Though small, rural hospitals, including the Bridgton Hospital, are largely being spared state cuts for now, the Legislature will consider cuts again for the next fiscal year’s budget.

A legislative sub-committee decided Wednesday to recommend against reducing reimbursements to small, rural hospitals in the state’s tax-and-match program. The committee also recommended a smaller reduction to the reimbursement rate for hospital-based physicians than the one that had previously been proposed.

“It took a long time to sort out what we can do. We really took a hard look at rural health care,” said Rep. Anne Perry (D-Calais), the co-chairwoman of the Health and Human Services Committee who served on a joint sub-committee with the Appropriations Committee.

The proposed cuts were part of Gov. John Baldacci’s supplemental budget meant to make up for a $140 million budget shortfall in the current fiscal year, but they are also included in his proposed 2010-2011 biennial budget presented to the Legislature this month.

Instead of finding savings in hospital reimbursements, the sub-committee recommended putting off one periodic MaineCare payment of $4.5 million to the hospitals until the first week of fiscal year 2010.

Perry acknowledged that it is a temporary fix. “All we’ve done is mitigated what happened in this year’s budget,” Perry said. “It’s going to give us and the hospitals some time to look at what the issues are.”

Perry said the sub-committee also recommended creating a health care task force to take a look at the health care issues facing the state and draft possible solutions.

John Carlson, president of the Bridgton Hospital, was worried that the proposed cuts would put the facility in the red, given already poor financial times. Mary Mayhew, vice president of the Maine Hospital Association, was also concerned about the recommendations.

“I am extremely concerned that it is going to cause irrevocable harm,” Mayhew said Tuesday. “These cuts will force them to eliminate health care programs and services.”

The proposed cuts would have been on top of more than $400 million owed to hospitals by the state for care provided to MaineCare patients since 2005. The MaineCare program, or state-run Medicaid program, provides health insurance to Maine’s poorest citizens.

But the state hasn’t been fully reimbursing hospitals for their care of these patients, and owes Bridgton hospital more than $7 million, Carlson said.

“It’s killing us,” Carlson said, “$7.5 million in a small hospital like ours is a lot of money.”

Besides the money owed for MaineCare, the two new proposed cuts would have cost the Bridgton hospital another $1 million, Carlson said. The most troubling proposal, Carlson said, was the cut to a reimbursement to critical access hospitals for the state’s tax-and-match program.

The state’s 15 critical access hospitals are classified by their distance from another hospital, small size and short average length of stay. Bridgton is the only hospital on the list in Cumberland and York counties.

The tax-and-match program was set up to take advantage of federal matching dollars for money spent on MaineCare. The state started taxing hospitals and reimbursing them for that tax in 2004. The proposed cut would have taken away part of that reimbursement to critical access hospitals.

The Bridgton hospital would have lost more than $700,000 a year.

“That’s really going to hurt us,” Carlson said Tuesday. “If I lose that, I’m going to be operating in the red.”

The second proposed cut to hospitals was a decrease in the amount reimbursed to hospital-based physicians for care provided to MaineCare patients. Though hospital-based physicians are paid more than those in private practice, they are also obligated to accept unlimited numbers of MaineCare patients, even though the state hasn’t fully reimbursed them for these costs.

Perry said the sub-committee recommended reducing reimbursement rates for hospital-based physicians from 89 percent to 70 percent of Federal Medicare rates. The initial recommendation was to reduce rates to 57 percent, which is what non-hospital based providers are paid.

Mayhew said this cut would make it harder for hospitals to compete in a declining pool of primary care physicians.

Perry and her co-chairman of the Health and Human Services Committee, Sen. Joseph Brannigan (D-Cumberland County), agreed that critical access hospitals were important to protect.

“(The critical access hospitals) are crucial to the areas that they serve, both in employment and to access to health care,” Brannigan said. “We cannot let them fail.”

“In many ways they are the base and the center of health care in the regions they serve,” said Perry, who is a nurse-practitoner in Calais. Without some of these hospitals, patients would have to travel two or three hours to receive emergency care at the next closest hospital, Perry added.

Given that most critical access hospitals are operating on a break-even or negative margin, these two cuts would have had negative impacts on both hospitals and patients, Mayhew said.

“The problem is that there are some hospitals that are fairly wealthy and some hospitals that are barely hanging on by their fingernails,” Brannigan said.

He attributed this disparity to location, size, income level of the area, size of endowment and the ability to do very expensive procedures. Larger hospitals in more wealthy areas tend to do better, while critical access hospitals tend to struggle, Brannigan said.

Hospitals are already struggling due to the economy and the money owed them by the state, and there has been an increase in charity care and bad debt state-wide, Mayhew said. Uncompensated care in Maine hospitals rose from $145 million in 2000 to $227 million in 2007.

Carlson estimated that 15-20 percent of Bridgton Hospital’s business comes from MaineCare patients. With an around $40 million operating budget, Carlson said, the hospital has a surplus of $500,000 in a good year, which is often invested back into infrastructure.

This year, however, is not a good year for the hospital. Carlson said he started to see a decline in volume in October and November, likely due to people deferring elective surgeries and generally trying to take care of themselves at home. He said volume was down around 20-25 percent from the same time last year.

To deal with the decline, Carlson said, managers have been asked to curtail any unnecessary spending for travel, education and other extras. If it becomes necessary, he said, they would have to reduce services and maybe staff.

Carlson said the hospital also has had to raise its rates due to money owed for MaineCare. When private insurance companies pass on rate increases to employers and employers pass on rate increases to employees, some drop their insurance. Patients who come in without insurance are cared for regardless of their ability to pay, and, Carlson said, free and reduced-fee care are up considerably in the last 10 years.

“This is the worst that I’ve seen in terms of financial pressure on hospitals and the severity of the decisions that hospitals are having to make with regard to health care services in their communities,” Mayhew said.