Nation’s Medical Schools See Revenue Sources Dry Up : Medicine: Proposed Clinton health reform cuts would add to battering from insurers. Some urban teaching hospitals may be facing bankruptcy.

Battered by insurance companies looking for bargains and terrified of cuts proposed by President Clinton in their Medicare payments, officials of some of the nation’s most prestigious hospitals say they are worried about the future of their institutions.

Most severely squeezed are the teaching hospitals that train many of the nation’s doctors and the massive urban hospitals that serve poor communities as everything from family doctor’s office to surgical center.

Institutions that play both these roles are in a double bind. In California alone, several medical schools eventually could face bankruptcy without financial help, warned Dr. David Korn, dean of the Stanford University Medical School.

The federal Medicare program for the elderly, recognizing the special needs of these hospitals, offers them extra reimbursement to compensate for their elevated costs. But now President Clinton wants to cut their special Medicare subsidies by $31 billion over five years as part of his plan to overhaul the nation’s health care system.

“I admire what President Clinton is trying to do,” said Sheldon King, who just retired as chief administrator at Cedars-Sinai Medical Center in Los Angeles. “But to say that hospitals can take all these cuts and provide care for everyone without the quality suffering, that is patent nonsense.”

Many of the biggest hospitals are heavily dependent on the flow of federal dollars. Just 71 of the more than 6,600 hospitals enrolled in the Medicare program received 10% of all Medicare funds distributed in 1992, according to a computer-aided analysis of the more than 11 million patients served by hospitals that year.

Hospitals receive a fixed fee, set in advance, for each Medicare case, according to their diagnosis of a patient’s ailments. Reimbursement rates are so low that the federal government covers just 88% of the full cost of caring for elderly or disabled Medicare patients.

Hospitals have been able to fill most of the gap by charging patients with private health insurance for more than the full cost of their care. Altogether, patients with private insurance pay 129% of the actual cost of their care, according to a special study commission created by Congress.

Beyond that, hospitals receive Medicare bonuses for training doctors and for treating poor people who cannot pay their bills. It is these two subsidies that are now in danger.

All this comes at a time when hospitals of all stripes are under increasing pressure to cut costs. In California, for example, more than half the population is enrolled in cost-conscious networks operated by health maintenance organizations or insurance companies--and they drive a tough bargain.

“Health alliances will say: ‘We’re interested in having you in our network of providers, but we will pay you nothing more than we pay the hospital up the street,’ ” King said.

Cedars-Sinai loses $2 million a year on its trauma center, which treats a thousand mangled and battered victims of car wrecks, shootings, stabbings, fires and falls.

“We’re in the teeth, the fangs of the storm,” Korn said. Stanford hospital has already carved $65 million from its annual budget of about $300 million and hopes to trim another $35 million.

“Insurers say: ‘Here it is folks, here’s what we’re willing to pay.’ If they don’t like it, they will go elsewhere. I have not seen one shred of evidence (that) the medical market puts any premium on academic centers,” he said.

His gloomy forecast is that some medical schools will close unless health care reform legislation offers them special financial relief.

At a time of great pressure on hospitals to become more efficient, teaching hospitals are inherently inefficient. In a teaching hospital, a medical student or a resident might see one patient every half an hour, while a doctor in private practice might take 15 minutes, said T. Michael Bolger, president and chief executive of the Medical College of Wisconsin.

“You just can’t be as efficient and quick because you’re training people,” he said.

At the University of Florida medical complex at Gainesville, 75% of the patients traditionally come from outside the county. But the institution is steadily losing profitable private patients to competing health networks in such locations as Tampa and Orlando, said Dr. David Challenor, vice president for health affairs.

New York has a heavy concentration of urban medical centers: what Dr. John Rowe, president of both Mt. Sinai Hospital and Mt. Sinai Medical School, called “medical schools and hospitals joined at the hip and heart.” Mt. Sinai hospital received nearly $140 million from Medicare in 1992, the latest year for which full data is available, according to The Times’ study.

But the biggest sum of Medicare funds, $146 million, went to another New York hospital, the Montefiore Medical Center in the Bronx, a 1,276-bed facility.

Montefiore’s president, Dr. Spencer Foreman, said the hospital stands to lose $55 million under Clinton’s proposed reforms, a deeply damaging blow to the annual budget of about $660 million. “We have 750 interns and residents, and these cuts would put us in serious financial jeopardy,” he said.

Presbyterian Hospital in New York now loses $25 million a year. The Clinton plan would take $38 million a year from its Medicare revenue, which totaled $141.7 million in 1992.

“We would probably have to give up being a teaching hospital and let the city take us over,” said Dr. William T. Speck, president and chief executive of the hospital, part of the Columbia-Presbyterian Medical Center.

Hospital administrators say they feel as though they are under siege.

“All these things happening to us at once add up to major losses in revenue,” said Dr. John D. Clough, chairman of the division of health affairs at the Cleveland Clinic, which received $134.5 million from Medicare, according to The Times’ study. “The ability to squeeze more out of the system without impacting services is very limited.”

The promise of health care reform from Washington has to be supported with dollars, said Sister Ruth Marie Nickerson, president and chief executive of the St. Agnes Medical Center in Fresno.

“No one can be against the objective of health reform, but I’m concerned by the constant reduction of various funding sources,” she said.

The Clinton Administration is telling the hospital administrators not to worry.

“You have lots of friends,” Health and Human Services Secretary Donna Shalala told a meeting here this week of the Assn. of Academic Health Centers. “We all understand it costs more to train students.”

If the Clinton health care reform plan becomes law, everyone will have health insurance, wiping out the problem of poor people who cannot pay for their treatment, Administration officials say. More than that, they add, that extra money will be available for hospitals that train and teach.

Hospital officials say they will believe it when they see it.

“To assume universal coverage would take care of these costs is a leap of faith,” Korn said. “To talk about coverage is one thing. To talk about actual dollars is another thing.”