One rule change that limits Medicaid reimbursements to public hospitals would deprive the University of Utah Hospitals and Clinics, UUHC, of $25 million a year, potentially tearing holes in the state's primary medical "safety net" and compromising University Hospital's ability to meet growing medical needs.

This one cut, which takes effect May 26 unless Congress or a court intervenes, represents 3.5 percent of the university health system's $700 million budget and would wipe out most of its operating surplus, Chief Executive David Entwistle said.

"This is too great a financial reduction for UUHC to offset without impacting programs and services," he wrote in a declaration filed last week in support of a federal lawsuit seeking to block the rule change.

The hospital would have to cut services to patients who are already underserved, he said, naming psychiatric services, pain clinics and inpatient beds as likely targets.

The public hospital rule change also will hit Primary Children's Medical Center and the U.'s School of Medicine, which could exacerbate the state's shortage of physicians and of rural health-care services. Six rural hospitals, serving Monticello, Milford, Beaver, Gunnison, Kanab and Panguitch, stand to lose a total of $1.2 million.

"The dollar amounts for the rural hospitals, even though they're small absolute amounts . . . end up being something that is really of concern," state Medicaid Director Michael Hales said.

For Kane County Hospital, the cuts could mean fewer capital equipment purchases, such as X-ray machines or laboratory equipment, hospital administrator Sherrie Pandya said.

"It doesn't necessarily impact our day-to-day operations, but it does impact what services we can offer," she said, adding, "we would have to go after grants and other avenues of funding in order to maintain our hospital at the same standard that it is now."

Rescue or 'reckless

amputation'? The federal Department of Heath and Human Services, headed by former Utah Gov. Mike Leavitt, has proposed a raft of rule changes designed to rein in Medicaid's $200 billion budget. In May, the agency's Centers for Medicare and Medicaid Services, CMS, finalized the controversial rule targeting public hospitals, over the objections of hospital associations and Congress, which imposed a one-year moratorium on reducing reimbursements.

Last week the associations sued Leavitt in a Washington, D.C., federal court on behalf of Alameda County Medical Center in Oakland, Calif., which anticipates a $100 million hit. The U. signed on as a declarant with 10 other medical institutions with millions at stake.

The U. has lobbied to rescind the rule. Rep. Rob Bishop and Sen. Bob Bennett have said they support efforts in Congress to extend the moratorium.

The five-year impact of the rule changes would be nearly $50 billion, more than triple Bush administration estimates, according to state-by-state figures recently gathered by Rep. Henry Waxman, D-Calif., chairman of the House Committee on Oversight and Government Reform.

"As the economy tips into recession, the last thing we should be doing is taking federal funds from states, especially funds that are supposed to help people with their health and medical expenses," Waxman said in a March 3 statement.

CMS officials say proposed reforms are designed to shore up Medicaid's fiscal integrity, not punish providers. Some states have shirked their responsibility to provide matching funds, pushing costs onto providers, said agency spokesman Jeff Nelligan.

Any negative impact on providers "would be due to decisions made by state and/or local governments," Nelligan said. ". . . CMS does not believe such maneuvers are appropriate, nor do they meet the matching requirements of the Medicaid program." Waxman, however, likened CMS' moves to "reckless amputation" that could destroy Medicaid.

If the changes were about program integrity, he said, CMS would refine its guidance to states and improve accountability. Instead, Waxman said during congressional hearings last November, CMS seeks "to prohibit services that have been successful for decades."

'Less able to help': The Association of American Medical Colleges argues the reimbursement limits fails to account for the broad social benefit provided by public teaching hospitals.

"Trauma centers, burn units and emergency preparedness programs could all be drastically affected if this rule takes effect," AAMC President Darrell G. Kirch said. "Whether it's a bus crash, a fire or a terrorist incident, without these Medicaid funds, public hospitals will be less able to help people when they most need our highly specialized services."

University Hospital serves the six-state Intermountain region with Level I trauma and burn units and trains more than 600 interns and residents each year. Its network handles 20,000 admissions a year and 900,000 outpatient visits, many from out-of-state patients seeking specialized care.

Medicaid covers 28 percent of the U.'s patients, accounting for 21 percent of the systems' operating revenue, according to hospital officials.

Meanwhile, the U. provides $40 million in uncompensated care.

UUHC is the only substantial provider of psychiatric services in the state, but its plans to expand its 60-bed neuropsychiatric unit could be jeopardized.

"That's a direct impact to the community. There's a critical shortage for behavioral health," Entwistle said. ". . . We provide services that aren't profitable, such as wound therapy and diabetes management. Money we generate all gets reinvested into the hospital. It goes to new construction so we can have more beds. It's adding to the services that the community demands."

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