Hospitals will make less money for performing lung transplants but will earn more for administering chemotherapy and caring for premature babies under new Medicaid reimbursement rates that take effect this month.

The new rates, which will be phased in over three years, mean hospitals in New York City stand to gain or lose millions of dollars each year in state reimbursement for inpatient care. The rates, which had not been updated since 1992, are based on an algorithm that takes into account the average cost of treatment.

“If you are in the wrong specialty, it becomes a major issue,” said Marlene Zurack, the senior vice president for finance at the city’s Health and Hospitals Corporation, which projects that it will come out $7 million better off on an annual basis once the new rates are fully implemented.

The changes, authorized in last year’s budget, will not add to or subtract from the state’s $47 billion Medicaid program, one of the nation’s most expensive. But the new reimbursement rates will impact individual hospitals, where some 75% of Medicaid revenues come from inpatient care.

“Medicaid won’t save money or spend money on this,” the state’s Medicaid director, Deborah Bachrach, said in a recent interview. “But the money we pay will be paid out in a smarter way.”

Medicaid reimbursement rates to hospitals are set by the state, which assigns to each diagnosis and treatment a code known as a “service intensity weight.” The weight — meant to reflect how complicated, expensive, and labor-intensive the service provided is – is then multiplied by the hospital’s previously established base rate to determine a hospital’s reimbursement for that procedure.

In addition to last year’s authorization for adjustments to the service intensity weights, this year’s budget is likely to change hospitals’ base rates.

Among the adjustments to the service intensity weights, published this month, state health officials said reimbursement rates for treating premature babies who weigh less than 750 grams will increase by 104.1%. Chemotherapy will also increase, by 18%.

Reimbursement rates for lung transplants will decrease by 28.2% and hip replacements will go down 32.5%. Some cardiac procedures will also drop, such as cardiac defibrillation without cardiac catheterization, which will decrease 26.4%.

The changes could mean that a hospital that was paid $252,700 for a lung transplant will now be paid $181,400. A hip replacement that would have cost about $25,000 would now cost about $17,000. A course of chemotherapy that would have cost $7,600 will now cost $8,900.

Among those hospitals that stand to benefit from the changes are St. Luke’s-Roosevelt Hospital, Jacobi Medical Center, and the Brooklyn Hospital Center. Some hospitals hurt by the changes include Beth Israel Medical Center, Woodhull Medical and Mental Health Center, and possibly some specialty hospitals.

Ms. Bachrach said the adjustment was overdue given the medical advances that have changed the way physicians care for patients. “Ten years ago, what we knew was markedly different,” Ms. Bachrach said, adding, “Care that used to be rendered in inpatient settings has moved to outpatient settings.”

Technology has also made certain procedures, such as caring for premature babies, possible. “Ten years ago, a lot of those babies did not live,” she said. “Now we have the ability to keep those babies alive, but it’s very complicated.” One hospital that will benefit from higher reimbursement for neonatal care is the Brooklyn Hospital Center, a 464-bed community hospital that recently emerged from bankruptcy. Administrators there said they expect the hospital to break even after the new reimbursement rates take effect, largely because of its neonatal intensive care unit.

“We’ll be okay because we do have it,” the hospital’s vice president of finance, Donald Minarcik, said. “But if the babies don’t come here, we may lose some money on this.”

Overall, the hospital industry backs the changes, which were hammered out over the past 12 months. “Generally, we support the product and we support the effort,” a spokesman for the Healthcare Association of New York State, William Van Slyke, said. “The whole Medicaid reimbursement system is woefully out of date.”

In broad strokes, the impact felt by hospitals will depend on the mix of services provided. “If they provide more services where the weights went up, they will see a more positive impact than a hospital that provides a larger percent where the weights went down,” the Greater New York Hospital Association’s vice president of finance, Elisabeth Wynn, said. “The size of the hospital doesn’t matter.”

Industry insiders said that ultimately, in larger health care systems, losses in certain areas will be offset by gains in others.

While HHC expects to see a $7 million net benefit overall, its 11 individual hospitals expect to report varying gains and losses. Jacobi Medical Center in the Bronx expects to see a $6.5 million benefit, while Woodhull Medical and Mental Health Center in Brooklyn anticipates a $3.5 million hit. “One of the things they did was reduce the service intensity for detox services and we’re a large detox provider,” Ms. Zurack of HHC said. “That’s one of the things that cost us money.”

Overall, she praised state health officials for preserving what she called “safety net services,” such as trauma care and obstetrics, but she raised concern over a decrease in reimbursement for treating AIDS patients. “We hope they will revisit it,” she said.

St. Luke’s-Roosevelt Hospital in Manhattan and Long Island College Hospital in Brooklyn both stand to benefit from the revised reimbursement weights. LICH would see $2.5 million more reimbursement, and St. Luke’s-Roosevelt would see $1 million gain, the hospitals are projecting. “The pickup for them is neonatal,” said Sharon Joy, the senior vice president of finance for Continuum Health Partners, the parent company for both hospitals. St. Luke’s-Roosevelt delivers some 6,200 babies annually out of 45,000 total inpatients, she said. In Manhattan, Beth Israel Medical Center, which is also part of the Continuum network, stands to lose $5 million as a result of its inpatient detoxification program. The program is the largest in the state and it accounts for 10% of the hospital’s annual discharges. Ms. Joy said the changes ultimately could affect the way hospitals do business.

“I think the issue eventually will be access to care, because as you see that switch in reimbursement and you’re trying to make sure the hospital stays financially viable, you need to look at the programs you offer,” Ms. Joy said. Services such as detoxification could suffer. “You wouldn’t consider growing that service,” she said.