Less than two weeks after New York's World Trade Center collapsed, while still working endless hours coordinating the hospital response in the emotionally wrenching days after the disaster, the Greater New York Hospital Association grappled with quantifying the staggering economic loss.
Finding the wherewithal to shift into automatic pilot on behalf of its stunned members, GNYHA officials e-mailed a survey to their 91 hospital members on Sept. 21. Over the course of five days that included a weekend, they crunched, extrapolated and completed a complex financial analysis that calculated the total financial damage: $92 million in lost revenue and $48 million in incremental expenses for a grand total of $140 million.
On Wednesday, Oct. 3, with Washington's airport still closed, four top GNYHA officials and two officials from the state health department boarded a train. They hand-delivered the fiscal impact report in a round of separate meetings with New York's U.S. senators, two representatives and top staffers at both the Office of Management and Budget and HHS. The GNYHA officials can't recall what time they left New York in the morning and what time they arrived home that night, because they were still numb from the disaster. David Rich, the GNYHA's senior vice president for government affairs, said he thinks they grabbed lunch in the Senate cafeteria, although he can't be certain.
"The main thing I remember was, we were trying to explain to people what the hospitals' story was, because the magnitude was so huge," said Patricia Wang, the GNYHA's senior vice president of finance and managed care. "We felt it was important for them to know that hospitals had a story here as well. As far as the total damage to the country, it was not significant to them, perhaps, but obviously it was hugely significant for us."
Well, New York got exactly what it wished for. Last week HHS Secretary Tommy Thompson announced a second round of emergency funds to healthcare organizations that suffered losses directly from the Sept. 11 attacks. The amount available-$140 million-matches the "hard" losses calculated by the GNYHA, likely no coincidence. And considering that city officials anguished long and hard with federal officials over the $20 billion they say it will cost to rebuild, New York hospitals are feeling pretty good about the funding, which will come off the city's total tab.
The GNYHA also ranked among the top five in a list of soft money contributors in the last election cycle (See story, p. 10).
Rich said the relief funds are the result of hard work, rather than pity money.
"Some funding for New York has been a real struggle on and off, so I don't think it's just the rest of the country saying, `We will give you whatever you ask for,' " he said.
The effort is the latest example of the New York healthcare lobby's ability to feed the industry's ravenous needs with hearty helpings of sparse funds. The lobby did it nationally in 1997 with a Medicare demonstration program that paid New York teaching hospitals not to train medical residents, and it did it regionally this year with a $1.8 billion state healthcare budget (Jan. 21, p. 18).
In 2000, a General Accounting Office report alleged that the then-HCFA (now the Centers for Medicare and Medicaid Services) gave preferential treatment to New York healthcare providers in resolving Medicare payment discrepancies dating back to 1983 (April 3, 2000, p. 2). The GAO accused former HCFA Administrator Bruce Vladeck, who has strong ties to the New York healthcare industry, of orchestrating the favorable settlements. Vladeck denied any wrongdoing in testimony before the Senate Permanent Subcommittee on Investigations, which requested the GAO report.
No resentment this time
Although the powerful New York healthcare lobby has been the envy and bane of other states in the past, no one is begrudging it this time around. Indeed, almost every hospital outside the New York metropolitan area that Modern Healthcare contacted indicated they would likely bow out from the second round of emergency funding.
"Some hospitals didn't even attempt to get reimbursement (from a first round of emergency funding)," said Cheri Rinehart, vice president of integrated delivery systems for the Hospital and Healthsystem Association of Pennsylvania. "The sense I received during the last round was that they felt awkward applying for reimbursement when their losses were so minimal compared with New York."
The first round of $35 million was announced in mid-November 2001 and has already been distributed to 131 organizations-including 91 hospitals-in (from most money to least) New York, New Jersey, Washington, Virginia, Pennsylvania and Connecticut, said Jon Nelson, director of the Office of Special Programs in the Health Resources and Services Administration (See chart). As the large grant-making arm of HHS, the HRSA is administering the emergency grants. Unlike in the second round, the first grants were capped at $1 million each. New York got no assurances at the time that a second round was coming.
Nelson said the HRSA received 277 applications requesting a total of $150 million in the first round. Discounting ineligible requests such as those for disaster preparedness, the money for which will come from a separate funding stream, the HRSA determined that $55 million met the criteria, resulting in a $20 million shortfall. Anthrax-related costs fall under the bioterrorism banner and so are not reimbursable under this funding, Nelson said.
