BY SCOTT MONROE

Staff Writer

The state's smaller, rural hospitals -- including those in Pittsfield and Skowhegan -- won't be walloped with mammoth budget cuts after all.

That's because Gov. John Baldacci's supplemental budget, signed into law on Thursday, does not contain hospital funding cuts that were originally proposed by the administration. The emergency budget fills up a $166 million hole in the current budget, which pays the bills until June 30, by slashing other state departments and services.

Initially, the budget included sharp funding cuts to the state's 15 "critical access" hospitals, which have been given that designation by the federal government because they have downsized 25 beds or less and are a certain distance away from other hospitals, among other requirements. In return, these hospitals receive larger reimbursements for the costs of treating patients covered by Medicaid and Medicare, the federal-insurance programs for the poor and elderly.

The supplemental budget would have reduced the reimbursement rate for critical access hospitals from 117 percent to 101 percent. It also lowered the reimbursement for hospital-based physicians who treat patients covered by MaineCare, the state's Medicaid program.

The Maine Hospital Association blasted the "117 to 101" measure as an unfair tax on the state's smallest, most rural hospitals. Top officials at two local critical-access hospitals -- Redington-Fairview General Hospital in Skowhegan and Sebasticook Valley Hospital in Pittsfield -- said both reimbursement cuts could have led to staff layoffs, higher patient charges and stalled efforts at expanding access.

Sebasticook Valley faced a $1.7 million shortfall and Redington-Fairview officials estimated a $5 million hole.

Not anymore. The Medicaid and Medicare reimbursement rate will stay the same for critical access hospitals and payment toward hospital-based physicians won't be cut as much as initially proposed.

Rep. Jeff McCabe, D-Skowhegan, said he was pleased the Legislature responded to the concerns of hospitals representatives and citizens.

"In addition to the emergency and life-saving role (Redington-Fairview) provides to our area, the hospital is a true cornerstone of our community by providing preventative health-care services and quality jobs," McCabe said.

Even so, the state's hospitals aren't entirely in the clear. Redington-Fairview now faces a more manageable $200,000 loss, said Dana Kempton, the hospital's chief financial officer. Sebasticook Valley officials couldn't be reached to provide an updated estimate, but the figure is likely to be at least several hundred-thousand dollars as well. The reimbursement reductions would also affect Franklin Community Health Network in Farmington. Physicians at Franklin Memorial Hospital, which does not have critical access designation, initially faced $1.1 million in losses because of the MaineCare cuts. As a result of the new supplemental budget, that reduction has dropped to $700,000, according to Gerard Cayer, executive vice president of the hospital.

"It is positive, but there is still nothing positive about a $700,000 reduction. And that is on top of reductions in other areas and in other reimbursements outside of MaineCare," Cayer said in a statement, adding that MaineCare still owes Franklin Memorial $10.5 million for services provided since 2004.

The supplemental budget also includes a $99 million funding commitment by the Legislature. The money would come from a potential federal economic stimulus package and be used to pay down charges owed to Franklin Memorial and other Maine hospitals by the state government for MaineCare services.

There's also a possibility the hospital's remaining reimbursement losses could be erased entirely if the federal government takes action. The U.S. House-approved version of the economic stimulus bill includes a freeze on funding reductions to hospital-based physicians; the Senate takes up the bill this week.

Scott Monroe -- 861-9253

smonroe@centralmaine.com