, then what happens? MC ATC $

6. Discussion “This agreement is a tremendous win for New Yorkers,” said Michael Marr, a spokesman for the governor. He said it would help ensure that the industry “remains strong, efficient and sustainable for many years to come.” “This agreement is a tremendous win for New Yorkers,” said Michael Marr, a spokesman for the governor. He said it would help ensure that the industry “remains strong, efficient and sustainable for many years to come.” Critics argue hospital closures carry steep short-term price tags and may be too costly to create true savings. Critics argue hospital closures carry steep short-term price tags and may be too costly to create true savings. http://www.health.state.ny.us/ http://www.health.state.ny.us/ http://www.health.state.ny.us/ http://www.hhs.gov/ http://www.hhs.gov/ http://www.hhs.gov/