Not certain how the second round of $140 million was arrived at, Nelson said it was simply part of the appropriation language that came from Congress.
For the second round of competitive, emergency grants as outlined in the March 29 Federal Register, healthcare providers in Washington, and only certain counties in Maryland, New Jersey, New York, Pennsylvania and Virginia that responded to the disaster, are eligible. In truth, however, the grants appear to be tailor-made for New York City hospitals. Funds will be based on hospitals' proximity to an attack zone, the number of patients served or the provision of specialized services such as trauma care. Applications must be postmarked by May 13. HRSA officials plan to hold seminars in Washington and New York to walk prospective applicants through the complicated process, Nelson said.
The HRSA is breaking new ground in administering grants of this size and scope.
Wang said the application requirements for the second round are more traditional than the first, which tried to expedite things. As a practical matter, the grants will reimburse losses that occurred as late as Dec. 31, 2001. "We are going to have to feel our way through it a little bit, but I think it's a reasonable request," she said.
Of the $35 million speedily distributed as part of the first round of emergency funding, New York healthcare organizations commanded $30.1 million. New Jersey followed, with $2.8 million of the distribution, which is but a small portion of the $6 million in "hard" costs and $30 million in lost revenue identified by the New Jersey Hospital Association for about 80 hospitals statewide.
A wide impact, or not as much
The disaster had an impact on almost all New Jersey hospitals because state health officials instructed all of them to stop performing elective surgeries in the hours after the attacks, said Sean Hopkins, the NJHA's senior vice president of health economics.
Only one Connecticut organization received funding in the last round: 464-bed Hospital of Saint Raphael, New Haven, received $44,316. The state was omitted from the eligibility criteria for the second round. Nelson said there is no reason to expect any Connecticut organization to be interested based on the experience in the first round.
David Benfer, Saint Raphael's president and chief executive officer, has no problem with that. The first funds covered the hospital's costs of canceling elective surgeries and beefing up supplies in anticipation of casualties that never arrived, he said. To the best of his knowledge, no other Connecticut hospital even applied for funds.
Similarly four-hospital Inova Health System, Falls Church, Va., applied for $1 million in the first round of funding and received $585,419 (two other organizations in Virginia got much smaller amounts) but has no plans to reapply, said Don Harris, the system's assistant vice president of government relations. The grant covered lost revenue and the expenses of overtime, clearing the operating rooms and collecting blood donations, he said. The difference between the request and the grant amount was because of money requested for disaster preparedness, an item these federal grants won't reimburse.
"We were quite pleased with the process," Harris said.
Those with gripes about the first round of funding are those hospitals closest to ground zero. The first round of grants, capped as they were, represented a drop in the bucket of losses. For example, eight-hospital Saint Vincent Catholic Medical Centers calculated it lost a total of $20 million but recovered only $1.9 million from among seven sites in its system, said spokeswoman Bernadette Kingham.
"We're very grateful that the criteria this time focuses on proximity to ground zero, number of patients served and specialty services provided," Kingham said. "It's going to fill the critical gap in funding some of the losses-at least we're hoping it will."
NYU Downtown Hospital, whose Wall Street neighborhood was choked off by the disaster, lost more than $6 million as a result of the attacks-$3.3 million from a stranglehold on admissions, said Kathleen Hill Zichy, senior vice president of corporate development. The cap on the first round hurt, she said.
"It would be fair to say we were disappointed in the methodology applied to the distribution of those funds, and it didn't work to the benefit of those hospitals that were most profoundly impacted by what had happened," she said.
The mammoth New York-Presbyterian Healthcare System received about $2.5 million in the first round against a total of $13 million in losses, said Herbert Pardes, M.D., president and CEO of the 30-hospital system. The system's New York-Presbyterian Weill Cornell Burn Center treated the most devastated burn victims. Pardes said much of the cost represents lost revenue. "We felt we saw 700 patients less in a period of the first couple of weeks," he said.
The system is hoping for a full recovery of its losses with the second round, although it had not had time to study the new guidelines last week, Pardes said. But based on the first round, the process should be relatively painless, especially compared with the process for the Federal Emergency Management Agency, which also supplies disaster relief money.
"I have to give congratulations to (the) HRSA for a job well-done," Pardes said. "FEMA we're still working on."