But federal lawmakers are unwilling to keeppace with more Medicare funding.

The Balanced Budget Act, which immediatelyfroze Medicare payments, made the federalgovernment as unwilling to provide reimbursementsbeyond the cost of actual care as privatecommercial insurers.

Across the country, academic as well ascommunity hospitals have been cutting costs, butacademic hospitals have been unable to keep upwith the loss in federal money and preserve theirtraditional role in health care.

"We in America have led the world in healthcare. That's very much in jeopardy," says JosephB, Martin, dean of the Harvard's affiliatedhospitals.

The problem for Harvard's hospitals is acute,he says,

The Partners Group, which runs both Mass.General Hospital (MGH) and Brigham and Women'sHospital, estimates that five years of thebalanced budget amendment will cost $340 million.

In the first quarter of this fiscal year--lastOctober through December--Brigham and Women'sposted a $10 million deficit and MGH lost $11.6million.

Deficits are now a common denominator acrossHarvard's teaching hospitals.

Though cost-cutting is underway--Partners, forexample, managed to shrink their budget by $200million--they say they see more patients than everbefore.

Brigham and Woman's cut 110 positions withinthe last two weeks, according to spokesperson VinPetrini.

"Sixty to 70 percent of the costs are people,"Martin says, "Reducing the numbers of peopletaking care of the sick raises serious questionsabout the quality of care,"

And the situation is likely to get worse.Medicare cuts over the next five years areexpected to average 12 percent annually, but thusfar they have been significantly lower. This meansthat by 2002, reductions are expected to reach 18percent.

Harvard's hospitals have dipped into theirfinancial reserves to keep from going under, butthis won't work forever.

"This year we'll muddle through." Rudenstinesays, "but within 12 to 24 months, we'll belooking at disaster...it is not an abstractconcern."

At Stake...